Nanosys IPO Could Spark More

The first venture-backed, pure-play nanotechnology company announced its plans to go public last week. Once Palo Alto, Calif.-based Nanosys Inc. hits the public markets, not only will a handful of venture firms, such as ARCH Venture Partners, stand to turn a profit, but the company’s performance will also be a bellwether for all the other VC-backed nanotech companies that are reporting small, but steadily growing streams of revenue.

If the Nanosys offering goes well, and its stock price holds steady, it could be the first of a handful of nanotech companies to launch an IPO.

Three-year old Nanosys’ offering is expected to raise $115 million after its IPO, although the company has not yet set a target for its offering or an offering price per share.

The company’s debut may also signal the maturing of a much-hyped, but rarely understood, technology whose applications span the life sciences, IT and materials sectors.

Nanosys is more than just the next new thing, say investors. Not only has it locked up 200 patents from nanotechnology’s major research centers – such as Cornell University, Harvard University, MIT and UCLA – but its board of directors includes technology legends Regis McKenna and Bob Metcalfe.

It also boasts research grants from the National Institutes of Health and development agreements with Intel Corp. and Matsushita Electric Works. Moreover, CEO Larry Bock has built 16 companies, 11 of which have gone public.

Nanosys is a platform technology company developing nanotechnology-enabled systems. With 30 scientists on staff, Nanosys is working with Matsushita to develop nanotechnology-based solar cells for the Asian building materials market. Its NIH grant is used to support its development of nanotechnology-based biosensors. The company is planning to deliver technology to the energy, defense, electronics, life sciences, and IT industry sectors.

For 2003, the company reported a loss of $9.2 million on revenue of $3 million, compared with a loss of $7.1 million the year before on revenue of $283,000, according to its IPO filing with the Securities & Exchange Commission.

Since its founding, the company has raised $54 million in venture capital. ARCH holds nearly 15% of the company, while CW Group (the firm associated with Nanosys Chairman Larry Bock), Polaris Venture Partners and Venrock Associates each hold a 13.6% share.

Backers also include CDIB BioScience Venture Management, Chiao Tung Bank, Eastman Kodak Co., Harris & Harris Group, In-Q-Tel, Lux Capital, Prospect Venture Partners and SAIC Venture Capital.

Proceeds of the sale will be used to expand the company’s intellectual property portfolio, continued technology development and to develop the company’s manufacturing and marketing capabilities.