Back before we had Web 2.0 and cleantech to obsess about the Valley was abuzz about nanotech—the idea that sub-atomic particles would suddenly be the building blocks of, well, everything. It would make the paint on our houses last longer, the non-stick on our pans stick less, and our pants impervious to wrinkles. Somewhere, someone was probably promising their board they could use nanotechnology to make Harry Potter’s invisibility cloak a reality.
It seemed like a great investment thesis for a few reasons: There was actually real patentable science there and because the possibilities seemed so limitless, it was a huge market. A February 2005 BusinessWeek cover pegged it at nearly $300 billion by the end of the decade. (You know, now.)
There were some VCs who shied away, some—like Steve Jurvetson—who went whole hog, but most were somewhere in the middle. In other words, they didn’t really know if this tiny thing could be huge, but wanted some horses in the race just in case. In all more than $1 billion was invested in the space, according to that same BusinessWeek cover, and some 1,200 startups created. (The typical venture research firms don’t break out nanotech investments so better numbers are hard to find. I think BusinessWeek’s figures are actually pretty conservative considering fundings of $20 million-$40 million a pop weren’t unheard of.)
By some measures, the movement succeeded. According to a new report from the Pew Charitable Trusts’ Project on Emerging Technologies more than 1,000 nanotech products are available to consumers now, up from only 212 products in 2006. The director of the study David Rejeski told PEHub he expects the number of products to reach 1,600 within the next two years.
Awesome. Oh, wait. Not awesome—What about the exits? Where’s all that nano-cash the Valley was supposed to be awash in by now? Pending IPOs of companies like Nanosys, Nanofilm and Konarka never happened. (All three companies are still in business and have raised hundreds of millions in venture capital and private equity between them.) What exits nanotech had were, well, tiny. There was never a huge, iconic nanotech IPO to justify all that hope and keep the believers believing and investing.
Looking at the Pew study, the product potential was clearly there. So what happened? One of three things: The markets for those products were too small and the companies couldn’t scale as hoped, the products and science was just too incremental to turn into a big hit, or some huge IPOs are still around the corner.
In some ways, that’s not too different than complaints lodged at the Web 2.0 generation. Skeptics say that most of the startups are less companies and merely Y Combinator-style features and apps that at best will get acquired for $20 million or so.
The difference with Web 2.0 is these sites and apps are incredibly cheap and quick to build and host. Designing sub-atomic particles that will be manufactured into pants are not. You know what else isn’t? Most of the big opportunities in cleantech.
Cleantech investments are down 30% this year in terms of deals and 60% in terms of dollars—with a big shift going away from energy generation towards energy savings. It’s in danger of looking a lot like nanotech several years from now. For the billions that have poured into cleantech—what do we have so far? There’ve been a few public exits. We’ve had a smaller number of jaw-droppingly killer products, mostly in the car space with companies like Tesla, Fisker and Better Place. And….what else exactly?
As oil prices have spent much of the last year in more reasonable territory and the whole Inconvenient-Truth-fad has faded, cleantech needs a huge Netscape-like IPO to get everyone excited and ignite real investment in needle-moving science and development, not play-it-safe software programs to manage smart grids more effectively. VC Paul Holland of Foundation Capital says in the Press:Here clip below that there are a few contenders on the horizon right now. [Discussion near the 4 minute mark.]
Others have speculated that several cleantech companies were readying themselves to go public before the crash, signaling a potentially active 2010. But most of these are well under the $1 billion market cap level. For an industry that billions have been invested in—that’s like kissing your sister.
No doubt the opportunity is huge for cleantech to remake nearly every old-line industry in the world. And I don’t doubt that it will. The question is whether it succeeds where nanotech failed and remakes the golden era of VC returns.
[BTW: Steve Jurvetson, if you're reading this and that big IPO is just around the corner, we'd love a guest post rebuttal on why nanotech is still alive.]
I still want my non stick pan
i thought the current generation of non-stick pans are pretty awesome. if they’re using a titanium substrate, you can use metal silverware on them without scratching the coating.
I using one of those Tefal ones with the red dot in the middle that does absolutely nothing either
It’s supposed to go red when the pan is ready… maybe it does but generally my food is cooked by the time the pan is ready in that case.
I’ll look out for a titanium substrate one though, thanks!
History is showing that Nano is at a phase of producing many enabling technologies and processes vs consumer products. Many of those companies may still be of huge value.
Clean Tech is producing many products (Tesla, Solar City, BrightSource) which are in the “senior class” ready to IPO when the market returns. But there are also enabling technologies companies like Synthetic Genomics developing enab-tech for bio fuels which will take more time but can become world changing.
No doubt, both of these categories are far more capital intensive than building a Social Widget or iPhone App but there is no comparing the upside potential in success.
