It's one of the most watched Silicon Valley IPOs in years - one that could lead to billions of dollars in new investment, the birth of a powerful industry, and a huge boost to American high tech.
Google? No, Nanosys.
While the media has been busy tracking the soap opera of Google's pending Going Public Day, tech veterans are watching this other, nearly unknown nanotechnology company just up the road. And with good reason: The search engine business has already been bled of most of its profit potential, with giants like Yahoo! and Microsoft poised to force that industry to grow up fast.
Nanotech is a different story. Its glorious future - perhaps even as the great successor to silicon - is still over the horizon. And, given that Nanosys is the first big IPO in the field, it's easy to understand why many believe it could signal the birth of a boom.
Not so fast. These days, nanotech resembles the state of ecommerce four years ago: a lot of new startups with no profits (and usually no real products), a few wildly enthusiastic venture capitalists who are eyed with suspicion by their peers, and a lot of loose definitions of who is in the game. In other words, a recipe for big losses.
No wonder. "Nanotechnology" is one of those concepts that captures the world's imagination long before it gets close to practical reality. You can trace the birth of the nanodream to a specific event: the publication in October 1986 of Eric Drexler's Engines of Creation. Suddenly the idea of nanotechnology - especially the notion of an "assembler" that could build anything out of individual molecules (a diamond house, anyone?) - seemed entirely plausible.
Never mind that knowledgeable critics dismantled the assembler idea, calling it unlikely and unrealistic; it created a brilliant image that has stuck. Not a year has gone by that bookstores haven't displayed some new tome that extols the wonders of nano, urges you to jump on the bandwagon, or advises you on how to get rich investing in hot companies. There are well-trod Web sites covering the latest news from the field. And Forbes offers, for $195 a year, a nanotech newsletter for investors who've forgotten just how useful the Gilder Technology Report was.
The reality of nanotechnology is a lot more prosaic. We may have dreamed of tiny robots voyaging through our veins, but what we have so far includes industrial coatings, sunscreen, and stain-resistant pants. Nanosys itself develops "nano-enabled systems based on a platform technology incorporating patent-protected, high performance, and highly integrated inorganic semiconductor nanostructures" - in other words, it can create ultrasmall and uniform shapes, form them into grids and arrays for items like solar cells and LEDs, and "tune" some of the unusual quantum effects found at this level to do such things as produce multicolored light.
These aren't insignificant accomplishments - but they are a long way from "engines of creation." History will likely remember today's work in nanotechnology as the first faltering steps down the path to a glittering future.
But there isn't gold in nano these days - unless you count the more than $1 billion venture capitalists and corporations have sunk into startups since 1999. Or the $4.6 billion the federal government has authorized for both R&D and programs of the National Nanotechnology Coordination Office. This level of financial attention to an emerging market is usually a sign that something big is afoot.
The reality is that much of this investment is being made by only a handful of VCs. Most notable among them is Steve Jurvetson of Draper Fisher Jurvetson, who, with partner Warren Packard, has invested $90 million in nanotech, MEMS, and novel materials startups (20 so far). Jurvetson estimates one-third of future investments will go toward nanotech.
There is something enthralling about a major VC embarking on a campaign to create an industry. You can't help wondering if he knows something you don't; that where you see haze, he sees the Promised Land of eBay-sized IPOs. But it's important to remember that the same things were said a few years ago about John Doerr and pen computing.
Even if Jurvetson is right in the long run, the chance of a private investor getting any substantial return on nanotech for many years is probably, well, minuscule.
You may ask, what about all those newsletters and all those nanotech indexes created by brokerage houses? The answer is that they are excitement in search of something to be excited about. Drexler now complains that the very definition of nanotechnology has become so amorphous that it can mean anything.
Which brings us back to Nanosys. Its 2003 revenue was $3 million from research projects, with net losses of more than $17 million since its founding in 2001 and no commercial products anticipated for several years. But it does have some big-time investors and collaborators such as Intel, DuPont, Matsushita, even the CIA, and a whole pile of impressive patents.
Seen that combination before? You betcha: biotech. The same big dreams, PR, and revenue-free IPOs - even its own budding Luddite movement - but without biotech's crucial reality check of US Food and Drug Administration oversight. Nanosys has even been called the next Genentech.
IPO buyers beware. "I'd say we're a little early," Packard recently told an audience. "But we need to start somewhere." True enough. For the rest of us, though, that somewhere is further on up the road.
Contributing editor Michael S. Malone is an executive producer of The New Heroes, a PBS miniseries about social entrepreneurs.START
The Big Tease
