May 14, 2004 — Despite the year’s first nanotech IPO in April and another likely coming this summer, funding activity in nanotechnology, MEMS and microsystems is continuing to proceed at a measured pace.
Twenty-six companies raised $173.6 million in the first quarter, versus the same number of deals and $183.2 million raised in the year-earlier period, according to a Small Times analysis of the MoneyTree Survey by PricewaterhouseCoopers, Thomson Financial Venture Economics and the National Venture Capital Association. The number of nanotech-specific funding rounds increased slightly, although the amount invested in nano fell to just $34 million, reflecting an increase in early stage deals for smaller amounts during the quarter.
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The 26 nano, MEMS and microsystems deals accounted for 4.2 percent of the 618 investments made in the quarter, while the $173.6-million venture capitalists invested in small tech accounts for 3.8 percent of the $4.6 billion invested overall. Quarterly funding has stabilized in the $4.2 to $5.2 billion range over the last seven quarters, after a sharp descent from the record years of 1999 and 2000.
That could ramp up soon, however. “The thing I’ve noticed the most is that now (venture capitalists) are all saying, ‘send me deals because we’re going to start doing stuff in six months,'” said Lynn Foster, an emerging technologies director at Los Angeles-based law firm Squire Sanders & Dempsey who tracks the nanotech sector closely. In the past, he said, many VCs were merely asking to be kept in the loop.
Furthermore, the first quarter venture data shows that early-stage investments were responsible for 38 percent of the quarter’s deals in nanotechnology, MEMS and microsystems. The 10 early-stage deals accounted for $48.3 million, or 28 percent of the dollars invested. And a full 50 percent of nanotech deals were classified as early-stage investments.
Four early-stage companies reported receiving venture financing for the first time. They include Applied MicroStructures Inc., a San Jose, Calif.-developer of MEMS processing technologies; Eikos Inc., a Franklin, Mass.-manufacturer of carbon nanotube inks for conductive coatings and circuits; NanoChip Inc., a Fremont, Calif.-developer of MEMS-based memory; and, Siargo Inc., a San Jose, Calif.-developer of MEMS and microsystems. NanoChip’s $20-million round was the largest small-tech funding event of the quarter.
Small tech startups are also continuing to pull in investments overseas and from government agencies. NTera Ltd., a Dublin, Ireland-developer of displays using nanostructured materials, recently announced closing on $9.5 million in funding.
Meanwhile, the Commerce Department’s National Institute of Standards and Technology (NIST) this month awarded a slew of Advanced Technology Program (ATP) to small tech firms, which garnered five of the 27 awards granted. They include Cabot Superior MicroPowders of Albuquerque, N.M.; Discera Inc.of Ann Arbor, Mich.; MesoFuel Inc. of Albuquerque; Molecular Imprints Inc. of Austin, Texas, and Syrrx Inc. of San Diego.
The largest is a joint project in which Molecular Imprints is collaborating with University of Texas at Austin and three other firms, including Motorola, for three years to design and demonstrate technology for high-resolution imprinting of device patterns using nanolithography. The total project is estimated at $36 million. NIST will supply $17.6 million to the project and the rest will come from the partners involved.