Nano in the 'Pour' House?

Are venture capitalists really pouring money into nanotech, as this story says?

Well, as an ex-president might say, depends on what your definition of "pour" is. Small Times' David Forman tracks the numbers, and he found that investors put $241 million into 29 small tech companies in the fourth quarter of 2003. Small tech accounted for 4.9 percent of the $4.9 billion in venture capital invested in the United States during the quarter. These are not pure nano numbers, though, since Small Times also tracks MEMS (microelectromechanical systems), an industry that is not only a bit larger (microns vs. nanometers), but also slightly more mature. As for nano, Forman reports:

On the nanotech front, notable fourth-quarter rounds included the $17.5 million funding of ZettaCore Inc. (News, Web) and the $18 million funding of Molecular Imprints of Austin, Texas. ZettaCore, a molecular memory developer, brought top tier venture firm Kleiner Perkins on board. Molecular Imprints, a maker of nanoimprint lithography tools, brought on strategic backers such as Japan's Hakuto Co. Ltd. along with distribution agreements.

CNet reports that nanotech VC kings Draper Fisher Jurvetson "will look to invest in about 15 additional companies per year. Among some of its requirements for investment: a business must be able to establish a large market within five years and avoid tangling with a well-established company such as Intel, DuPont or Dow Chemical."

Forman reports that customer- and product-focused companies were rewarded with VC money in 2003, and I'd expect that this trend will continue in 2004.

Steve Jurvetson told me in an interview last fall that he's attracted to nano companies that "integrate within the existing industry standards, and then slowly but surely infuse from within." In other words, hang on to your long-term vision, but have a short-term plan to sneak your technology into an existing product or process. Your average VC on the street, Jurvetson said, would have never heard of a molecular assembler, and once it's explained to them, their reaction would be, "Are you out of your mind? I'd never invest in something like that."

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