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Big challenge for small technology

Nanotechnology offers a wealth of unrealised potential for investors. According to 3i’s white paper, “Size Matters. Building a Successful Nanotechnology Company”, nanotechnology is at the heart of applications that are already making money, yet is misunderstood, over-hyped and a long way from delivering its full potential. The white paper is based on a survey conducted by 3i in association with the Economist Intelligence Unit and the Institute of Nanotechnology. In a seminar launching the white paper, 3i director Ian Lobley said: “It is clearly a difficult time for anyone who is involved in technology which is precisely why we thought it was a good time to launch our white paper.” He describes it as a sector that is both “over-hyped and under-sold.”

Nanotechnology refers to any application of science dealing with elements between 100 nanometres and a tenth of a nanometre in size, in which size is critical to the application’s ultimate purpose.

Also speaking at the seminar with other contributors to the white paper, Ottilia Saxl from The Institute of Nanotechnology outlined the potential of nanotech: “In the US, the percentage of VC money invested in nanotech is greater than any other area at the moment.” Government commitment to the sector is also encouraging with increasing financial commitments from Japanese, US and European governments. Government support from the European Commission and the EU has increased by more than 40 per cent in over three years from e130 million in 1997 to e184 million in 2000.

The panel was asked, when raising a technology fund, how do you market nanotechnology to institutional investors? The answer is you can’t, says Ian Lobley. “Nanotechnology does not lend itself to a sector approach it touches so many industries. It is trying to understand how nanotechnology touches these industries that is the key,” says Lobley.

“To realise the potential of nanotechnology, 3i engages in its international network of technology specialists, with knowledge of a wide range of sectors including healthcare, advanced materials, IT, etc. We put together interdisciplinary teams to seek out and help build valuable business propositions.” Further findings from the white paper include successful sectors and the biggest challenge for nanotech companies. Smart paints, pigments and coatings show the most promise commercially over the next five years, according to 33 per cent of survey respondents, while 36 per cent said the biggest roadblock to nanotech progress is the challenge of finding and recognising the commercial applications of the science.

The US emerged as a leading player in all areas, while Japan is the global leader in electronic applications of nanoscience and Germany is set to be the trendsetter in chemical applications. The larger investments being made by the US government and Japanese companies compared to more modest European investment demonstrates why these regions are taking the lead. But the UK was still identified as one of the most sophisticated in the development of medical and pharmaceutical devices.

“It will take smart investors and companies to uncover the riches and rewards,” concluded Ian Lobley. Paul Atherton, an angel investor on the panel agreed: “Remember, getting the funding is no guarantee to success. Getting the money is the easier part becoming a successful company is the challenge.”

Size Matters, Building a successful Nanotechnology Company is the third in a series of reports that 3i has published. The first was eSecurity: 2002 and Beyond, which was launched in January 2002 and the second Wireless Untangled was published in March 2002. The findings of the white paper are based on a global survey and in-depth interviews with about 100 leading nanotechnology entrepreneurs, investors and researchers from organisations such as IBM, Motorola, General Motors, Hitachi research centre, MIT, Oxford and Cambridge University and the European Commission.