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Dawn of the Nano-Age
by: Jae Kim
November 1, 2004
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Page: 1 2 3 4
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The proposed model is to fund universities to hash out the scientific fundamentals
of nanotechnology: quantum physics, chemistry, and so on. Once an idea finds merit,
it can be spun out of academia into a private start-up. Capitalistic mechanisms,
which include additional grants from the Nanotech Act, venture capital, and the
public market will then march the product towards commercialization.
But the nanotech party is not confined to the government. Billions are being poured
into nanotech research by private corporations: IBM, Intel, Dupont, and others. And
venture capitalists are also pouring hundreds of millions into the nano pot. If you
look globally, the Japanese government last year spent slightly more than the US
(which spent $783 million in 2003). And the European Union spent about half as much
as the US. In 2004, global nanotech investments are estimated to reach $8.6 billion.
In this macro perspective, the writing is on the wall. Governments and major
corporations all over the world are placing a huge bet that nanotechnology is a
significant part of our future. The stakes are high. We are embarking on the next
industrial revolution. We are at the dawn of the Nano-Age.
As an investor, one should focus on near-term commercial possibilities. One major
difference between the coming nano-investing frenzy in the latter part of this decade
and the Internet dot.com frenzy of the late 1990's is that back then, it only took
an interesting idea and a business plan to get started. Your neighbor working in his
garage could have been a promising dot.com entrepreneur. With nanotechnology, however,
it is not possible to boot strap on a small budget. Achieving breakthroughs in
nanotech requires expensive high tech equipment to run experiments as well as
scientific training. In other words, nanotech companies require assets and
correspondingly will have substantial book value. But you shouldn't let this
difference lull you into a sense of greater safety as you consider investing in
public nanotech firms. Already, Nanosys, a capital hungry start-up, tested the grit
of investors by trying to launch an IPO this past summer. The investment bankers, who
for once acted properly as guardians of the investment community, shunned the offer.
With a loss of $9 million on revenue of $3 million in 2003, it found the Nanosys
formula distasteful. But this is probably only an isolated instance of sanity. It
is highly probable that as nanotech firms begin producing more commercial products
in the latter part of this decade, that a nanotech frenzy will engulf the stock market.
And in the absence of a statute preventing profitless firms from going public, the door
will inevitably open for future Nanosys' to go public.
Also, you should ask whether nanotechnology (most of which is still largely theoretical
science) will ever pan out. You only need to reflect back five years to the 3G
(third generation wireless) debacle. Major telecoms spent billions to purchase wireless
spectrum only take on mountains of debt and stand helpless as the promise of a 3G
wireless infrastructure withered away. The 3G market, for most of the world outside
Japan and South Korea, never materialized.
A difference, however, between 3G and nanotech is that 3G involved an industry of
telecom competitors who were terrified of not participating in the future of wireless.
Those fears drove up spectrum prices and resulted in misguided decisions. With
nanotech, we are witnessing a grassroots and holistic effort beyond one industry.
Academia (universities), corporations (all major industries), governments, the
scientific community, and venture capitalists will all play a role in an integrated
nanotech advance. It is one thing to see an isolated industry fall into group-think
that causes everyone to run in the wrong direction. But it is quite another for
society to miscalculate on such a wide scale. The bottom line is simply that there
is a preponderance of evidence that nanotech has legs. And it is with irony that
working with the smallest known matter will result in the biggest technologic impact
on modern history.
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