Investing In Nanotech

Douglas Jamison Vice President of Harris & Harris Group

What is your definition of nanotechnology?

Harris & Harris Group, Inc. invests in tiny technologies, which we define as nanotechnology, Microsystems and microelectromechanical systems (MEMS). Our primary focus is nanotechnology. One must remember that we invest in what we hope are good business opportunities, not definitions. It just so happens that we focus on business opportunities that leverage proprietary technologies that happen to be at the nanoscale. With that in mind, we tend to define nanotechnology as the creation of useful materials, devices and systems through the engineering of properties at the nanoscale and the unique properties and phenomena observed in this size regime.

How many nano investments have you made to date?

As of September 30, 2004, we have 16 tiny technology companies in our venture capital portfolio. Fourteen of these companies are working at the nanoscale.

With which companies have you invested, and in which round? (Seed, A, B, C)

Our web site lists the companies we have invested in, although Cswitch, Inc. and Crystal-IS, Inc. are being added to the web site. We are focused on having the best tiny technology investment opportunities in our portfolio, and hence, we invest in companies anywhere from seed rounds through IPO, depending on the investment opportunity.

In a typical investment, are you the Lead Investor, Co-Lead, or part of a Syndicate?

In our current portfolio of tiny technology companies, we have been the lead investor and we have also been part of a larger syndicate. We believe that because of our focus on nanotechnology, we need to invest with syndicate partners that have domain expertise in the industry in which a company will be selling products into. Because of his we often syndicate with other value-added top tier venture funds.

Which specific nanotechnologies will you invest in in 2004? Which are you likely to invest in in 2005 and 2006?

We consider ourselves opportunistic, “bottom-up” investors. We don’t look for tiny technology companies in certain industry domains, but rather evaluate opportunities as we discover them or are introduced to them. Currently, of our 16 investments, we consider 4 materials companies, 6 electronic companies, 3 photonics companies, 2 nanobio companies and one an instrumentation company. For 2005, we will invest where the best opportunities present themselves. However, as the area of nanotechnology matures, I believe you can look for our portfolio to evolve towards more integrated nanotechnology solutions.

How many new investments do you anticipate in 2004? In 2005? In 2006?

We have made five new investments thus far in 2004. I would look for a few more this year, and I would assume we will continue on our average pace of 5-7 investments each year. As our capital base grows, I believe you may see us put more capital to wok in the opportunities we invest in as well.

What is the typical initial investment size or range?

We invest an amount that we believe is both appropriate for the company and appropriate for us such that we have a reserve amount for follow-on investments. Because the business of nanotechnology is so new, I don’t believe anyone has an accurate idea of how much reserve capital will be necessary, and it is critical to be able to have capital to invest in follow-on rounds when necessary.

What is the typical total investment size or range?

See above.

What are the typical sources for deals? Outside referrals? Referrals by associates? Conferences & events networking? Blind submissions by Internet or mail? Other?

We have looked at over 225 business opportunities in 2004. These opportunities come from research institutions, other venture capital groups, the companies themselves, our directors and associates and through unsolicited channels. I believe that because we are active in the space, nanotechnology companies know that their plans will have an audience from Harris & Harris Group. Access to quality deal flow is essential for venture investors, and it is important to remember that we have seen over 225 business opportunities but only invested in five in 2004.

What is your desired realistic time to liquidity?

We have publicly stated that we believe that from first dollar in to last dollar out, we would like to maintain our traditional five to seven year horizon. Our historical data is actually closer to 3.5 years from first dollar in to last dollar out. Because we have permanent capital, we have more flexibility, and we tend to view our investments in tranches, averaging a holding period of 2.8 years per tranche.

Regarding due diligence: do you complete it in-house or use outside consultants for technology? Markets? Other?

We have hired a capable team with the requisite skills of deep technology experience, deep intellectual property experience and deep venture capital experience. We tend to do a lot of the diligence in house, but we use consultants to help round out our diligence process.

In your opinion, what is the single most important factor in investing? Entrepreneur? Team? Technology? Market? Investors? Other?

