Investing in nanotechnology

In this issue of NanoNews-Now Editor Rocky Rawstern covers investing in nanotechnology via interviews with Douglas Jamison (of Harris & Harris Group), Bo Varga (of Silicon Valley Nano Ventures), and Norm Wu (of Alameda Capital).

Off the main topic: Dr. Pearl Chin (in the next in her monthly series) contributes an article titled Nanotech Environmental Activist Shenanigans.

Select quotes:

NN: 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

NN: 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.

NN: 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.
—Doug Jamison Vice President of Harris & Harris Group

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NN: 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.

NN: 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.
—Bo Varga Managing Director of Silicon Valley Nano Ventures

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NN: What are some of the worst bits of misinformation when it comes to nanotech investing? Who perpetrates it, and why?

"Nanotechnology is too far out there to be interesting from an investment perspective." - this is too much of a generalization. Many areas of nanoscience research are indeed too early for venture investors with a limited time horizon. Quantum computing. Molecular electronics. Nanodevices for targeted drug delivery. Yet there are many areas where nanotechnology is producing revenues today, or will be in the short term. Coatings for scratch resistant glasses. Smart fabrics. Advanced thin film photovoltaics on polymer substrates. Low power, organic silicon displays.

NN: 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.

NN: 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.
—Norm Wu Managing Director of Alameda Capital