Racing to the Bottom: Nanotechnology Picks Up Speed

Biotechnology has been in the news lately, with initiatives like the South Lake Union development and the Technology Alliance’s Bio 21 recommendations. There is another promising technology on the horizon – nanotechnology. At a panel presentation on February 24 moderated by Lee Cheatham, executive director of the Washington Technology Center, Jim Moore, managing partner of Avogadro Partners, and Dr. Viola Vogel, bioengineering professor at the University of Washington, discussed nanotechnology and why we should care. In a separate interview, Frederick Morris, Governor Locke’s policy advisor for science and technology, also discussed what is happening in the state. Their comments have been combined into an overview of this exciting frontier.

nanotechnology and entrepreneurship

What is nanotechnology?

How big (actually, how small) is nanoscale? “Nano” is a prefix meaning “one billionth,” 1/1,000,000,000 as a fraction or 10-9 in scientific notation and in the case of nanotechnology, connotes one billionth of a meter. Angels may or may not dance on the heads of pins, but at nanoscale sizes, we can see the atoms and molecules that make up those pins.

According to Dr. Viola Vogel, if you took a single human hair and cut its diameter another 1,000 times you’d finally get to nano-scale sizes. In terms of time, I recall Rear Admiral Grace Hopper, one of computing science’s giants, handing out lengths of wire about 11 inches long, pointing out that light travels that distance in a nanosecond.

This means we have new opportunities for discovery in different disciplines with the quality of life and economic implications that implies. We’re used to creating things from the top down, as those in the field describe it. That is, we take existing raw materials like wood, ores, oil, earth, and the like and put them together in ways we find useful. This makes us dependent on the existing properties of those materials – if you make a glue to hold something together, it will pull apart given the right amount of force. Nanotechnology will allow us to move the actual atoms and molecules around in ways that will give us new materials with new properties. And we’ll be able to control what those properties will be. That’s working from the bottom up.

What’s the big deal about this small subject?

Considering the potential, the excitement about nanotechnology is fairly recent. While the concept was introduced in 1959 by the physicist Richard Feynman and the term coined in the 1980s by Eric Drexler while he was an MIT undergraduate, interest in nanotechnology surged only in the last several years. That’s because it wasn’t until the 1990s that researchers were able to see and work with individual atoms, with demonstrations like IBM’s creating its logo with 35 xenon atoms. Against the backdrop of discoveries like carbon nanotubes that can be stronger than steel but much lighter, a growing availability of tools for researchers, and creation of the National Nanotechnology Initiative, that decade saw the number of nanotechnology related firms grow from 10 to over 1,000. Government funding now approaches $1 billion per year by the United States alone with other governments close behind.

Lay people who might not fully understand the science behind nanotechnology get excited about the practical possibilities. For example, Dr. Viola Vogel, former director of the Center for Nanotechnology at the University of Washington, described how coli bacteria actually bind to surfaces in spite of quickly flowing fluids that should wash them away. This counterintuitive situation happens because the hairs on the bacteria contain nanoswitches that increase their hold on a surface if stretched. Research suggests we can use that property to make glues that get stronger as the pressure to pull apart increases.

While the science is nice, shouldn’t we be cautious? After all, everyone remembers the dotcom bubble and its results. Jim Moore, managing partner at Avogadro Partners, who has watched and participated in the business aspects of nanotechnology, pointed out some differences. There are higher barriers to entry in nanotechnology than with Internet based businesses. For example, someone can start an Internet business with a domain name, a hosting service, and an eCommerce service, but nanotechnology requires more specialized equipment and services, resulting in more capital expenditure as well as operations costs.

A much deeper and more specialized knowledge base is needed in nanotechnology. Advanced disciplines like physics, materials science, chemistry, and the life sciences are required to even make a go of a business proposition. The result is a much smaller group of entrepreneurs available to start companies. Compounding this are ethics rules affecting the ease with which people like university researchers can capitalize on their discoveries. Because of those constraints, it’s likely that there won’t be a massive rush like the dotcom boom, but that growth will more likely match the actual demand for products and services related to nanotechnology.

What is the current state of nanotechnology?

There is a lot going on in nanotechnology research and business these days and it’s picking up speed. According to Frederick Morris, Washington could be on the verge of being a major nanotechnology center, having just missed being named one of the nation’s top ten centers by Small Times magazine. What are some of the reasons behind that rising importance?