Venture investing is a dynamic process, and it is never one item that causes you to invest, although it may be one item that causes you not to invest. We tend to focus on whether the opportunity has the right team to drive the right technology solution to a large market opportunity. We believe this often takes investors with a certain combination of skills as well. Each opportunity is evaluated on its merits for its business opportunity.

Typically, what is your contribution to companies with whom you invest? Team Building? Strategic Alliances? Sales? Marketing? Strategic advice? Keep CEO focused? Other?

We have focused our value add on deep technology experience in nanotechnology and deep understanding of technology transfer and commercialization. We believe both skill sets are critical for investing in early-stage tiny technology companies.

Overall, what do you like about nano as an investment area?

I like the opportunity to invest in the research coming out of a few of the premier research labs in the country in an emerging area of science that often provides for broad intellectual property coverage before too much capital chasing too few deals has led to capital market myopia. Just as in the early days of biotechnology, the quality of people is astounding, and I spend most of my days being the dumbest person in the room, which means I am always learning something.

In your opinion, how important is Silicon Valley?

Silicon Valley will be important to certain aspects of nanotechnology, but I believe the world and the opportunity is too broad to have any one area of the country totally dominate this opportunity. Nanotechnologies are sets of enabling technologies, and I would guess that certain areas of the country will hope to dominate certain sets of this technology development.

Bo Varga Managing Director of Silicon Valley Nano Ventures

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What is your definition of nanotechnology?

The control of atoms and molecules leading to the ability to synthesize nano materials by design or to construct nano-devices.

By your definition, how many nanotech investments have you made to date?

Five

With which companies have you invested, and in which round? (Seed, A, B, C)

OptivaInc, Nanospire, Nanostellar, Tailored Materials Corporation, Integrated Nanosystems, A round

In a typical investment, are you the Lead Investor, Co-Lead, or part of a Syndicate? How is each role different from the others?

Part of Syndicate. Lead Investor negotiates funding terms and conditions as laid out in Private Placement Memorandum and makes the largest single investment in the deal. Co-Lead is usually the second largest investor, sometimes the lead on A round will be the Co-Lead on the B round as a new Lead is needed to set the increase in valuation. The Syndicate are the followers of either the Lead or Co-Lead or connected with the company - investors who want to participate but not be responsible for the financing. Usually Lead and Co-Lead have board seats while other Syndicate members do not.

As things stand today, which nanotechnologies will you likely invest within the next five years, and why?

Tools - required for all applications development and market sizing, channels, penetration is easiest to model. Software - same comments. Materials - basis for all applications and same comments.

How many new investments do you anticipate in 2005?

Two, possibly three.

What is the typical initial investment size or range?

Syndicate members typically invest $250,000 to $1 million, depending on size of round.

What is the typical total investment size or range?

Typical total investment is in the $1 million to $3 million range for Syndicate members.

What are the typical sources for deals? Outside referrals? Referrals by associates? Conferences & events networking? Blind submissions by Internet or mail? Other?

Referrals by professional network, mostly outside referrals. Networking events. Blind submissions are 95% junk - if a startup does not have ability to professionally network then very unlikely to be a fundable deal.

What is your desired realistic time to liquidity?

3 to 7 years

Regarding due diligence: do you complete it in-house or use outside consultants for technology? Markets? Other?

In house primarily, including reliance on board of advisors and venture partners. Some outside consultants, especially academic or corporate. Corporate often from limited partners in VC fund who are looking for "windows into emerging technologies."

In your opinion, what is the single most important factor in investing? Entrepreneur? Team? Technology? Market? Investors? Other?

Entrepreneur first - either capable of building a company or willing to hire management who is. Team second. Technology, Market Sizing/Channels/Penetration, Ability to scale from proto to product, ability to recruit quality investors, etc. is all dependent on the entrepreneur and the team. All investors invest in people, including those who claim they invest in technology or markets.

Typically, what is your contribution to companies with whom you invest? Team Building? Strategic Alliances? Sales? Marketing? Strategic advice? Keep CEO focused? Other?

