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Wednesday, February 16, 2005

Reasons for the Venture Funding Drop

Technology Review on the drop of venture funding for nanotechnology dropped from $386 million in 2002 to $200 million in 2004.

That means nanotech startups are finding it harder to do research in areas that could have tremendous long-range impact: new nanomaterials for optics and chip-cooling systems; biological diagnostics based on ultrasensitive nanosensors; and smart, automated delivery systems for protein drugs. "Over the years, the financial community has pushed for shorter-term results," says Peter Garcia, chief financial officer of Nanosys, a nanotech startup based in Palo Alto, CA. "There are projects that are more long term technically that have the greatest potential to change how products are made, but the funding is not there."

Move over to page
two for a graph showing a precipitous drop in venture funding since 2000. the totals from all funding rounds peaked in 2000 and dropped every year until 2003. Also note that the big bucks are in the “later round” category (third and later). “Later round” funding is always larger than earlier round funding; products are ready for commercialization, risk is lower, payoff is closer. These later rounds are triggered by seed and first round funding that take place previously. The drop in funding in 2001-3 has left a gap in companies ready for “later round” funding. This gap is being filled with new investments and I expect to see a dramatic upsurge in funding as these nanostarts mature.

Page two also includes a graph that includes a legend “more than $50 billion in venture capital raised since 2000 remains unspent.” This venture capital is not making them any money and as the pain from 2000 goes away it will come into the market and fund all sorts of new companies. Then nano will be competing for venture dollars with bio, IT, security and who knows what else. It will be interesting and fun to watch.

The best line is about internet companies and their funding "Twenty-four months ago, they couldn’t get any love from venture guys. Now they’re beating down their door." Is it time for nanotech to get some love? It’s going to happen, I’m just glad I’m not trying to go public right now.


  • No wonder there is a problem in the nano world with funding. I hold the first patent on independent operability (patent # 5,764,518 and have experienced extended froad in the patent office and have been ignored as "to fantastic" and find inverstors to short term in interest and biast towards colledges with no interest in the private sectors. As an example of this will be extant herein as no interest will be even had to this post even though I hold the most important inovation since the dawn of time and because I hold the patent it is well known that otheres will be infringing if they go about developing material from my patent which leaves the proper investment target unfunded and the industry as a whole, in terms of what is invested in chaotic at best. If you want to respond with my assistance it would be nice. Odds are it will not occur.

    Charles Michael Collins

    By Anonymous Charles Michael Collins, at 12:51 PM  

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