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Nanotech industry and outlook

The nanotech industry is still very much at the start of its growth, but there is still a lot of excitement about it. In the Forbes/Wolfe Nanotech report, Josh Wolfe sets out his predictions for the year ahead.

People ask me all the time, "What the sentiment on nano right now?" Based on my insider interviews with, scientists, CEOs, venture capitalists and institutional investors, there is an energy, an excitement in the air over nanotechnology in 2003. Last year, investors and corporations became acquainted with this new molecular science, there was a steady stream of nanotech fundings and momentum began to build.

In 2003, I expect to see major breakthroughs and growth stories as capital flows more freely, the pace of patents and scientific discoveries accelerates and high profile deals get done. Here is a quick review of top nanotech trends in 2002 and a few predictions:

1. Global Funding Spigots Turned On
In 2002 over $4 billion was anted up by governments and corporations worldwide for nanotechnology. With U.S. competitiveness, job creation, homeland defense and economic turnaround on the tip of politicians' tongues, they were fighting over who gets to wave the nanotech banner. A bill was introduced in Congress doubling the budget of the NSF and on the State level Northern New York is styling itself as the new “Nanotech Valley”. In our Follow the Money section, we've featured over $230 million this year going toward academic research into nanotechnology.

Northwestern University's Rod Ruoff, professor of Mechanical Engineering, agrees, citing the Senate Nanotech Act as one of the top five most important events in Nanotechnology in 2002. He also stressed to me the importance of increased nanotech funding in addressing the “brain drain.” In 2003, I predict the Senate will approve the 21st Century Nanotech Research and Development Act, the NIH will expand their budget allocations to nanotech, the President will give a speech specifically on nanotechnology and propose future nanotech legislation to keep bright minds here and strengthen US competitiveness. I predict that global nanotech spending will grow by 25% to $5 billion globally. I also expect nanotech to produce its first sizzling-hot IPO. Most likely candidate: Nano-Tex, the maker of the stain repellant fabric used in Levi's “Stain Defender” pants.

2. Intellectual Property
In 2002, we witnessed a dramatic rise in the number of patents filed for nanotechnology-related work. Stephen Maebius, partner at law firm Foley & Lardner in D.C. and expert on intellectual property and nanotech says that between 1996-2002, there have been over 2,800 mentions of the word “nano” in patents. To put that in perspective consider that a recent study revealed that more than 800 US patents were issued in 2001 for nanotechnology, up from fewer than 70 in 1990. What does this mean for investors? Patents fuel innovation and innovation begets new investment opportunities. Intellectual property is the barrier to entry, the foundation of high-tech businesses and the lifeblood of competition. In 2003, I predict major litigation and settlements over the ownership of foundational patents and the rights to commercialize them. Start-ups, universities and major corporations will fight for them in the areas of quantum dots, fullerenes, nanotubes and microscopy and lithography tools.

3. The Schön Affair
This was an ethical scandal for the history books. Mark Reed, Professor of Chemistry at Yale University, best known for his work in molecular computing told me that, “the most important achievement of 2002 was outing [Lucent's Hendrik] Schön. It may seem strange to list this as an achievement, but it shows that in science, ‘the truth will out.' The extraordinary claims by Schön in the nanotech area, and their exposure, have uncovered conflicts of interest issues in this field. It also proves that the scientific community will police its own to correct these and related problems.” We wrote about Schön in the October issue after he was fired from Bell Labs after a peer-reviewed investigatory panel determined he had manipulated and fabricated data on molecular transistors. Now expect increasing vigilance among scientists and venture capitalists when it comes to nanotechnology claims.

4. Nanotech Hype is Rising
Suddenly nanotech is the stuff of sci-fi lore. Spiderman and Minority Report premiered the topic and Michael Crichton's new novel Prey turned it into an action thriller. Even President Bush was vocal about nanotech, stating in his federal budget, “the convergence of nanotechnology with information technology, biology and social sciences will reinvigorate discoveries and innovation in many areas of the economy.” In 2003 I predict that there will be a downside to this hype. For one thing, there are many start-ups touting nanotech, that have nothing to do with the science. There will be backlash against nanotechnology, largely in the media, spurred on by Crichton's new book and movie to come. Expect to see ethical debates, like those on cloning, on what regulations should be put in place to limit the manipulation of molecules.

5. Nanotech's Commercialisation
As highlighted in my June 2002 article “Nano Product Guide: The Future is Here,” this past year proved many wrong who dismissed nanotech as “blue sky” research with far off commercialization horizons. Sure there will be more incredible advances like in the area of nanodevices for in vivo drug targeting and biosensors, but I also expect to see cross-linked carbon nanotube fibers that have tensile properties in excess of Kevlar's. But there will be very real products too from Babolat tennis racquets to fuel cell catalysts and semiconductor quantum dots used for biological tagging, products developed thanks to nanotechnology emerged from small startups to the world's largest corporations like BASF [BF] and ChevronTexaco [CVX]. Perhaps the most visible commercialization of nanotechnology was the use of Nano-Tex LLC's NanoCare advanced stain repellent fabric in Levi's Dockers pants, branded “Stain Defender.” Stain Defender attaches molecular structures to cotton fibers, forming a barrier that causes liquids to bead and roll off on contact. In 2003, I expect more real products in the form of flat panel displays, sensors for detecting pathogens and disease as well as stronger protective coatings embedded in our cell phone casings, cars and windows.

Copyright © 2003 Forbes/Wolfe

Josh Wolfe, the author of ‘The Nanotech Report' and the monthly ‘Forbes/Wolfe Nanotech Report', is a co-founder and Managing Partner of Lux Capital, focusing on investments in Nanotechnology and Software (Artificial Intelligence, Distributed Systems). He is a Senior Associate of the Foresight Institute for Nanotechnology, the Coordinator for the Institute of Molecular Manufacturing's Prize in Computational Nanotechnology, a co-founder of The NanoBusiness Alliance and a member of the Cognitive Science Society.

The Forbes/Wolfe Nanotech Report will help you to stay one step ahead of Wall Street and the nanotech revolution. You'll always know which nanotechnology companies are making new breakthroughs and about to see revenue soar. Visit www.forbesnanotech.com for more information.