Typically interaction is with CEO via board meetings and some coaching and mentoring. Investors can be useful in terms of introductions to relationships, however CEO and team have to "sell" partners and develop business relationships. Certainly strategic advice. Keeping CEO focused is primarily done via board meetings - is the company on plan regarding product development and sales

Overall, what do you like about nanotech as an investment area?

Potential to build a major enterprise by investing in a quality team developing a fundamental technology. Potential to dominate a niche and reap extraordinary returns via an M&A exit.

What advice do you give to individuals regarding investing in nanotech?

Either build a portfolio of public companies or private companies, but definitely build a portfolio of 7 to 9 companies to assure (i) ability to ride the wave and (ii) potential winner.

What are some of the worst bits of misinformation when it comes to nanotech investing?

That the path ahead is up, up, and away, all new technologies back and fill and while the 20 year or the 50 year projection is straight up, the 5 year or 10 year reality will have down as well as up waves in valuation.

Who perpetrates it, and why?

Information providers including books, consultants, seminars, etc. who hype "what's new" and hustle newcomers for money to share their "knowledge." Newsletter providers who take a short term success trend (e.g. nano stocks are up 50% in one year since we advised you to buy) and imply that this guarantees a long term trend - several major newsletter purveyors have recently fallen prey to "irrational exuberance."

Norm Wu Managing Director, Alameda Capital.

What is your definition of nanotechnology?

At Alameda Capital, we view nanotechnology as the commercialization of technology that takes advantage of unique phenomena that exist at the atomic and molecular scale, giving rise to new and useful properties at the macro scale. Examples of such phenomena might include surface effects (such as what you get when nanoscale fibers repel liquids by changing the surface tension of a fabric), molecular forces (such as the Van der Waals forces that provide the potential for next generation non-volatile semiconductor memory based on the natural attraction of closely spaced nanowires with one another), thermal vibration (such as selectively directing thermal vibration energy to harmful bacteria to break them down), or quantum effects (which will someday enable high performance quantum computing). Commercialization is the key word that differentiates real nanotechnology from nanoscience (which is basic research at the nanoscale).

Our investments will be in the traditional market sectors of IT, life sciences and energy where the convergence of multiple technologies, including advanced materials, creates an opportunity for new companies that can integrate such multiple disciplines to capture share with a proprietary set of products. We call this "convergent technologies." Many, but not all, of these opportunities will stem from nanotechnology.

By your definition, how many nanotech investments have you made to date?

As we have not yet completed the fundraising for our fund, we have not yet made any investments. We have reviewed over 100 investments that fit our nanotech definition to provide feedback to entrepreneurs and other prospective investors, and to refer entrepreneurs to other sources of capital.

With which companies have you invested, and in which round? (Seed, A, B, C)

None yet, see #2 above.

In a typical investment, are you the Lead Investor, Co-Lead, or part of a Syndicate? How is each role different from the others?

Many if not most companies involved with nanotechnology tend to be early stage, since much of the nanoscience research has taken place in the last few years. Because of the significant operating and entrepreneurial experience of our partner group, we have the ability, interest and expectation to lead a significant percentage of early stage investments we make -- perhaps 30-50%. These might be spinouts from research labs where the founders have very little business or start-up experience, or they may be start-ups initially funded by angel investors that are seeking their first professional venture capital. As a lead investor in an early stage company, we will be very active, helping the management team with many things: recruiting additional members to fill out the team, developing the business strategy and plan, forging alliances with key partners and customers using our global business and research network and corporate limited partner base, supporting operations as necessary or raising additional rounds of financing. We will of course be on the Board.

With companies in which our initial investment comes at a later stage, we may take the lead or be part of the investment syndicate. If a promising company is in a geography where we are not readily accessible to the management team, we will consider being part of a syndicate if that deal is led by an investor with similar experience, values and perspectives as us. In such cases, the Alameda team will continue to offer assistance where needed, but will play a support role to the company and lead investor. We will typically require at least Board observer rights in those cases.

