Intel Makes First Nano Investment

Nanolayers’ seed round of financing is not just Intel Capital’s first investment in nanotech-based manufacturing processes, but the company may also be one of the first in a wave of nanotech-related startups emerging inside Israel’s research universities to attract U.S. venture dollars.

Jerusalem-based Nanolayers’ processes could potentially be used in the production of flat-panel displays and integrated circuits. Besides Intel, its backers are Israel’s Millennium Materials Technology Fund and Summit Technology, a group of angel investors. The size of the round, which closed last week, was not disclosed.

“We’re interested in funding manufacturing processes that work in theory and can be brought into the production line rather than gee-whiz technology that is really revolutionary but where you have to throw out all the existing processes,” says Michael Dierks, a strategic investment manager with Intel Capital in Silicon Valley.

Although Intel Corp. has long funded university-based nanotechnology research, Intel Capital is new to the field. “We have no public investments in carbon nanotube work, but we’re actively looking at those companies and interested in talking to more with interesting approaches to building transistors,” Dierks says.

Nanolayers was spun out of Jerusalem’s Hebrew University in September 2001 to commercialize the research of organic chemistry professor Dr. Shlomo Yitzchaik. Very little about the specifics of its technology has been disclosed, but the company has said that its thin-film technology may be used to build flat-panel displays and may ultimately be used to build organic integrated logic circuits.

Hebrew University has created a $40 million Center for Nanoscience and Nanotechnology, an initiative that includes 15 researchers, guest lecturers, undergraduate courses and a building that is to be completed in another 18 months. Hebrew University is not the first Israeli research institute to establish a nano-science center – Ben Gurion University of the Negev, Technion Israel Institute of Technology and Tel Aviv University have all announced plans to do so.

Despite the cheerleading of academia, as of December of last year, there were just 24 nanotech-related companies in Israel, according to Deloitte & Touche-Brightman Almagor. Israeli venture capitalists, however, are pushing that figure forward. Reico Ventures Ltd. has taken a stake in Power Paper Ltd., a maker of ultra-thin energy cells in Kibbutz Einat, alongside BancBoston Ventures and EDB Investments of Singapore. Millenium Materials Technology, for its part, has invested in at least four Israeli nanotech-related startups including NanoPowder Industries and MEMPile Ltd.

While this is Intel Capital’s first nanotech deal, it has invested in several micro-electronic mechanical systems (MEMS) companies. Nanotech and MEMS developers operate on the same scale, but nanotech focuses on building systems on the molecular level. Across its entire portfolio of 475 companies, Intel has funded two startups that, like Nanolayers, focus on manufacturing processes on a miniature scale: Coventor Inc., of Cary, N.C., makes MEMS deign tools, while Colibrys SA of Switzerland is an industrial supplier of MEMS components.

Contact Carolina Braunschweig