Small Tech: Nanotechnology, Microsystems and MEMS
Background
In early 2002, Harris & Harris Group announced that it would concentrate its new business activities exclusively in a single focus: small tech, including nanotechnology, microsystems and microelectromechanical systems (MEMS) technology. Eight years earlier, the Company had invested in its first small tech company, Nanophase Technologies Corporation, a spin-off from Argonne National Laboratory, which subsequently completed an initial public offering in 1997. Harris & Harris Group sold its interest in Nanophase in 2001 and invested part of the proceeds of the sale in August, 2001, in privately held Nantero, Inc., a Harvard University spin-off developing a high density, nonvolatile random access memory chip using nanotechnology. Since then, Harris & Harris has made all of its new investments in small tech. At the 2002 Annual Meeting, shareholders will be asked to approve changing the name of the Company to Small-Technology Venture Capital, Inc.
Our decision to concentrate on small tech evolved over a period of years, since our 1994 initial investment in Nanophase, as we became convinced that small tech would be the next frontier for capital formation and company building. With the eventual prospect of significant small-tech applications in all types of commercial products, we believe that our portfolio will remain somewhat diversified, even with a small-tech focus.
Approach
Our fundamental approach to evaluating small-tech companies does not depart from the classical venture capital approach that we have taken over the years with other types of technology. This approach begins with these questions: does the prospect have solid management, a product or service that fills a real need, proprietary technology, and is it aimed at a market of significant size? We also look at ease of market entry and how challenging it may be for a company to secure customers. As early-stage investors, we also look at a startup's ability to attract additional investment, whether in later rounds of venture capital financing or through an IPO or acquisition, and we like to see the startup team include someone with proven experience launching and building a company. Overall, we look for proprietary technology as a good building block around which a company can grow, with people involved who care deeply about what they are creating and building.
As a public company with permanent capital, we have an appropriate corporate and capital structure for long-term commitment to small-tech entities. Over the years, Harris & Harris Group has been characterized by patient investing. It is not unusual for it us to have an investment in a company for seven years or more, as we did in Nanophase, our first small-tech investment.
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