Small Times Reads the VC Tea Leaves

Small Times has an interesting article on the drop in VC funding of Nanostarts and finds more but smaller companies being funded. Not surprising in view of the large funding rounds acquired in 2003.

At first glance, private nanotechnology funding appears to be contracting. But that's not necessarily the case. By the end of the third quarter, only $122.1 million had been invested in the field in the U.S., according to a Small Times analysis of the MoneyTree Survey by PricewaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association. That puts funding on track to be well below $200 million for the year, a far cry from the $301 million invested in 2003.

While the dollar amount has come down significantly, there has actually been a dramatic uptick in deal volume. By the end of the third quarter, investors had already invested in 30 nano companies, on pace to significantly outstrip the total of 34 funded during the entire year of 2003.

Beneath those numbers are essentially two generations of startups. The more mature of the companies founded in 2001 and 2002 raised fat rounds in late 2003 in anticipation of a possible exit window in 2004 or 2005. Consequently, they had no need to raise venture dollars last year.