As things stand today, which nanotechnologies will you likely invest within the next five years, and why?

We are currently excited about a number of sensor and imaging technologies for security and medical diagnostics, new display technologies, next generation semiconductor devices (first memory and later logic), and certain alternative energy technologies. Each of these have large existing markets, reasonable capital requirements, good technology maturity, and talented entrepreneurs who have developed a compelling value proposition based on the convergence of nanotechnology with other technologies.

How many new investments do you anticipate in 2005?

We anticipate making 4-6 investments a year, starting approximately mid-2005.

What is the typical initial investment size or range?

Because we are willing to consider investments at an earlier stage than many venture capitalists, we expect our initial investment to be as little as $200 thousand, or as much as $1.5 million. If more is needed at the initial investment stage, then we will typically seek to syndicate the deal.

What is the typical total investment size or range?

Our typical total investment in a company will be on the order of $4 million. In almost every case, we expect there to be multiple investors over multiple rounds, so the total funding for any one of our portfolio companies will be much greater.

What are the typical sources for deals? Outside referrals? Referrals by associates? Conferences & events networking? Blind submissions by Internet or mail? Other

We have an extensive global network of scientists, entrepreneurs, venture capitalists, angel investors, limited partners, consultants, lawyers, accountants and bankers who routinely refer prospective portfolio companies to us for consideration. We also evaluate many opportunities that come to us as a result of our extensive conference speaker schedule and media coverage. We are especially proud of the close relationships we have developed with leading researchers and management at many of the most prestigious universities and national labs on the West Coast including Stanford, Caltech, many of the UC campuses, CNSI, Lawrence Livermore and Berkeley National Labs, and NASA Ames. These relationships often give us an advanced look at some of the most promising start-ups 6 to 9 months before they are ready to spin out of these institutions.

We will also look at unsolicited submissions via the Internet, but because these have not been pre-screened by someone we have a relationship with, we ask that entrepreneurs follow certain guidelines listed on our web site that include a one-page description of the business and an optional Executive Summary.

What is your desired realistic time to liquidity?

Ideally, 3 to 6 years, with many around 5 years. This timeframe is driven by the kinds of returns that limited partners have come to expect over the ten-year life of a typical VC fund. It also gives us an opportunity to work with a management team over a number of years to add enough value to have an attractive liquidity event. There will be, however, some great opportunities we will have to pass on simply because the gestation period is too long.

Regarding due diligence: do you complete it in-house or use outside consultants for technology? Markets? Other?

Primarily in-house, which includes our Advisors. For technical due diligence, we have an extensive Scientific Advisory Board comprised of world-class experts in various nano- and convergent technology disciplines. Their role is to evaluate the competitiveness of the start-up's technology, the strength of their technical team, and the realistic timeframe to commercialization. Most of these advisors are listed on our web site. These advisors also provide access to an even larger network of experts if more specialized technical expertise is required. The Alameda partners will do most of the business and management due diligence, consulting outside experts if and when necessary.

In your opinion, what is the single most important factor in investing? Entrepreneur? Team? Technology? Market? Investors? Other?

Definitely team. Any experienced entrepreneur or investor will tell you it is rare for the technology or the business to evolve according to plan. Management teams that have the passion, intelligence and teamwork to realize their vision will find a way to evolve their technology and adapt their strategies, plans and organization to make it happen.

Typically, what is your contribution to companies with whom you invest? Team Building? Strategic Alliances? Sales? Marketing? Strategic advice? Keep CEO focused? Other?

We help entrepreneurs build great success stories by providing a broad range of support. I've attached a description below of how we do that from our web site.

Nanotech Environmental Activist Shenanigans

In a Thursday, October 28th, 2004 Washington Post article titled "Nanotech Group's Invitations Declined" (by Rick Weiss), the article spoke about how three key environmental activist group representatives were invited but had declined to join the International Council on Nanotechnology (at its inaugural meeting in Houston on October 28, 2004). This council was organized as an international group of industry, government, academics, environmental and social organizations, formed to identify and address potential risks of nanotechnology before the risks become real problems, and to quickly fund the research. The representatives cite that they declined for now because they doubted the initiatives would serve the public interest.