A strong research core connected to the rest of the nation leads the charge to significance. For example, the University of Washington’s Center for Nanotechnology brings together researchers from different disciplines and is among other initiatives like the PhD program in nanotechnology, the first of its kind in the US, and user facilities at the Washington Technology Center which allow organizations and businesses to create practical uses for the technology. Dr. Vogel highlighted the Joint Institute for Nanoscience & Nanotechnology created by the University of Washington and the Pacific Northwest National Laboratory (PNNL) as another example of the strong research efforts in the region.

And the business world is taking notice of the opportunities arising from the research. According to Jim Moore, in 2003 governments around the world invested an estimated $2.5 billion in nanotechnology and R & D. Private corporations invested an equal amount or more. By early 2004, there were 1,500 firms around the world focused on nanotechnology, 800 of which are in North America.

The current business environment is marked by several characteristics. While the downturn in early-stage investment seems to have bottomed out, the market is still highly competitive with private investors being very conservative and strategic investors only beginning to get more active. This means money tends to go to select firms. The recent upsurge in research efforts and budgets indicates another aspect of the business – it’s still in its infancy. In the United States., this means most of the investment is with public money, from the National Nanotechnology Initiative signed by President Clinton to the 21st Century Nanotechnology Research and Development Act recently signed by President Bush. Most of the business effort, meanwhile, is in staking out territory, creating diverse patent portfolios to hedge against anyone not panning out and to defend against competitors for the same application markets.

The early-stage nature of the research also means science and business players have to have deep knowledge of the disciplines to make wise choices about which avenues to pursue. That’s because they have to decide which ideas can return an investment in a reasonable time frame and which ideas, while interesting, may never have commercial applications.

What are the trends?

Where is this all taking us? Frederick Morris is optimistic. While some might overestimate what nanotechnology can accomplish in the short term, he thinks the long term benefits may actually be underestimated, that being able to control the properties of what we build through nanotechnology tools and techniques may yield benefits beyond what we can imagine today. At the very least, nanotechnology promises to be a powerful enabling technology that can help build Washington’s economy through some of the state’s technology fields like computing, materials, and biotechnology. This comes from the increasing collaboration of normally different scientific disciplines when they work at the nanoscale level, says Dr. Vogel.

There will be even more collaboration in the future with Washington playing a large part because the Center for Nanotechnology is a member of the National Nanotechnology Network (NNIN), an integrated partnership of thirteen user facilities, supported by the National Science Foundation. The National Science Foundation provides extensive opportunities for nanoscience and nanotechnology research. The NNIN will support nanoscale fabrication, synthesis, characterization, modeling, design, computation, and hands-on training as well as allow qualified users to work in the open, hands-on user facilities of NNIN members.

Trends in the business sector, according to Jim Moore, show increasing activity and investment with rapid development in higher education and significant government funding under girding a 30% per year increase in VC funding as more start-up companies appear. The large corporate players have noticed as well, with increasing R&D investment and more investment reports covering the nanotechnology sector.

These developments have led observers to predict the number of nanotech companies to reach 2,000 by the end of this year. This commercial activity, with an expected $3.5 billion in government support to research and technology transfer, will attract up to $1 billion in venture capital.
Part of this activity will yield some commercial developments, specifically a carbon nanotube flat panel display (expected to be marketed by Samsung) and the first commercial nonvolatile RAM for instant-on computers. However, observers expect choppy waters as well, with some consolidation occurring to weed out the weaker companies. This year may see the first patent infringement lawsuits as the early instances of grappling with legal impact of nanotechnology.

The legal aspect of nanotechnology raises very interesting questions. In response to questions about the ethical implications of nanotechnology and the resulting translation into law and regulation, Dr. Vogel described some issues already being addressed in workshops under the auspices of the National Nanotechnology Initiative. For example, we expect that eventually humans will be ingesting nanoparticles in foods and medicines but aren’t sure if that should be considered an issue. After all, we ingest nanoparticles today in the form of pollution, aerosols, and the like. And currently, effects because of size are not regulated.

So what do entrepreneurs need to know?

Frederick Morris advises entrepreneurs to understand the research and make connections. Because of the higher barriers to entry, entrepreneurs need to be on their game – customers and investors need to be persuaded that a company can be guided through what is essentially uncharted territory.

Jim Moore listed some things investors are seeking. A company must be positioned to return a high payoff within the investment time horizon in a market in which large players are not significantly involved and be able to defend itself by locking up the proprietary rights to its technology (no small order considering that intellectual property law in this area is in its infancy). This calls for a credible management team working with key scientists.

Entrepreneurs have their work cut out. Nanotechnology offers an opportunity to get into a relatively new field that promises to bring about great change but requires significant intellectual and physical capital investment. Yet, the fundamentals remain unchanged – a sound business model, a well thought out business plan, and savvy execution will bring a new firm to profitability.