Nanotechnology Now - Funding for Early Stage Nano Companies - Is this the Darkest Hour Just Before the Dawn?

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Skip Rung
President and Executive Director
ONAMI

Abstract:
Angel groups and specialized boutique investment firms for whom a $20M exit can be a home run may be part of the answer, and we're starting to see some interesting things being tried. But if we're to see a renaissance in manufacturing and the related broad high-wage skilled job base that it brings, some lasting solution must be found to the problem of how to profitably make the risky and patient investments in the just-post-research stages of what will become the next transistor or the next laser.

August 4th, 2009

Funding for Early Stage Nano Companies - Is this the Darkest Hour Just Before the Dawn?

In spite of the well-justified belief that advances in nanotechnology (aka 'disruptive materials science', as it was nicely put by Lux Research) will enable most or much of where "clean tech" needs to go, take the fight against cancer to the next level, and provide the competitive/innovative edge that manufacturing must have in high-cost regions (exemplified perfectly by state-of-the-art 65nm and 45nm semiconductors), it's been awfully quiet around the nano launching pad.

Second quarter reports from various sources such as Dow Jones VentureSource not surprisingly show that VC investment remains way down from its peak, and early stage investment is down even further and continues to slide. With the exception of medical devices, categories relevant nanotechnology/advanced materials are generally out of favor. In clean tech, for example, poor results for much of the vast sum invested in generation technologies have led to the conclusion that the grass is surely greener on the demand side, hopefully just like the classic software deals. And of course, profitable exits have been very few (though I note with pleasure that one of those rare good multiples in our neighborhood, though small in absolute terms, was in nanotechnology). But it's just hard to see how most nanotechnology/materials science deals can sound all the right notes in the VC model: capital efficient at the start (very low investment to first revenue) and then rapidly scalable to dominate a major market.

Angel groups and specialized boutique investment firms for whom a $20M exit can be a home run may be part of the answer, and we're starting to see some interesting things being tried. But if we're to see a renaissance in manufacturing and the related broad, high-wage skilled job base that it brings, some lasting solution must be found to the problem of how to profitably make the risky and patient investments in the just-post-research stages of what will become the next transistor or the next laser.

Our annual Micro Nano Breakthrough Conference ( http://www.micronbc.org ) is right around the corner, and we're addressing this issue head on with our traditional closing panel on commercialization, organized for us this year by a very interesting new investor group, The University Funds ( http://www.theufunds.com ) that is developing a unique model for technology transfer and commercialization right out of research institutions, piloted at eight sites in the western U.S.

Here are the panel details:

The Changing Face of Technology Transfer and Early Stage Venture Funding

Today's emphasis on delivering more value to society from the $Bs invested in research is both a problem and an opportunity for our institutions, researchers, entrepreneurs and investors. While research budgets are generally increasing in many areas, the capital markets mess and other economic factors have caused venture capital sources to shrink significantly. Private (Angel) startup investing is hard to find. The generally depressed economic activity doesn't bode well for new product entries. On the other hand, economic downturns often stimulate a wave of new ventures.

So how does the aspiring inventor/entrepreneur best pursue commercialization of their innovation? What are the decisions you must get right the first time? What common business traps must they avoid? What resources are available to provide guidance and assistance? How are changes in the IP/Patent monetization arena impacting strategies for emerging businesses? Is the current Venture Capital model "dead", or just in need of re-tooling? How can startups improve their odds of not only 'surviving', but thriving - and earning high returns for themselves, as well as for their early and late-stage investors?

Confirmed Panelists:

Dr. Fiona Wills, Director of Technology Transfer and Licensing,University of Washington

Cheryl Cejka, Director of Technology Commercialization, Pacific Northwest National Laboratory

Jim Torina, President and CEO of The University Funds, LLC, a business accelerator and seed-stage venture fund company based in Bellevue, WA

Rick LeFaivre, Ph.D, Partner, OVP Venture Partners

Michael Hochberg Ph.D, University of Washington electrical engineering faculty member and co-founder of two companies

Lewis Lee, co-founder of Lee & Hayes PLLC, and co-author of two books, Intellectual Property for the Internet in 1997 and Managing Intellectual Property Rights in 1993.

Panel Moderator: Pat Murphy, COO, The University Funds, LLC

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