Industry does not have a wonderful track record when it comes to social and environmental responsibility, but things have improved much since the ills of the Industrial Revolution, and there is still room for improvement. So they should be allowed the room and latitude to improve.

With $500,000 in industry donations, the council hopes to answer questions about risk, and advise governments on how best to regulate new substances. The attempt at preemptive cooperation drew praise from some who have opted to join. However, none of the three invited representatives of environmental groups has agreed to join the newly created International Council on Nanotechnology.

Jennifer Sass of the Natural Resources Defense Council said the group's "heart is in the right place" but worried that it "may be heavily influenced by industry because that's where the funding is coming from." Scott Walsh of Environmental Defense in Washington - who will attend to listen but not as a member - expressed similar concerns.

One representative stated that they wanted their name removed from the membership list because the group - "funded almost entirely by industry - seemed more interested in easing public jitters than in actually doing something about the potential risks of nanotechnology." Easing public jitters and actually doing something about the potential risks of nanotechnology are not mutually exclusive; you cannot actually not do something and expect to ease public jitters.

I do not think the International Council on Nanotechnology would refuse funding from non-industrial sources if the activist groups wanted to raise some funding themselves. Did they ever offer to help this initiative? Were these activist groups not aware of this Council being formed from such high profile participants as DuPont, Mitsubishi, L'Oreal, non-profit organizations like Woodrow Wilson International Center for Scholars, and the U.S. federal government? Did they actively participate in forming of the Council's makeup and objectives instead of just waiting to be invited to join?

Of course big business will fund an initiative like this. They must because they must demonstrate that they are addressing societal concerns in order to maximize their profits. If their products are not proven safe, they will not make money because people will not buy a dangerous product. The federal government provides economic incentives if they actively participate in promoting safety on the job, and develop and meet compliance requirements.

Pat Mooney of the Ottawa-based citizen's organization ETC Group was also critical of the group's claim to be "international," saying that "it doesn't cut it to have Mitsubishi from Japan and L'Oreal from France. Two-thirds of the globe is left out in this process, including most of the world's poor." He declined to join because "the whole tone of the approach is 'How can we convince society we're nice guys?'" and he said "that's just not going to fly."

However, this is exactly what industry must do. Industry must prove to their potential customers that they are nice guys, otherwise we, the public, will not buy their products and they will not make money to enable their existence and provide products that we need. When the Exxon Valdez - in the worse oil spill in U.S. history - accidentally dumped over 11 million tons of crude oil along the Alaskan coast, we the public showed our displeasure for their lack of an expedient cleanup by boycotting their gasoline. We the public also work for these corporations. Each one of us, as human beings and citizens - not just of our countries but of the world - has a responsibility to monitor our work place to ensure that it adheres to its obligation to a safe environment and society.

When high performance composite technology was introduced, composites - which are a billion-dollar industry - were never targeted. This is interesting because carbon/graphite fiber and fiberglass were never targeted as potential environmental problems, though it seems they exhibit similar issues and dangers as with nanoparticles. Big business, academia, the EPA and OSHA did advise on how to handle these materials safely, at least when I was working with these materials as a graduate student. Perhaps composites were not as high profile to the media as nanotechnology to bother making a fuss about?

There are fears that some nanoparticles appear to be toxic and many are not covered by environmental and occupational health regulations. However, produced in large enough quantities, even naturally occurring nanoparticles, such as soot and carbon black, could endanger the environment and be harmful to humans, as was the case with coal miners' Black Lung Disease. Even asbestos is a combination of naturally occurring fibrous type minerals. Perhaps all that needs to be done to minimize safety hazards of nanoparticles is to modify existing OSHA standards?

