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What Does Nanotechnology Mean to Venture Capitalists?

Venturecapitaliststodayaremorecautiousthaneverbefore,notonlybecauseofthe internet bubble, but also because nanotechnology is still in its infancy. Healthy scepticism is a trademark of the profession, one that is valued more these days than in the boom times. Most in the venture capital community are still focused on digesting theirearlierinvestmentsfrompreviousyears.Bydefinition,theamount of new investment per year is only a small fraction of the total amount of funds under management. Very few new funds are being formed that focus on nanotechnology.



The top-tier venture capital firms are always alert to the possibility of new breakthrough technologies and will fund a very small number of start-ups. Startups need to rely on the few smaller, specialist firms that have the resources to support a nanotechnology company. Significantly, the history of investments in advanced materials has not been encouraging. Licensing as a primary business model is, in general, not appealing because companies that only license out their technology will generate very attractive profits but not large revenue streams. Such enterprises don’t grow to become big companies which would be valued highly by the public stock markets, so an initial public offering of stock is unlikely to be the exit strategy of choice. More often, the technology and the company are acquired by a major corporation that may be a strategic partner initially, or even a competitor. The path to tangiblevalue creation is long and arduous. This situation with nanotechnology start-ups actually poses a bit of a quandary for venture capitalists. They can clearly perceive the substantial market opportunities, but they cannot clearly see the path to commercial success. The increasing multitude offactors faced by entrepreneurs are shared by aventurecapitalist who is willingtoinvest.Venture capitalistsaremostcomfortablewhentheyunderstandthe business model, one that is based on previous successful experience, butwhich also includes new features to deal with the current risks. Today, venture capitalists tend to be specialists in certain areas of technology: software, semiconductors, wireless technologies, biotechnology, medical devices, etc. Venture capitalists rely on realworld experience as the most valuable asset of a management team, so they must apply that same rule to their partners, if not themselves.


Who are the experts in nanotechnology? Partners with a strong background in the chemicals or materials industries are relatively rare in the venture capital world.The situation is reminiscent of the early days of biotechnology. In the days of Amgen and Genentech, there were only biologists, biochemists and pharmacists, as well as chemists and chemical engineers. What was a biotechnologist? Today the term is broad enough to include all the earlier specialists, plus people who look at the business from a different, unique point of views. Before venture capitalists will invest large amounts of money in nanotechnology start-ups, they will have to develop not only technical expertise, but more importantly, a new and different point of view about their investment strategy. At this point in the development cycle of the technology, the smart investors are looking at powerful technology platforms with broad patent coverage of multiple market opportunities. Some nanotechnology start-ups have more than one hundred patent applications, with some already issued. Again likethe biotech industry, establishing strong intellectual property positions is going to be extremely important for startups, for defensive as well as aggressive strategies.


Nanotechnology Law & Business
Nanotechnology and the Best Mode
MATTHEW J. DOWD , NANCY J. LEITH and JEFFREY S. WEAVER
ABSTRACT The number of nanotechnology-related patent applications being filed with the Patent & Trademark Office (“PTO”) has steadily increased over the last few years—a trend that is certain to continue. One factor driving this trend is the need for nanotechnology start up companies to present a vibrant patent portfolio in order to attract much needed investment dollars. Associated with this increased patent activity, patent practitioners are faced with the challenge of certifying that such inventions comply with the traditional patentability standards. In this article, Matthew J. Dowd, Nancy J. Leith and Jeffrey S. Weaver address the particular challenge of ensuring a nanotechnology invention’s compliance with the “best mode” requirement of Section 112 of the Patent Statute. Following a detailed discussion of the best mode requirement in light of Federal Circuit precedent, Dowd, Leith and Weaver outline several helpful suggestions that may benefit the patent practitioner in prosecuting nanotechnology applications with an eye toward avoiding allegations of best mode violations should the patent be later litigated. Important considerations are included regarding the best mode requirement and due diligence investigations, and the pros and cons of trade secret protection for nanotechnology inventions are briefly discussed.
http://pubs.nanolabweb.com/nlb

A JOINT ECONOMIC COMMITTEE STUDY ON NANO TECHNOLOGY
Abstract
Enhanced abilities to understand and manipulate matter at the molecular and atomic levels promise a wave of significant new technologies over the next five decades. Dramatic breakthroughs will occur in diverse areas such as medicine, communications, computing, energy, and robotics. These changes will generate large amounts of wealth and force wrenching changes in existing markets and institutions. This paper discusses the range of sciences currently covered by nanotechnology. It begins with a description of what nanotechnology is and how it relates to previous scientific advances. It then describes the most likely future development of different technologies in a variety of fields. The paper also reviews the government’s current nanotechnology policy and makes some suggestions for improvement.