By Guy Paisner
Small Times Correspondent
LONDON, Dec. 7, 2001 — As nanotechnology prepares to leave the laboratory and enter the marketplace, investors are circling around Great Britain’s academic centers. But unlike the United States, the United Kingdom is not renowned for its ability to mix academia with business, and a degree of confusion exists over how nanotechnology research should be funded.
In the United Kingdom, government funding allows for long-term research that is largely untainted by a commercial agenda. But venture capital is
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| “It is extremely important to commercialize as much as we can.” — Mark Welland, Cambridge University |
Mark Welland, a nanotechnology professor in the engineering department at the Cambridge University, believes that it is vital to develop the fundamental research that underpins nanotechnology away from the glare of commercial sponsorship.
“There are so many areas where we don’t know what is out there, that to try and second guess them in commercial terms would be a mistake,” he said.
Welland is also director of the Nanotechnology Interdisciplinary Research Collaboration that formally launches at the beginning of next year. The initiative will be funded with a $14.3 million government grant.
Although Welland argues that nonprofit research councils should fund basic research, he recognizes that once a commercial application has been identified, outside funding becomes invaluable.
“For nanotech to flourish it is extremely important to commercialize as much as we can as soon as we can and venture capitalists need to play an active role in this.”
This twin track funding approach stems from an academic mistrust of the short-term goals of some venture capitalists. Peter Dobson is a professor of engineering at Oxford University and has been involved in a number of spinouts in the nanotech arena.
“My experience of venture capitalists is that even before they’ve invested in a company they’re looking for an exit route to maximize their profit rather than looking out for the long-term gains of building a sustainable company,” he said.
Welland, Dobson and others debated this tug-of-war between the public and private sectors recently at an event that drew more than 100 venture capitalists, bankers and academics to the lecture theater in London’s Institution of Mechanical Engineers. The event was organized by First Stage Capital, a London-based corporate finance house that specializes in securing venture capital for early stage technology companies.
The turnout proved that 18 months into a technology downturn, nanotechnology seems to be one of the few topics that can still pull a crowd of investors.
Dobson’s comments about venture capitalists might seem surprising, given that he is a founder and director of Oxonica, a nanomaterials company that was spun out of Oxford University in August 1999 with funding from angel investors. Oxonica is currently seeking $5.7 million for its first institutional round of funding.
Oxonica has developed an enabling technology based on its ability to engineer nanoparticles with unique magnetic or optical functionality and then modify the surface of these particles to allow them to be tailored for use in specific applications. Business development is currently concentrated on sunscreen and fuel additive applications.
Dobson also founded Oxford Biosensors, which was spun out of Oxford University in August 2000. Oxford Biosensors uses a generic platform for analyzing the chemicals present in blood or any other body fluid. Using enzymes to do the molecular detection work, Oxford Biosensors can alter the design and functionality of enzymes through nano-engineering at the molecular level.
Giuseppe Curatolo is a London-based partner at Draper Fisher Jurvetson, a venture capital firm that has already invested in two nanotech startups in the United States. In October this year it invested in Nantero which is developing a high-density nonvolatile random access memory chip using nanotechnology. In February 2001 Draper Fisher Jurvetson invested in Arryx, which is developing laser beams that can manipulate matter like tweezers at a microscopic level.
Curatolo has seen a number of nanotech startups in Europe and Israel and anticipates that the firm’s $750 million European fund will invest in a couple of nanotech companies.
“I believe that nanotech is going to be an extremely important area for unlocking value over the next 10 years but we need to be careful not to create too much hype in this area,” he said. “Fantasizing about robots flying through your bloodstream to cure cancer doesn’t do anyone any favors. We shouldn’t create expectations that nanotech can deliver applications in the short term as the reality of the science is far from that.”
The current hype surrounding nanotech should not disguise the fact that there are only a handful of real nanotech startups in the United Kingdom. Before Oxonica was spun out, the best known British nanotech company to have received funding was NanoMagnetics, which uses nanomaterials to dramatically increase the storage density of hard disks and other magnetic media. NanoMagnetics was spun out of Bristol University in 1999 and has so far raised $9.5 million over two funding rounds from investors including Amadeus Capital Partners and UBS Capital.
Dobson argues that the market opportunity is just not big enough at the moment to support more than a few U.K. nanotech companies. However, continued investor enthusiasm for the technology will undoubtedly result in the rapid growth of nanotech in the United Kingdom.
Hazel Moore, chairwoman and co-founder of First Stage Capital, estimates there are currently up to 10 startups waiting to be spun out of U.K. universities.
“Applications in tooling, processing and materials that are close to having products in the market will be the ones most likely to attract VC funding in this investor climate,” she says. “There is some world-class nanotech research going on in the U.K. but in order to ease the bottleneck of spinouts we need to increase the level of industrial involvement and boost the level of commercial ambition in the university technology transfer offices.”
Nanotechnology in the United Kingdom had an early start when the National Initiative of Nanotechnology was established in 1986 by the National Physical Laboratory and the government with a mandate to boost public awareness of the subject. By 1995, the funding for this program had run out without much success in commercializing its research initiatives.
In 1997 the Institute of Nanotechnology was created to provide a focus for interest in nanotech and encourage new research.
It was, however, only in 2001 that real efforts were made to boost the commercial applications of nanotech research. These included the funding of a center for innovation in microsystems and nanotechnology at Newcastle and Durham universities with Proctor & Gamble and British Aerospace and the creation of two interdisciplinary research centers, involving collaboration between several of Great Britain’s leading academic institutions.
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