Tracking the Nano Evolution

June 24, 2002

Not only is nanotechnology not a real market, it's not even a real industry
or science community. This appears to clash with the recent National
Science Foundation proclamation that "nanotechnology has a projected total
worldwide market size of over $1 trillion dollars annually in 10 to 15
years." This viewpoint is echoed not just from investors with cold feet or
skeptical analysts, but from technologists whose work and research is
focused on science at the nano-scale. Such a perspective is not borne out of a reluctance to validate nanotechnology, but is on the contrary, a testament to its vast range of possibility and application, which they say is both too broad and too nascent to be categorized.

"Yes, I'm reluctant to define it as an industry, and as a community," says
Mike James of Rockwell Scientific, which has invested significant
funding towards nanotech-related research and development, most recently in
the area of nano magnetic particles. James will be speaking at next month's
Nano Republic Conference at UCLA, which will bring together primarily
California-based technologists, academics, and investors. James' background
is in the materials field, which is one of the few nano applications that
already has an industry track record, years before the term nano became the
current hot high tech topic. No matter what market outcomes it produces in
the near or long term, nanoscience will never be an industry unto itself,
but a science of many avenues of application and possibility that could
redefine the direction of several industries.

"I think the framework for this is to recognize that nanotechnology is a
technology or set of technologies, and not a market. It's a set of technical
breakthroughs that will seep into many different markets," says Arati
Prabhakar, the former director of the NIST program who is now a venture
capitalist with U.S. Venture Partners. "I think somewhat to the detriment of the
field, you're seeing a lot of science fiction speculation about what's
possible, and the great things that can be done, hype about the next big
thing in terms of venture investing. That really creates a lot of noise
because at the end of the day what you really get to is that nano is set of
very amazing technologies. It's a very fertile research area, but it's
not a particularly fertile area for venture investment. It's still very,
very early stage, and there will be a few opportunities, but not many, in the
next few years."

The attention has been extraordinary in nano recently, and despite the
myriad of hype and hype artists, much of this is rooted in justifiable
excitement for what technologists can do to harness nano for a variety of
applications. Yet despite this, investor interest has been carefully
plotted, largely due of course to the significant decrease in high tech
venture investing in general. Rockwell Scientific, as well as other major
research labs, have also been careful to invest R&D only towards nano
applications that have near term market potential. What is the most
important about the recent plethora of media introductions, reports, and
publications is the attention it brings to the work that is being done in nano, not because of its ability to sway skeptical investors.

"Whenever you have these leapfrog technologies, there's no detailed roadmap
to outline the future so there's a lot of analysis that has to go into the
investments," James says. "I believe that the VC community is smart enough
to sift through all the fluff, and I think that's why you're not seeing a
great deal of investment at this point in time because the payoff is a great
deal of years out."

Despite this careful approach amongst investors, the public and private
money flowing towards nano has not been insignificant. A recent study
published by the research firm In Realis found that $42 million of private
investment has gone towards nanotech-related ventures in the first quarter
of 2002 alone. Also, U.S. government spending towards R&D, although significantly behind from other countries, saw an ascent in 2001 to $495 million. Yet because nanotechnology is so dissipated, and often hidden under
other umbrellas such as bioscience or electronics, treal numbers of total
private nano investment flow have yet to be determined. Yet these figures do
provide a strong argument that a rise in dollar commitment has been somewhat
parallel to the rise of attention in nano. But despite the generally sober
approach, nano investment, as well as nano attention, will likely see a sobering
as real market outcomes become more clear.

"The hype for this whole area is going to be over in about 3-5 years," says
Joe Lichtenhan of Hybrid Plastics, another speaker at the upcoming Nano
Republic Conference. "I just think that within three to five years the
market leaders for nanotechnology will be very apparent. And there will be a
portfolio of nanotechnology companies for the public to invest in. Once the
public market has appeared, and the clear market leaders are identified,
there may be some valuation readjustment. It will follow a similar trend to when the dot com companies went down, except with more standing companies. And by then the public's attention will have turned to something else."

by Wendy Hall
Larta Staff Writer

The Nano Republic Conference 2002 - July 17
The Nano Republic Conference is a one-day Larta event featuring world-class speakers and highlighting California-wide nanotechnology efforts. The Nano Republic Conference will serve as a serious examination of the current state of nanotechnology and focus on its near-term developments and constraints. The Nano Republic Conference will bring together all current industry segments and leaders from industry, academia, labs and the capital markets. Registration for the Nano Republic Conference will give you free admission to the ZONE Club dinner reception and program.
more information >

The ZONE Club - July 17
Immediately following the Nano Republic Conference the ZONE Club will host a dinner/networking event featuring one of the leaders of the venture capital community. Steve Jurvetson, Managing Director, Draper Fisher Jurvetson, will speak on "Nanotechnology: What's Hot, What's Hype, What's Not"
6-7 Networking, cocktails and great food
7-8 Program
8-9 More networking, food and drink
more information >