Who’s Investing In Nanotechnology?

by Ketaki Sood, Larta Research Economist

Nanotechnology has been touted as the biggest thing in technology since the Internet, and the money is flowing. Nanotechnology is the development and use of devices that are only a few nanometers (one billionth of a meter or roughly 75,000 times smaller than the width of a human hair) in size, via the manipulation of molecules and atoms.  And growing Federal support of nanotechnology as well as increased venture capital funding in an otherwise gloomy investment environment are testament to the potential and promise of this industrial revolution.

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The President’s 2004 budget for the National Nanotechnology Initiative (NNI) increased 9.5% to $847 million, from $774 million in 2003, with the National Science Foundation (NSF) receiving the largest share of Federal nanotechnology funding ($247 million). Furthermore, in May 2003, the U.S. House of Representatives passed the Nanotechnology Research and Development Act allocating $2.36 billion over a three-year span for nanotechnology research to government agencies, including NASA, NSF, and the Departments of Energy and Commerce.

National Nanotechnology Initiative

Research and Development Funding in the President’s 2004 Budget

Source: Office of Science and Technology Policy

The Federal government isn’t isolated in its conviction in this rapidly growing science. Venture capitalists have joined the bandwagon as well, investing over $350 million in nanotechnology companies in 2002. According to Lux Capital, venture investments in the electronics, industrial products, and life sciences/nanobiotechnology segments of nanotechnology increased by over 200% between 2001 and 2002. Many nanotechnology companies have been able to receive funding despite the lackluster venture capital environment overall. Nanosys Inc., a nanotechnology company based in Palto Alto California, whose core technologies include developing nanostructures and nano-enabled systems for a broad range of industries, just closed a $30 million second round of financing earlier this year. Investors included high caliber venture firms who participated in the previous financing round, such as ARCH Venture Partners, CW Group, Polaris Venture Partners, and Venrock Associates, who were joined by new investors including CDIB BioScience Ventures, Harris & Harris, Lux Capital, and SAIC Venture Capital Corp. Although recovering from the dot com debacle and weary of the hype surrounding nanotechnology, venture capitalists continue to invest in the field as a slew of nano products have proven to be commercially viable in a challenging economic environment. The Nanobusiness Alliance predicts optimistically that venture capital investments in nanotech companies will surpass $1.2 billion in 2003.

Private corporations have initiated their own nanotechnology ventures as well. General Electric has recently begun to fund large amounts of nanotechnology research, ranging from far-reaching and futuristic projects that may never materialize to stable and short-term projects. Included in these are such projects as the creation of ceramics on a molecular level for use in jet engines, as well as projects including nanotubes, wires, and composites. Not to be excluded is IBM, which has accelerated its nanoresearch division with a large influx of cash in order to create better computer electronics along with machines that can easily mass-produce nanotechnologies. Technological breakthroughs by IBM have included the creation of a terabit memory cell, which can hold over a trillion bits of data, or twenty times the amount held by high-speed computers. To continue its reign at the top of the computer processor market, Intel has also realized the need to create new nanotechnologies. The Tri-Gate transistor is one of Intel’s current projects that aims to significantly increase the amount of electrical storage of computer chips. Hewlett-Packard has also been a strong competitor in the race for new technological breakthroughs in the nanotechnology space, creating new circuits for chips that measure less than one square micron. This technology has been a milestone in the company’s search for faster and better computer chips.

Growing concerns regarding the societal and ethical impacts of nanotechnology have caused many to question the large amount of funds that have been invested to further the science of nanotechnology. But such skepticism will be put to rest once nanotechnology’s influence on a broad range of industries including the life sciences, IT, defense, entertainment, and communications, to name a few, will begin to unfold. It is therefore no surprise that the NSF predicts nanotechnology to grow into a $1 trillion a year industry. A science at the molecular level it may be, but this is no tiny revolution we are talking about.

Coming soon from Larta Research, White Paper on the Nanotechnology Industry.

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