Glad you like Tesla and the early cleantech IPOs (like ENOC). I think the important crossover theme is that science projects take time, and most are too early for venture investment. But the cleantech field is quite diverse, a set of markets with a common zeitgeist, but very different timelines and business models.
On the other end of the spectrum, rather than a set of markets, “nanotech” describes a set of enabling technologies. The scientists learn from each other and discover interdisciplinary breakthroughs at a common nexus, but the businesses created (product, channel, customer) have nothing else in common. So we should never expect a nanotech industry to emerge; it’s as meaningless as the thermodynamics industry. The companies will define themselves by their products and markets, like Konarka in flexible solar cells. Other than the scientists, nobody really cares if there’s nano inside.
(The branding exception applies to nano tools companies, like Molecular Imprints which sells nanolithography equipment to the chip and disc drive manufacturers. Still, the end consumer does not know or care that their higher capacity hard drives were made possible by their nanoscale patterned media.)
So this is why you hear research groups talking about all of the nano-enabled products, but the average consumer has not. It’s like Intel making a breakthrough with a new gate dielectric. Just us chip geeks know and care. Some nano tools companies are ready to go public, but I don’t think one should judge the contribution of an enabling technology by the picks and shovels alone.
Also, of the nanotech branches, the synthetic biology angle is personally the most interesting to me, and may usher in an era of “Industrial Biotech 2.0”, if you will. When we write the genetic code of life like a computer program, and synthesize the DNA with no animals involved, we have a capability to explore more avenues more quickly than the clumsy cut-n-paste of biotech 1.0
The early markets for this form of molecular engineering are, not surprisingly, in energy and cleantech. So we come full circle. Many nanotech applications are for energy markets — to self-assemble a better battery cathode, or solar cell, or filtration membrane. And when we look to bio-nano, many of the radical breakthroughs in how we bioprocess the formerly petrochemical economy will come from the bottom up, from the microbial workhorses that convert CO2 and other waste streams into fuels and chemicals with molecular precision.
See http://www.synt...ticgenomics.com for some recent developments.
Nonstick pans cause cancer. And not just a little bit, like everything else. More like, a lot. Read the backs of the labels sometime. Lots of legal jargon on how you can’t sue them once you get cancer from consuming their nonstick coating.
The absence of home runs here is not due to the level of innovation or the drive of entrepreneurs to create successful businesses.
Rather, it is that customers are voting with their wallets, choosing to get their innovative products from trusted brands. That’s what makes these markets base-hit markets rather than home run markets.
Why? Because customers have decided that they value reliability over innovation, and when that happens the brands in that market are pretty much built. Home runs, though, require brand building, which is tough to do when the customer wants to keep doing business with the companies they know and trust.
Nowhere is this more likely to be true than cleantech. I may want solar electricity or biodiesel fuel, but I’m not going to buy them from NewCo.
No brands, no home runs. No home runs, no big venture returns.
Still plenty of innovation to come, though, and plenty of money to be made by VCs who figure out how to optimize for base hits.
Nano had the same problems 3G in this country had… it wasn’t a unified science. Had the industry as a whole come together to generate a best practices and standards, then possibly it would be further ahead. But when each company is using a different approach and each approach is for a slew of different products it kills cohesiveness in the industry at large.
In the late 90’s early 00’s, I was a huge supporter of 3G – the way NTT did it… I thought it made sense. Unfortunately in America there wasn’t a single company brave enough to go this route (I do however find it interesting that Apple essentially adapted the closed network approach of NTT w/ the iPhone… and of course, has been successful with it)… and the networks themselves are still a mess of different systems and architechture.
I still believe in Nano – and think the future looks very good for the technology… if only the technology had interoperability. One size in Nano does not fit all… but it should.
oh, and Cleantech sucks altogether. It’s a joke altogether that these idiots believe they can do anything – especially “save” the planet. When they can cure the common cold, I’ll believe in their ability with a whole world.
Think about why this happens with so many of these revolutions (especially over the last 25 years or so):
A culture of short-termism, which is worse now than it’s been in decades, or maybe longer
An expectation, perhaps, that all innovations are easy – especially over the past 10 years, things like social networks, improved wireless protocols, microblogging, whatever.
If you’re an investor without the requisite knowledge, you may wrongly assume that all innovations are alike, but they are not. The things listed above are innovations built on well-understood, easy-to-develop for technologies. They are incremental – and sometimes all they are is a new of of packaging old ideas (blogs). For nanotech and other fields, the innovations and gains may tech decades to reach the point of being truly useful.
The big difference: innovating in well-understood technology areas versus largely unexplored, and often poorly understood (even by those that work in those areas) areas of science.