Carbon or glass fibers, like nanoparticles, may be dangerous and useless on their own, but when they are typically mixed with something or encased in a supporting medium or matrix such as epoxy in a tennis racket, surf board or golf club shaft, they are relatively harmless. The point is not that the B2 Bomber or F16 fighter jets are harmless to society even though their composite structures are relatively harmless environmentally. The point is that nanoparticles confined either physically or chemically in another medium are as harmful to the environment as the current commercially available composite products in the market.

Do any of these activists own graphite fiber tennis rackets or golf clubs with graphite fiber shafts, or automobiles with fiberglass bodies? Even natural degradation over many years of even just the old wooden (wood is one of nature's composites) tennis rackets may release fine particles into the environment, but by then the tennis racket would probably have been disposed of for diminishing performance. I hope no one decides to chew on their tennis rackets to try and deliberately release carbon fiber particles into the air. They might break their teeth doing it.

I may seem to be harping on composites, but I do so as an example, as it was one of my areas of research expertise as a Ph.D. graduate student. The nascent nanotechnology concerns are not that different from what should have been concerns for now commonly accepted composite technologies that were revolutionary at the time.

Why do activist groups fan the fires of our fears? Perhaps their existence hinges on our having fear? In other words, without the fear, they would be out of a job. Without the fear, they would have no influence and no one would interview them for the public media about what is going to kill us next.

Are there ulterior motives for these groups not coming to a conference whose public intentions are to help alleviate and address the fears these groups trumpet about nanotechnology? How can one pass judgment on a group and its work that hasn't even really started working yet and without observing and participating and trying it first?

Are the dangers of nanotechnology (or any new technology for that matter) real but exaggerated? Are these the same mindsets that told me years ago that milk was bad for me too? Again, I concede that anything in large enough quantities can be toxic.

Perhaps these environmental groups are not coming to the conference out of fear of being proven wrong? What type of politics and games are going on in trying to improve the human condition?

So where is the incentive to address those fears? Does it seem that there is more to gain by these environmental groups to increase fear by stalling sincere efforts by big business and government to help alleviate these fears?

Mooney and others expressed more confidence in an effort being organized by the Dillon Colorado-based Meridian Institute (funded by the Rockefeller Foundation and Canadian Public corporation) called "The Global Dialogue on Nanotechnology and the Poor." "The Global Dialogue on Nanotechnology and the Poor" will focus on environmental and health concerns, and especially on nanotech's potential to help developing countries, such as by cleaning water and making cheap electricity.

First, the Rockefeller Foundation is a nonprofit organization, but the Rockefellers made their money as industrialists. It is industry's wealth that also fuels changes in society. Second, too many separate efforts causes factions. Factions, each operating on furthering their own cause, result in politics because their objectives are skewed. Is there a reason "The Global Dialogue on Nanotechnology and the Poor" cannot also be invited to pool their efforts and funding resources with the International Council on Nanotechnology, so we can have a balanced, cooperative effort?

Granted there are a lot of people trying to make money hyping the benefits of nanotechnology. However, power, influence and celebrity are also benefits of hype. Social and environmental activist groups do not have entirely altruistic motivations. No one here on earth is all good, and human nature is such that people do not do things that do not somehow benefit themselves. Hype goes both ways. There should be a healthier balance of optimism and skepticism about the benefits and problems with nanotechnology…as there should be with everything.

Solving the problems of the world requires cooperation from both sides. Without cooperation, the effort will fail. In other words, if one side decides not to come to the negotiation table, there is no hope. If one side invites the other to the table to negotiate and the other side refuses, then which party is not cooperating?

The other point being that we all live in the same world and on a basic level need and want the same things. Our goals and objectives are not that different nor unfamiliar even though the means by which we all wish to attain them are very different, as they should be because we are all different. There is always more than one way to skin the proverbial cat. As long as the cat gets skinned, the many different ways to do it can be accommodated by working together. Not everyone has the ability to skin the cat the same way so there can be no best way, but just a best way for each group or individual that can be a combination and/or overlap of others' approaches. In the end, the cat just has to be skinned.

