Nanotechnology - the next dot.com?

Given the usual reluctance of European venture capitalists (VCs) to move away from the wireless investment space, it was encouraging to find that the nanotechnology breakout session was limited to standing room only. Even more interesting was that almost one-third of the attendees had recently looked at nanotechnology deals. The number actually funded is somewhat lower, but activity levels in Europe are ramping up quickly - great news for entrepreneurs and scientists.

One problem that European VCs have in common with their US counterparts is the difficulty of defining nanotechnology. This is exacerbated by the fact that many nanotechnologies have applications in a range of markets and cut across a variety of disciplines. This was summed up neatly by one of the panellists, Brendan Hegarty, CEO of UK company NanoMagnetics, when asked whether his business is a nanotechnology company, a biotech company or a data storage company. It turns out that NanoMagnetics' core technology can also be used in drug delivery, and data storage is but one of the markets that they could attack.

This is becoming a common trait with nanotechnology companies - the technology often cuts across many different markets and management has to decide which to exploit first. However, it remains to be seen whether, from an investment standpoint, it is an advantage or a distraction for companies to have a plan a, b, c, d and e for exploiting their technology.

The nanotechnology panel session, with speakers from Prelude Ventures, NanoMagnetics, Evolution Capital, Banexi Ventures and the European NanoBusiness Association, concluded that nanotechnology will not be the next dot.com. The applications are broader and the revenues are real. If we couple that with the new realism sweeping the VC community, namely that investments need to be held for five to seven years to add value, not 18 months, then we begin to understand why nanotechnology fills rooms at investment conferences.

With regard to the scale of the opportunity, however, participants felt that all things nano could be the new dot.com. Real companies, often with back-up plans for their technologies, real revenues and opportunities on the scale of the peak of the dot.com market? If this is what European VCs really believe, then they are not as far behind their US counterparts as is usually imagined.