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Contrary to popular opinion, significant events moving the nanotechnology industry forward occurred this summer. The return on all the money invested in nanotech to date will begin to pay dividends during this next year.
September 1st, 2006
An Important Nanotech Summer
This summer has been a very important season for nanotechnology business progress. Many readers have missed key events because there were no dynamic headlines; none of the promised IPO’s materialized; no announcement of earthshaking nanotech use surfaced; and predicted major product introductions were postponed to the fall or early next year. To many, it seemed as if the dog days of August had hit the nanotech industry.
If you interrogate the industry as I do, one heard: “nothing is happening”; “ The Street isn’t interested in nanotech because investors don’t see major sales and earnings in the space”; “ most major nanotech efforts are in large companies, not the small to medium size creators, and we are watching them”; We can’t find private money so we’re going back to the government for contracts to keep our doors open”; “We have products to introduce but we can’t find first mover customers to make us commercially viable”; “We’re reluctantly looking to joint venturing with a major”; “We can’t survive on our own without public market participation in the nanotech sector”; “ We’re still not ready to introduce a commercial product - so this hiatus is good for us”; “We have enough funds but we are in no hurry to introduce a product before it is ready”; etc. Familiar phrases? They might tell you that the slow, meticulous and risky “tomorrow” pace to create a commercial nanotech industry is continuing. Careful … don’t rush to hasty conclusions … look beneath the words … important events are happening below the PR radar. Here’s what is encouraging and why this summer was important for the industry.
In significant regions of nanotech space, the groundwork for a major commercialization breakout is underway. First, there is an accelerating shift in nanotech company operating management. Those who have been running nanotech ventures are being changed. When industries move from R & D to commercial introduction, much to the regret of founding scientists and engineers, maturing companies’ boards find that those founders are the wrong managers to take the company profitably into the marketplace. Scientist/entrepreneurs usually have little experience in building market/product demand and large customer bases. Marketing and sales are not their strengths. Nor is creating profits. Faced with a dilemma of changing need, boards bring in management that has proven marketing and sales experience and, in the process, reorganize young companies into market focused, not feature focused, companies. When entrepreneurial management replacement occurs is usually the time when positive economics are about to happen to a company or an industry.
Nanotechnology is at that stage. You saw the beginnings such a change in 2003 at Nanotex, Inc. when Wilber Ross et. al. brought in Donn Tice, an experienced P & G marketer and professor of marketing at Michigan, as CEO to take nanofabric coatings from lab to a major industry force. During the next three years, Donn traveled the world, licensed companies and factories, created brand distinctions, incented major retail brands to incorporate Nanotex fabric coatings into mainstream clothing and now into the home decorating arena. Tice was a dedicated marketing professional who, in three years, put Nanotex on the map as a successful nanotechnology company. He’s resigned, probably burnt out, but his tenure as CEO is an example for all in the industry.
During this summer I began to see, in more than one nanotech sector, a shifting of nanotech scientists out of CEO positions back into the lab. Their appointed replacements are marketing/product proven executives charged with building companies with commercial nanoproducts to sell. I will not name those who have been moved back to the lab because I respect them too much. However, replacement has occurred in at least 15 companies that are on the verge of breaking out from the large mélange of nanoscience companies. In sum, quietly this summer, a switch from science to marketing in nanotech management has begun … with more to come. Moving toward marketing is a very positive event for nanotechnology.
Second, when industries are moving into commercial viability, boards discover that those who are Chief Financial Officer s (CFO’s) during the development phases have little experience in building financial control and accounting systems including integrated information technology systems capable of supporting rapidly expanding commercialization efforts. (We’ll leave Sarbanes-Oxley out of the discussion but clearly it, too, plays a part). This summer, a number of boards begin to replace CFO’s with financial professionals capable of guiding nanotech companies financially through the next stages. That change occurred this summer in the nanotech diagnostic arena and the nanotech solar arena to name two specific nanoproduct marketplaces in which companies made such a change. Similar changes happened in other sectors, and more companies are contemplating such a change during the next six months. To my experienced eyes, such financial management adjustments are another sign that broad based commercial nanoproduct introductions and successful growth are about to occur.
The last area of positive action this summer has been a series of large dollar commitments to expand a company’s capacity to make nanostuff in volume. Manufacturing small amounts of nanoanything usually is not a challenge. Making stuff in commercial quantities requires major increases in plant and equipment, and the financial commitment to build out such capacity. Nanotechnology product manufacturing requires costly instrumentation (you have to see the nanostuff you are making) and continuous clean room quality manufacturing lines. Multi millions of dollars are therefore needed to move to commercial viability. This summer, for the first time, we saw VC’s committing large dollars to build out production capacity in the nanosolar and nanodiagnostics sectors. Specifically, Konarka, Nanosolar, and Nanosphere have received $20 to $60 million in production round financing to build commercially viable manufacturing capabilities. Such production round fundings are harbingers of successful nanotech commercial companies.
Obviously, contrary to popular opinion, significant events moving the nanotechnology industry forward occurred this summer. The return on all the money invested in nanotech to date will begin to pay dividends during this next year.
© 2006 NanoClarity LLC - All rights reserved.