Perhaps next time I should use a carving-a-turkey analogy instead of a skinning-the-cat one as many might be offended by the imagery, but it probably would not have the same impact.

In the end, we all want nanotechnology breakthroughs to help us, not harm us.

Stay tuned for next month's article.

NN: Overall, what do you like about nano as an investment area?

We see significant opportunity in materials science and in the manipulation of matter at the atomic scale. Catalyzed by critical tools such as the AFM and sequencing of the human genome, these advances promise to enable a host of new applications that are based on the often unique properties that are exhibited at such a small size. Carbon nanotubes, for example, are stronger than steel, highly conductive, and are precisely ordered. Far from being scientific curiosities, these structures may enable a new generation of nonvolatile memory, which is the focus of one of our portfolio companies, Nantero.
—Jennifer Fonstad, Managing Director at Draper Fisher Jurvetson, Investing in Nanotechnology

"Most high-tech VCs concentrate on one of three areas: information technology (IT), life science or materials. What we're seeing most interesting at Alameda Capital are those products based on a convergence of two or all three of these disciplines, say materials for use within IT," Wu said. "Convergence technologies promise to be extremely powerful, especially given the advances in nano- and micro-scale technologies. Companies are creating and investing in new materials with different structural and functional properties from anything previously known. The ultimate goal of this approach is deliberate and intelligent manipulation of atoms and molecules so that the resulting structure has desired properties and functions at the macro level."
—Norm Wu, Nanotech Gives Boost to Convergence Technologies

Oddly enough, VC firms find themselves competing with the federal government in some of the newer markets such as nanotechnology. Those areas still attracting dollars include convergence, particularly in biotechnology where electronics are being used in organic semiconductors and microelectrical mechanical systems (MEMS), as well as Web services and anything that reduces the cost of ownership for computers. But the process of getting that funding remains far more difficult than in the past, and the money is given out far less freely even though there's plenty available.
—Ed Sperling ... And The Ugly

Another factor H&H gauges when considering a startup is "ease of market entry," or how challenging it may be for a company to land real customers. Companies with truly new products – nano or not – often have a "disruptive" technology, one that may require a customer company to drastically change manufacturing processes, invest in new equipment or develop new employee expertise. For the moment, Harris and Melsheimer think that market entry is something of a disadvantage for small tech concerns.
VC Firm Harris & Harris specializes in small tech

Sales of products incorporating emerging nanotechnology will rise from less than 0.1% of global manufacturing output today to 15% in 2014, totaling $2.6 trillion. This value will approach the size of the information technology and telecom industries combined and will be 10 times larger than biotechnology revenues, according to a new report from Lux Research entitled “Sizing Nanotechnology’s Value Chain.” However, sales of basic nanomaterials like carbon nanotubes and quantum dots will total only $13 billion in 2014: Nanotechnology’s economic impact will arise from how these fundamental building blocks are used, not from sales of the materials themselves.
Revenue from Nanotechnology-Enabled Products

Leading economies have embarked on investing in R&D of Nanotechnology. For instance, the budget allocated by the European Union for Nanotechnology and Nanosciences is € 1 300 million for the period 2002 - 2006, whilst the Japanese government has quadrupled spending on nanotechnology, investing $ 466 million in 2001 alone. The US passed a nanotech funding bill, allocating USD 2.36 billion for the next three years. As a result to these significant R&D funds spent on nanotechnology, the number of patent applications to protect new products in this technical field will grow.
International symposium on nanotechnology and patenting

Nanotechnology is fast becoming one of the most promising and rapidly expanding fields of R&D. To make the most of European excellence in nanosciences, research must be translated into commercially viable products and processes.
—European Research Commissioner Philippe Busquin EU Adopts Nanotechnology R&D Investment Strategy

Unlike the many waves of technological development over the past decades, nanotechnology is not dominated by the United States. European and countries from the Asian-Pacific Rim have long realized that funding, specialization and patent knowledge are crucial to obtain market dominance. The nanotechnological perspective must be global since governments and corporations worldwide are investing in nanotech and research is active on several continents. Assuming the government and private investors can promptly establish less bureaucracy, more flexible investment schemes and continue R & D support, the prospects for the nanotechnology industry seem bright. Ultimately, the economic and social gains nanotechnology brings will be a result of the efforts of the private companies that commercialize applications of the science, and thus, the US needs to create an ideal competitive environment for these companies to prosper.
Molecular Engineering Commerce Forum 2004

Sander Olson: Will the current economic slowdown have a significant effect on the development of nanotechnology?

