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15th June 2003
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By Richard Fletcher and Lauren Mills It's the stuff of science fiction: nanotechnology, a scientific breakthrough which its proponents claim will create computers the size of a grain of sand and miniature robots that will march through the body repairing damaged organs. Nanotechnology is no Hollywood fiction. According to a report to be published this week by Lux Capital, the US venture capital firm, worldwide governments and venture capitalists invested more than $3bn in the fledgling sector in 2002. And the investors hope to grab a fat slice of a market which the US government confidently claims will be worth $1 trillion by 2012. Even British fund managers looking after our bog standard pension funds are betting that nanotechnology will be the next big thing. Meanwhile, last week the UK government joined the gold rush. Lord Sainsbury, the science minister, announced plans for an independent study to examine the benefits and risks of nanotechnology, which involves working with materials 80,000 times smaller than the width of a human hair. But the technology is controversial. Earlier this month Prince Charles latched on to the scary notion that nanotech "self-replication" could lead to armies of "microscopic robots" which would turn the earth's surface into "grey goo". However, probably a more urgent anxiety for investors is the claim that the enthusiasm is creating a bubble. According to sceptics, greedy financiers are once again backing little more than hype and hot air. And there are similarities with the dotcom boom of the late 1990s. Last week a website domain, called "Nanotechnology.com", was put up for sale with a $1m price tag by Technology Networks, a small Sudbury-based internet company. "It is a very hot area. This website address has enormous intrinsic value," says Ken Browne, the managing director of Technology Networks. Although the term nanotechnology was coined in 1959, the technology has only recently become modish. Unsurprisingly, many former stars of the internet boom are busy reinventing themselves as nanotechnology experts. One such is Julie Meyer, the founder of the dotcom networking group First Tuesday - who was dubbed "Queen Bee" at the height of the online boom. She has invested $10m in the sector through her venture capital firm Ariadne Capital. Alongside Volkswagen, Meyer has put her cash into NanoMuscle, an early-stage business that hopes to develop miniature motors for the toy and automotive industries. Then there is NanoMagnetics, a Bristol-based start-up business which is developing a protein-based coating for hard disk drives. Its pounds 6.7m fundraising attracted backing from former internet investors, including Amadeus Capital Partners, best known for its investments in Lastminute.com, ThinkNatural and Greenfingers. Prelude Trust, the quoted technology investment trust, also participated. Other UK investors in the sector include BTG, the quoted technology company which counts Prudential, Legal & General and Axa Sun Life as shareholders. BTG has invested pounds 2.8m in Mesophotonics, a nanotechnology firm developing the next generation of optical communications. And Schroder Ventures Life Sciences has invested in Quantum Dot Corporation, developing a new cancer treatment in a joint venture with GlaxoSmithKline. But it is 3i, the FTSE100 listed venture capital firm, that has so far led the UK's investment in nanoscience. 3i has recently invested in six nanotechnology companies across the UK and Europe. Alan Duncan, a director at Prelude Trust, insists that comparisons with the dotcom boom are wide of the mark. "There is a lot of interest, but not a lot of hype," says Duncan. "Nanotechnology is about technology you can defend and patent. Dotcoms were about setting up shops on the internet." But Jeremy Curnock-Cook, a long-standing biotechnology investor and the chief executive of Bioscience Managers, a venture capital fund, warns that investors should be cautious. "Clearly, it is a very exciting science, but you have to be careful that there are commercial applications. One has to look very carefully at the way it can be developed. Someone needs to understand the application side and not just get enthralled by the intellectual cleverness." Christian Reitberger, a partner at Apax Partners, believes that nanotechnology is "much, much more than hot air", although he admits that Apax has yet to find a compelling investment in Europe. "There is no hype in the investor community. The hype is in the press," adds Reitberger. Carl Franklin, technology analyst and author of a recently published book, Why Innovation Fails, also blames media hype for many of the misconceptions surrounding nanotechnology. "Articles trot out the brighter future that nanotechnology will bring, when tiny little nanosubmarines like the one in the film Fantastic Voyage sail through your bloodstream digging away at plaque on your arteries so you'll live a longer and more productive life," explains Franklin. "But in any of those articles, did you ever read how those little excavators stop digging when they come to the artery wall itself? Did you ever read about how the immune system might react to the presence of tiny submarines in the bloodstream?" asks Franklin. The nano-cheerleaders remain undaunted. "We believe [nanotechnology] will drive the next technology boom. We believe the past decade has been about manipulating digital bits and that we will see a reversion to the next industrial revolution - rather than huge machines, it is at the molecular scale," says Josh Wolfe, the managing partner of Lux Capital. For the moment though it's mainly a brave new world of conferences and networking events. Even Wolfe admits: "The only people making money today in nanotechnology are conference planners." |
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