simplify a potentially long article, nanotechnology and venture
capital at this stage can be characterized by this often made
statement by some venture capitalists about investing in nanotechnology:
too early to invest in nanotechnologyĒ. This statement can
be interpreted as:
I donít know what nanotechnology is
But I donít want you to know that.
b. But I donít believe in telling people that I donít know.
c. But then the media wonít quote me and put my name in print
if I admit that I donít know.
d. This should be enough for me to say so I wonít put my foot
in my mouth about this.
e. I like to appear to be cynical because it will make me
f. I am a contrarian.
g. So I cannot invest in it.
I know what Nanotechnology is
But I am too risk adverse since the dot.com and biotech bubbles
b. Iíll stick to what I know even though it wonít give my
investors the ROI they want.
c. We only invest in late stage deals which are safer.
d. With the dot.com and biotech bubbles bursting, now we invest
in late stage deals.
e. But VC funding is not appropriate at this stage. There
is a funding gap that needs to be addressed. Depending on
the stage of the company, angel investing or government grants
may be more appropriate.
I read Michael Crichtonís ďThe PreyĒ. Nanotechnology is not
for another 50 years at leastÖ
I am not aware that large companies like LíOreal, DuPont,
BASF, Kodak, Ilford, etc. are already making money from nanotechnology
process improved products to the average consumer.
I am not aware that large companies like Volkswagon, Air Products
and Chevron are already investing in nanotech startup companies.
The typical nanotech entrepreneurs donít have enough experience.
The typical nanotech entrepreneur is a university professor
and doesnít have enough business, marketing and sales experience
to create and make their business model successful.
b. Itís a lot harder than they think. Itís even a lot harder
than we think.
c. The nanotech companies donít know how to scale up.
d. The nanotech entrepreneur wonít accept outside help or
give up a reasonable amount of control and equity for outside
help and financing.
e. The nanotech entrepreneur doesnít know what he doesnít
know about business.
f. The nanotech companies donít know how to put together a
good management team.
g. The nanotech entrepreneurs donít have a realistic grasp
on expenses, profit, their market and ROI.
h. We donít know how to manage deep tech PhDís.
i. Many of these nanotech companies would do fine with just
angel investor money. The ROI and scale that we work at is
much bigger and later stage.
j. This is why we take such a large equity stake so we can
have more control in the business in order to offset this
Nanotechnology is too big to get a grasp on.
I donít like a concept which doesnít make it easy for me to
categorize and confine in a neat little box to sell it.
Thereís too much hype about Nanotechnology.
I am not sure how to tell when a company is a really a Nanotechnology
company just because it has ďNanoĒ in its name.
b. I donít want to get caught in a nanotech investment scam
(see World Nanotechnology Summit http://www.smalltimes.com/document_display.cfm?document_id=5823
and Ishoni Networks http://www.siliconvalley.com/mld/siliconvalley/7659988.htm)
I subscribe to the herd mentality of investing because I am
I am having trouble finding and getting on the bandwagonÖI
b. I donít know Steve Jurvetson or Charlie Harris.
But I invest in biotech in much more earlier and riskier stages
with longer time horizon for and more risk with achieving
I donít remember or acknowledge that there was a biotech bubble
as well as the dot.com bubble.
b. I may have and again be contributing to another biotech
But I invest in biotech even though much of it comes under
the nanotechnology umbrella.
Even though I invested in dot.com startups with even riskier
or nonexistent revenue generating business models.
I specialize in investing in hi-tech but to me hi tech is
just IT and biotech.
What US$3.7 Billion nanotechnology fund bill?... (21st Century
Nanotechnology Research and Development Act that President
Bush signed into law Dec. 3, 2003)
I make a lot of money from management fees so I donít have
an incentive to really maximize ROI for my investors even
though nanotechnology will affect all industries globally.
Venture capital is largely unregulated so I am not penalized
by my investors if our investments donít perform. When the
investments donít perform we can blame it on the market because
other VC firms with a similar investment strategy have failed
too so we can absolve ourselves of responsibility. Of course,
these days Iíve heard that LPís are now suing GPís.
The timing environment is not yet right so that I can use
my normal Russian Roulette and machine gun investment strategy.
This is why I take so much equity stake in the companies we
invest in. If one makes it big, it covers my losses on the
After downsizing, we have the same expertise since five years
ago so we donít have anyone nor can we now afford to hire
anyone with expertise in nanotechnology or anything else new
for that matter.
However, we still invest in companies in our areas of expertise,
even if they not optimal, so that we can collect our management
fees. Otherwise we will have to give our LPís their money
Iím having enough problems salvaging the portfolio of investments
weíre still invested in.
Iím having problems raising more funding from my LPís with
which to invest since we lost more than half their money after
the dot.com and biotech bubble burst.
I donít take the term ďventureĒ in venture capital so literally.
I actually said more than this but the reporter only quoted
about 10% of what I said.
My friend said so.
This is a rather tongue-in-cheek article but more true than
many people would care to realize or admit. Note that not
all venture capitalists embody these characteristics and mindset.
They may also exist in some combination thereof. This may
be an indication that there is room for improvement in the
relationship between venture capitalist and entrepreneur.
you can think of some more contributions, Iíd welcome them.
If we accumulate enough, perhaps there would be enough for
a sequel article. I can be contacted at email@example.com.