No. Economic slow downs affect the availability of R&D at the corporate level. This affects maybe 12 % of the net investment in nanotechnology. As long as the tax base holds and competing governments invest in the technological high-ground, R&D for nanotechnology will continue. What would tank investment globally would be if tax revenues drop off. If that happened, nanotechnology R&D would come to a screeching halt.
—Glenn Fishbine link

"Nanotechnology is not science fiction," explains the report's publisher and co-author, Tim Harper, CEO of Cientifica. "Consumers today can buy products that use nanotechnology, from pants to trucks to ski wax. Companies are commercializing several kinds of nanotechnology today and many more will come to market in the near future. Recent government and corporate investment-similar in scope to the human genome project-is paying off, as many new companies bring nanotechnology into our daily lives."
—Tim Harper, CEO of Cientifica

From Our Molecular Future: How Nanotechnology, Robotics, Genetics, and Artificial Intelligence Will Transform Our World, by Douglas Mulhall:

• What happens to the monetary system when everyone is able to satisfy his own basic material needs at very low cost?
• How would we use cash when digital manufacturing makes it impossible to differentiate a counterfeit bill or coin from the real thing?
• What happens to fiscal policy when digital information, moving at light speed, is the major commodity?
• How fast will monetary cycles move compared to, say, the ten- or twenty-year cycles of the late twentieth century, when products and patents go out of date in a matter of months instead of years?
• What happens when we don't have to worry about trade or social services for our basic needs, because most of what we need is provided locally with digital manufacturing, and the biggest trade is in information?
• How do we control the excesses of the ultrarich, the overabundance of the molecular assembler economy, and the challenge to intellectual property laws created by intelligent, inventive machines?
• What happens if half of all jobs are made redundant every decade?
• What happens to the War on Drugs when there's no import, export, or transport of contraband because drugs can be manufactured in a desktop machine using pirated software downloaded from the Internet?
• What happens to democratic controls when individuals can get as rich as small governments in a year or so?
• What's the relevance of insurance if many things are replaceable at very low capital cost, but liabilities from software are potentially unlimited?
• How should organized labor react when molecular assemblers and intelligent robots eliminate most manufacturing jobs?
• What is the nature of work going to be?
• What happens to land prices when an individual can build a tropical farm under a bubble in North Dakota, and get there from New York in an hour?
• What happens when everyone can go everywhere, whenever they want, and work from wherever they want?

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Issue #18 will cover self assembly. It will land in your mailbox December 6th, 2004.

Infamous Quotes:

"This 'telephone' has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us." Western Union internal memo, 1876
"Heavier-than-air flying machines are impossible." - Physicist and mathematician Lord Kelvin, President of the British Royal Society, 1895
"Everything that can be invented has been invented." - Charles H. Duell, Director of U.S. Patent Office, 1899
"There is no likelihood man can ever tap the power of the atom." - Robert Milikan, Nobel Laureate in Physics, 1923
"Theoretically, television may be feasible, but I consider it an impossibility-a development which we should waste little time dreaming about." - Lee de Forest, inventor of the cathode ray tube, 1926
"I think there is a world market for maybe five computers." IBM's Thomas Watson, 1943
"Landing and moving around on the moon offer so many serious problems for human beings that it may take science another 200 years to lick them." - Science Digest, August 1948
"Computers in the future may weigh no more than 1.5 tons." Popular Mechanics, 1949
"There is no reason anyone would want a computer in their home." Ken Olsen, Digital Equipment Corp, 1977

And the lesson is? It's a tough game to call.

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