The truth about nanotechnology
Scientific journals, market research organizations and the financial and business press cover nanotechnology from every angle. Wall Street has jumped on the bandwagon: Merrill Lynch published the first nanotechnology equity report this September. Science magazine named nanotechnology the Breakthrough of the Year, and NEC has touted its nanotechnology research in corporate ads.
Unfortunately, all this attention has done more harm than good. In an inevitable backlash, many analysts are bearish on nanotechnology's outlook. By some measures, they're right. Nanotechnology is still maturing as a science, let alone a technology. Only a handful of companies--Veeco Instruments, Perkin-Elmer and FEI Corp.--with nanotechnology-based products have been profitable.
However, the focus on nanotechnology as a "market space" is misdirected. Nanotechnology is an enabling and potentially disruptive technology that can solve problems in industries as disparate as telecom, biotechnology, microelectronics and energy. Currently more than 100 start-ups are developing nanotechnology-based products that will be marketable in the next three years.
Applications of nanotechnology are enabled by nanomaterials, which have novel optical, electric or magnetic properties. These materials include semiconductors, metals, metal oxides, carbon materials and organics, and are the infrastructure or building blocks for nanotechnology.
A nanometer is about 100,000 times smaller than the diameter of a human hair, which means nanotechnology-based devices work on a very, very small scale. The size of a nanometer is important because quantum mechanical properties of electronics and photons and atomic interactions inside matter are most heavily influenced at that scale. Think of a pebble thrown in a pond whose waves ripple outward across the entire surface of the water; the pebble is much smaller than the mass the water, yet it can affect its behavior in its entirety. Nanometer-scale structures can control fundamental properties of materials without changing the materials' chemical structures.
Companies working with nanomaterials fall into six categories: nanomaterials and nanomaterials processing, nanobiotechnology, software, nanophotonics, nanoelectronics and nanoinstrumentation. There are just under 50 companies focused on the nanomaterials and nanomaterials processing markets. These companies, part of the next level of infrastructure building, are developing the materials and methods to manipulate and manufacture nanomaterials-based products.
Of the other five categories, the most promising are nanophotonics, nanobiotechnology and nanoelectronics. These areas use nanomaterials and nanoscience concepts that have evolved rapidly and are becoming broadly understood. Start-ups with the most potential in these areas have significant "know-how" as well as a strong portfolio of intellectual property, world-class researchers and a product under development that targets a specific and large market.
Nanophotonics companies are developing highly integrated optical-communications components using nano-optic and nano-manufacturing technologies. This approach to manufacturing optical components allows rapid prototyping, high-performance advantages, smaller forms and lower costs.
Nanobiotechnology is a hybrid discipline that combines biology and nanoelectronics. Nanobiotechnology companies are building a variety of biological diagnostic tools from an array of tiny sensors that can detect specific biological molecules or individual strands of DNA. These devices will provide far faster, cheaper and more comprehensive diagnoses of complex diseases. For example, a single nanochip could provide a comprehensive diagnosis from one drop of blood, while other applications will include new tools for rapid drug discovery.
Nanoelectronics includes electronic and opto-electronic devices in which individual assemblies of nanometer-scale components function as active device elements. Potential nanoelectronics products include memory, logic, passive optical components, field emission devices, and flat-panel display and light-emitting diodes.
Nanotechnology investments may represent only 2 percent of the total capital raised in the first quarter of 2002, but that is a fivefold increase since 1999, according to PricewaterhouseCoopers. There are still chasms to be crossed in terms of product stability, but the outlook for companies using nanotechnology is strong. We need to keep in mind that nanotechnology is going to be a long-term investment.
Daniel Leff, a senior associate at Sevin Rosen Funds, has published several articles in peer-reviewed scientific journals and has been awarded two patents in the field of nanotechnology. Sevin Rosen is an investor in two nanotechnology firms, Luxtera and Nanomix.