When I graduated from college in *ahem*1995*ahem* I made the jump from nanotechnology to Internet/telecom and stopped just shy of “the web”. The year of graduate school was 1/2 co-op and 1/2 being a data assistant in a materials science and engineering area where the study was theoretical nanoscale tribology [1]. Computer modeling was the rage but since those things connected over networks… I got more into the tools than the goals of using the tools.
The fundamental attention span problem is that there was simply too many products that needed to be created for the web boom using existing COTS solutions. Seriously. Can anyone say their humble projects really needed the Sun and Oracle systems they launched with? Were the swells of Internet masses really that large?
Or, was it that what was in the pipeline was good enough and the nanotech promises were just about as exciting to VC as the shoe laces that were worn by those highly prized software developers?
One thing to keep in mind with the sciences is that the funding arms and inertia for them tend to have a pendulum swing… a periodicity.
On one side: applied science (attack a market)
On the other side: pure science (attack a problem)
I think there were too many people wanting to attack a market but they had not spend enough to attacking (or confirming) a problem.
Technology is the response to a perceived need. Funding is the response to a perceived market.
[1] many moons later… it’s REAL now http://www.flic...2395070/detail/
:%s/not spend/not spent/g
Great summary! Cleantech especially in Europe and Asia is still the investment Place to be. See http://www.Clea...tech-europe.com and others!
The next wave just started.
Umm, Nanotech, as originally envisioned by Drexler et al, was not something ready for shipping products in 5 years, it was a new field of research that could take decades and culminate in the universal replicator.
The entire valley seems to be suffering from attention deficit disorder. If something is hard, and could take decades, its panned as a failure after a very short time due to lack of IPOs? We’ll never invent the future if everything is funded like that. So we’re left with nine gazillion URL shortners and feed aggregators and commenting systems and twitter clients pumped up every day to pass the time.
If TechCrunch was around when DNA was discovered, they’d be panning the whole field of genetics and biotech for lack of immediate home runs.
The problem with the way Nanotech is described is this article is a symptom of the whole hype-cycle involved in tech that this blog is at the center of. Somebody opens up a new field, and everybody and their bandwagon floods VCs with harebrained businesses ideas promising 40x returns in a few short years in fields which are still very immature.
Originally Envisioned by Eric Drexler?? Dude, he is a recent addition to Nanotechnology. Although, I am not denying that he has made a substantial contribution towards Nanotechnology. But, when you say originally envisioned, well, please don’t forget Richard Feynman. He was a true visionary and according to me at least the father of Nanotechnology.
As for scope of Nanotechnology, well, very limited as of today. You are correct in saying that it would take a few decades for something concrete to appear in the market.
Cheers mate!
“the idea that sub-atomic particles would suddenly be the building blocks”
Examples of SUB-atomic particles: electron, proton, neutron, quark, neutrino, etc…
This is just plain stupidity. Nanotech is about nano-scale matter: atoms and molecules. Go back to high school Sarah Lacy.
“Go back to high school Sarah Lacy.”
I second this motion. How credible can an article be if its author does not even have the most basic grasp what she’s writing about?
…or it is just BusinessWeeks prediction that is wrong and not the entire nanotech industry that is slow or not coming true?
As said before, (nano)science takes more time than building a web 2.0 app. Please do not compare the two industries.
sarah,
can i feature this article on SolarFeeds? Great stuff here, thanks for the info…
Take a look at Nanologix, Inc. They’re doing some truly innovative stuff using nano-technology in the field of rapid detection of infectious and hazardous agents …. sometimes cutting detection times to a fraction of what traditional methods required. Their technology appears to deliver on some of what was promised with the whole “nano” hype.
http://www.nanologix.com
Listen folks, the energy market is BIGGER THAN ALL TECH COMBINED and will always be. Green tech just needs to find a way to be profitable and it will be huge. Nanotech is a TECHNOLOGY LOOKING FOR A MARKET. Big difference. I’m certain there are some great nano opportunities, but the point is, you have to find them. In energy, man, if you could do something so uncool and boring as to improve energy transfer in a vehicle by 20% – that’s worth billions. TechCrunch is about cool, not about business
, but that’s ok.
I agree. And the implication that web 2.0 / social start ups might join this category is a great point as well. More commentary here:
http://www.tren...oney-elsewhere/
BRAZILIAN POSTS ARE CENSURED HERE IN TC.
IT’S A SHAME!
On the subject of nanotechnologies I came across an interesting start up company in England which might be worth watching.
These fellows seem to know the science inside out and sugested they were trying to develop a capital market structure for emerging nanotechnologies.
Maybe the next big thing in nano is just around the corner?
Worth a look anyway.
http://www.nano...partnership.com