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June 12, 2003 — It was only a matter of time before more big firms came hunting for small tech development deals and acquisitions.
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If the last few weeks are any clue — with four high-profile development deals or strategic investments and plenty of acquisition activity — publicly listed corporations are increasingly interested in their smaller, privately funded brethren. Corporate representatives scouting the nanotech startup field, however, say that for now it’s more about collaboration than consolidation.
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Earlier this week, Air Products and Chemicals Inc. of Allentown, Pa., a Fortune 500 firm with more than 17,000 employees and $5.4 billion in annual revenue, announced a joint development agreement and equity investment in Nanotechnologies Inc., a 25-person Austin, Texas, nanomaterials maker.
Last week, Nanotechnologies also inked a development agreement with eyeglass manufacturer Essilor International, a leading European provider of eyeglasses and contact lenses. Meanwhile, Nanosys Inc., the Palo Alto, Calif., developer of nano-enabled systems, announced strategic investments from Eastman Kodak Co. and H.B. Fuller Co.
As if a quartet of development agreements and strategic investments weren’t enough, Cabot Corp. of Boston recently acquired the assets of Albuquerque, N.M.-based Superior MicroPowders LLC while at least two other acquisitions in micro- and nanotechnology were announced in recent weeks.
Charlie Harris, president of MEMS and nanotech venture capital specialists Harris & Harris Inc., said the companies in his firm’s portfolio are receiving more attention from large corporations, but he is not sure whether it is happening industrywide.
Industry events and feedback from corporate representatives suggest it is, at least for nanomaterials and the chemical industry.
Last October, a chemical industry meeting convened to discuss how to integrate nanotechnology and nanomaterials into their businesses, with the ultimate aim of producing an R&D road map on the topic. Among the 143 participating companies were Air Products, Ciba, General Electric, Dow, DuPont, Praxair, Rohm and Haas — the seven companies which lead the consortium that hosted the meeting, as well as representatives of government and academia.
Air Products has had a “formal, intentional plan to look at nanotechnology and see how it fit in” for about a year-and-a-half, according to Jeff DePinto, Air Products’ business development manager, and had various nano projects that preceded the formal effort.
The Nanotechnologies agreement, the company’s first public announcement in the field, may exemplify what big firms are looking for in a startup partnership. DePinto said Air Products will have access to “what we feel is unique nanoparticle technology.” Although he declined to cite specific applications, he said the company will develop nanoparticles for its current businesses and for new product markets.
One of Nanotechnologies’ strengths is its ability to create particles that disperse more uniformly and are more consistently sized — characteristics that make it easier to produce the kinds of transparent or anti-scratch coatings that industrial partners desire, said Randy Bell, president and chief executive.
The company is going after markets for nanoparticles with what the industry calls a high value-add — that is, they do something special and cost more — rather than the less expensive materials that sell more like commodities. Bell said the company is likely to announce one or two more partnerships in the next year.
There could also be more to come from Air Products. “We’re still in the process of looking for alliances that will help us get access to technologies and speed to market,” DePinto said. “Part of our strategy is to not invent everything ourselves.” He said that the company stands to grow faster by taking advantage of technologies that are already out there.
However, he stopped short of saying the industry is at the threshold of a full-fledged trend. “There hasn’t been as much activity as you would expect,” DePinto said.
Jack Solomon agreed. The director of technology assessment at Fortune 500 Praxair Technology Inc. of Danbury, Conn., said the chemical industry, at least, is still trying to figure out what nanotechnology means for their businesses. He said the variety of diverse technologies involved and the fact that few have high volume manufacturing experience mean that companies must take careful steps toward nano.
“By necessity, we’re looking at the startups,” he said, adding that companies like his must simultaneously do in-house R&D while they scout external technology opportunities. Furthermore, Solomon said, Praxair has informal relationships with some nano startups that could possibly evolve into more formal arrangements, although he declined to name the companies.
That doesn’t necessarily mean Praxair will be buying any nano startups soon. In fact, Solomon said, the acquisition opportunities may not be as viable as some would think.
In most cases, he said, nanomaterials companies are trying to develop the ability to supply other firms with a high-value material. That kind of business model means the nano startup will supply disparate industries that have little, if anything, to do with one another.
And that, said Solomon, means larger firms may be better off buying nanomaterials than nano companies.
Frank Lipiecki, director of the Engineering Technical Center at Rohm and Haas Co., does not see any trend that would favor large firms collaborating with or acquiring nano startups. Each opportunity would have to be evaluated individually, he said.
Another Fortune 500 chemicals company, Rohm and Haas posted $5.7 billion in annual revenue for 2002 and employs 17,611 people. Lipiecki said the firm, which has its own nano R&D efforts as well as relationships with small nanotechnology companies, has increased its interest “with the increasing capability of the technology to produce these materials.”
Its outreach efforts run the gamut from word-of-mouth communications to more formal efforts. Last month, it announced an agreement with Fudan and Sichuan Universities in China to work together on patents in the development of polymer nanotechnology.
As for the startups, Lipiecki also pointed out that it works the other way: In short, for every large firm scouting startups, there are likewise nanotech startups on the prowl for equity investments and development agreements from the big guys.