Will 'Nano' Be Next 'Dot-Com'? Tiny-Tech Believers Dream Big
Taking many start-ups public a few years ago was simple. Just add ".com" to the company name.
Shares of Internet firms shot up the first day of trading, even if they had murky business plans.
Will "nano" be the next cue that investors can't resist? Perhaps so. Dozens of start-ups are popping up with the "nano" label. They're involved in nanotechnology - making supersmall particles and devices. Nanotech firms plan to improve industrial materials, electronics and medicine. About 30% of nano start-ups hope to go public within three years, says the NanoBusiness Alliance, an industry trade group.
Investors were burned when most dot-coms died. This time will be different, say nanotech believers.
"There was a superficiality about dot-coms," said Charles Harris, principal in Harris & Harris Group Inc., a venture capital firm.
"Nanotechnology is a lot more substantive. It's very hard to do. There's serious intellectual property. It's not an easy business to get into. There was nothing proprietary about dot-coms." Government and venture capital funding of nanotech firms is soaring. In fiscal 2003, federal money for the National Nanotechnology Initiative could reach $679 million, up 150% from $270 million in 2000.
Venture capital firms put about $250 million into nano start-ups in 2001. That could easily double this year, observers say. Big computer firms, like IBM (IBM) and Hewlett Packard Co. (HWP), are investing big money in nanotech. Oil-and-gas giant ChevronTexaco Corp. (CVX) and drug firm Eli Lilly & Co. (LLY) recently opened funds that plan, in part, to invest in nano start-ups. Several states - including California, Texas, New York and Pennsylvania - are setting up nanotech research areas. Not that nanotech is new. The high-power microscopes needed to pursue nanotech work have existed for about 20 years.
To some, it's been the next big thing, like superconductor materials, for awhile. In 1986, futurist Eric Drexler, head of the Foresight Institute, described self-replicating nanomachines that would solve many of the world's problems. About 150 start-ups have been spawned, mostly by university labs, says Peter Hebert, co-founder of Lux Capital. It's a venture capital firm focused on nanotech. 'Sophisticated Science'
Hebert says the nanotech firms are different from dot-coms.
"There was some electrical engineering and computer science behind the Internet's advances," he said. "But most of the dot-com craze involved marketing. With nanotechnology, you're really dealing with sophisticated science."
Nanotech firms make things smaller than 100 nanometers. A nanometer is one-billionth of a meter.
One nanometer is 75,000 times smaller than the width of a human hair. Viral cells inside the body are 100 nm in size. If nanotech firms work on a slightly bigger scale - above 100 nm - they're often involved in microelectro-mechanical systems, or MEMs.
"The science is new. You have to look at the individual applications and markets." Advances in nanotech are capturing public attention at scientific meetings. Nanotech is expected to be a hot topic at the American Association for the Advancement of Science's annual meeting Feb. 14-18 in Boston. Science magazine, published by the AAAS, named nanoscale computing circuits as the breakthrough of the year in 2001. Many nanotech start-ups are targeting the computer chip industry.
BY REINHARDT KRAUSE
INVESTOR'S BUSINESS DAILY
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