Home > Nanotechnology Columns > Alan Shalleck-NanoClarity > A New Method For Financing Nanotechnology Companies In A Networked World
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Alan Shalleck President NanoClarity LLC |
Abstract:
Let's network nanotech companies when financing them to hedge underwriting risk and to raise the probability of upside for the investor. Form a virtual company with 3+ divergent product lines in three different markets where a "basket" of the stocks of the three companies make up the ‘virtual' company stock that is sold to raise funds for the entities.
April 20th, 2011
A New Method For Financing Nanotechnology Companies In A Networked World
A New Method For Financing Nanotechnology Companies In A Networked World
By
Alan B. Shalleck
NanoClarity LLC
April 2011
Last month I discussed the application of ‘open innovation" (OI) to Nano "science" to accelerate commercialization. There are many paths to nanotech technological success but in the Internet and social network age a single company's R & D staff really doesn't efficiently find all the answers it requires in a timely way. With open innovation, the entire world's inventory of scientific brainpower can become part of your company's efforts and for a fixed or variable price, needed technical and scale up solutions pour through the door from sources worldwide so that the "open innovation using" company can quickly and efficiently move forward. It's tough to sell "open innovation" to the nanotech entrepreneur who himself is probably a ‘know it all' scientist. But there are significant technological holes in the nanotech world, more specifically in all the money losing nanotech ventures trying to find resources, paths, and money to commercialize their developments and then to create sustainable profitability that today are stymied and dead in the water. OI is a modern innovative way to move your company forward.
I had significant inquiries from my last article … we structured one effort and it seems very successful. More of you should consider OI in your commercialization efforts.
Despite nanotech being a "materials" science, it lives, like everything else, in our new commercial "information" networked world, one characterized by information and interconnection first, and labor and materials second. Horizontal is now as important as Vertical in all corporate functions - R & D, marketing, sales, supply and production, etc. Much of this new environment is low or no cost. You can instantly have customers from the entire world, at very little incremental cost. You can get innovation for your company without expensive hiring and training, etc.
Modern managements have to learn to leverage information as our forbearers learned to leverage energy and materials. Someone has called the process "informationalizing" where previously the process was "industrializing." Look what now can occur. You can advertise worldwide at essentially zero marginal cost. You can accomplish order entry worldwide at essentially zero marginal cost. You can obtain suggestions and new customers worldwide at essentially zero marginal cost.
These information benefits are not being fully realized by nanotech companies. In my surveys I find a distinct lack of horizontal innovative thinking regarding the operations and structures of most nanotechnology companies. Old forms are preserved unsuccessfully within a changing new horizontal world.
A truism of the networked informational world is that networks inherently accelerate innovation…and, in a correlative way, networks also increase the need for innovation. The world changes more rapidly when everyone is aware of everyone else's doings. A little social networking creativity would go a long way towards increasing those few nanotech "paying sales" you struggle so hard to generate. More important, such networked innovational thinking is not being applied to vital nanotech financing.
Although the IPO market for technology companies seems to have found new life … some would argue that there are now "exit" strategies for nanotech market sectors … the financing options for most nanotech companies for commercialization… to fill in the abyss of death…. remain bleak. It's clear that single product focus, single technology, company smallness, lower gross profit projections, lack of true product innovation, marketing and production are holding nanotech company commercialization and profitability back.
My research shows that useful and incremental funding could accelerate the commercial evolution of the industry. I'd like to offer an innovative way of financing nearly commercially viable nanotechnology firms in a social networked age that could be a winning formula for all and to solve the concerns of the underwriter and the investing public in nanotech investing success. It would hedge risk and be a saleable larger entity for the underwriter while providing needed funds for struggling nanocompanies.
Let's network nanotech companies when financing them to hedge underwriting risk and to raise the probability of upside for the investor. Follow me closely. If one nanotech company with one technology in one market isn't going to get funded, why don't we align 3+ nanocompanies, each with good prospects within a single market, technology, or product focus to form a virtual company with 3 divergent product lines in three different markets where a "basket" of the stocks of the three companies make up the ‘virtual' company stock that is sold to raise funds for the entities. The "basket' stock would contain all three stocks as the real underpinnings of the virtual company stock with the weight of each company stock based on some ratio of sales, or gross profit, or market size, or assets. The underwriter or financing arm, would maintain a shelf-registered amount of each of the ‘basket' companies' stock for later adjustment and distribution.
The value of the virtual stock would be conditional. The amount of final stock of each of the nanocompanies contained by the virtual company stock would not be settled for about 3 years. The 3 year delay would provide time for the money raised to go into the companies to commercialize each of three different products in the three different markets yielding different degrees of success. At the end of a specified period, say 3 years from the date of the underwriting, the ratio of stock held by the investors supporting their virtual stock would be adjusted based on true performance of the companies in the market using the shelf stock as the balancing stock. Thus, the final theoretical value of the basket stock will be determined by the final ratio. In certain circumstances, the owners of the virtual company stock might have to exchange stock in one company for another to reflect relative performance. What the virtual stock trades at during the three-year period would depend upon market perception and supply and demand.
What would be funded would be a micro mutual fund of private nanocompanies to the benefit of all providing liquidity, risk mitigation and upside in a different but market reflective way. Much industry benefit could come from such a new financing vehicle implemented in the next 12 -18 months.
Alan B. Shalleck
NanoClarity LLC
www.nanoclarity.com
©2011 - NanoClarity LLC. All rights reserved.
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