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Home > Nanotechnology Columns > Alan Shalleck-NanoClarity > No Nanotechnology Unicorns Yet

Alan Shalleck
President
NanoClarity LLC

Abstract:
As yet no nanotechnology unicorns.- Nano ventures whose stock price soars beyond economic justification when taken public - exist. "No nano unicorns" is a far cry from the predicted breakthroughs and unique businesses that pundits told the investing world in 1999 would emerge from a dedicated focus on the 0.1 - 100.0 nanometer material world.
Nanotechnology based unicorns would swarm because of technological breakthroughs.Smart prognosticators predicted materials revolutions and a new economic growth phase.

June 12th, 2018

No Nanotechnology Unicorns Yet


As yet no nanotechnology unicorns.- Nano ventures whose stock price soars beyond economic justification when taken public - exist. "No nano unicorns" is a far cry from the predicted breakthroughs and unique businesses that pundits told the investing world in 1999 would emerge from a dedicated focus on the 0.1 - 100.0 nanometer material world.
Nanotechnology based unicorns would swarm because of technological breakthroughs.Smart prognosticators predicted materials revolutions and a new economic growth phase.

Well, twenty years later, where are these business breakthroughs? Feynman said "plenty of room at the bottom!" Was his vision economically wrong? Or has the nano world turned out to be significantly more difficult to understand and manipulate economically than he imagined? Is there anyone in this government who understands what he meant? Clearly not. There is no national scientific advisor to push our program at the highest levels.

Our nanoworld economically moves opposite other economic trends. Worldwide most economies are beginning to grow significantly. New businesses and IPOs are emerging in major financial markets. IPO's emerge in all disciplines ... scientific, non scientific, commercial, service, industrial, consumer based, software, specialty market, etc. Yet, there isn't a single nanotechnology "unicorn"! Why the disconnect? Maybe nanoworld economics do not support the entrepreneurial or Wall Street preferred path.

Most of we "pundits" can show that it takes about 20 years for "reforming" or "disruptive" (in the Christiansen sense) technologies to convert earlier successful technologies to the newer, more flexible, more dramatically useful and more economically justifiable technologies. All you need is a single adopting industry to demonstrate advantages in that change... E.g. profits, strength, lower cost, lower weight, ease of manufacture, etc. for example plastic in airframes in major plane structures ... for the trend to catch hold. However, over the last twenty years, nanotechnology has been incorporated in process but failed to "disrupt" any major industry. The nanotechnology economic pattern is different. We had such hopes! What seems to have happened?

Feynman was wrong, not technically, but economically. Not absolutely but in terms of what Wall Street and Investors find attractive investment vehicles. The classical disruptive or entrepreneurial business model doesn't work in nanotechnology. The key criterion is gross profit. The Wall Street favored unicorns have truly attractive gross profits. Their products are software influenced products with inherently low costs of goods. If you begin conceptually with costs of product under 20% of selling price and, your technology, not some upstream product, controls the selling price of the product, you've created a formula for a high gross product business and a way to protect that margin from outside product or technology attack. Add to that mix one or two patents on fundamental aspects of the product to keep the cost of product or service low and protect some unique application of the product and you have created the formula for a "unicorn " ... One that can be recognized by greedy wall street speculators and or investors who then irrationally drive up the stock price of the new venture. The unicorn success key is that the product has to, with all those built in protections, provide an economic value unmatchable in the near term and maybe over a decade by alternative companies ... and one well respected analyst who recognizes these assets for the unicorn to emerge.

Nanotechnology doesn't lend itself to classic "disruptive" analysis. Nanotechnology is new hardware, not new software. It is at the bottom of the value chain. It affects the core structure of developments but doesn't control the higher levels of the end product value chain where all the profit potential resides. It doesn't influence end product pricing. It may provide valuable techno logical uses for the end product but total application and final pricing are determined by these higher level components, not by the nanotechnology based component. Alternatively, the value of a third party service may change because of the unique characteristic of the nanotechnology component but in 99 out of one hundred cases it is the service or end product that carries the economic value, not the nano portion.

A real illustration is avoiding the cost an insurance company has to pay for a patient needlessly to undergo an expensive series of breast diagnostic test series when the outcome makes no difference in a patients recovery. economic value resides in cost avoidance! Why put a patient and the medical financing system through a painful, fruitless and expensive procedure when the derived information won't help the patients outlook and a nanotech based unique diagnostic test can differentiate possible outcomes from the patients DNA. The " unicorn" aspect of this nanotechnology development is in the insurance payer cost and patient pain avoidance allowing the nanotech diagnostic test developer the freedom to charge high prices for the test. The insurance payer will save multiples of that price by not approving the test as reimbursable. Useless costly procedures are avoided and the reimbursement system saves money. Win -win! Plus the cost saving equation can be identified by Wall Street investors and the diagnostic test supplier can have its stock bid up. This exact diagnostic test. "unicorn", can be found on the NASDAQ...

Notice the value in the company is not, I repeat, is not in its nanotechnology,. It is in a third party application of the technology where a nanotech based procedure avoids an expensive cost reimbursement. I don't believe Feynman had this variant in mind when he pushed nanotechnology on the scientific world decades ago.

In sum, nanotechnology products are inherently high cost. They are expensively made, not created in a small lab or in a garage. They are at the wrong end of the value chain. They do not control their own end user price, and are not a natural stand alone basis for new ventures. It is no wonder, when technology and economics are examined that a new industry, based solely on nanotechnology developments, has not emerged. Have the funds been wasted? No. We have developed superb nano science and experienced only stage one. Four more stages are still to emerge. We will continue later with graphene, a nano product with application/financial promise. Keep the faith.

Alan B. Shalleck PhD
NanoClarity LLC

347-751-4977
Copyright 2018 NanoClarity LLC

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