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July 21, 2004 — Just two short years ago, the idea of a micro- or nanotechnology company going public was, well, wishful thinking. Reality was otherwise: There were fewer than 100 IPOs in 2002, a mere 22 of them venture-backed, compared to nearly 500 in 1999. In short, it was not the right environment for early stage technologies.
At the time, investors and entrepreneurs were forecasting upwards of three to five years before a viable IPO window would open.
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It took just two years. Today, the jury may still be out on whether these companies are going public too early — but it’s undeniable that they are here.
The most recent is Lumera Inc., a Bothell, Wash.-based nano firm. Lumera is offering 6-million shares and is slated to go public this week. The price estimate of between $6.50 and $7.50 per share was revised upward from what was originally a 5-million-share offering between $5 and $6.
Lumera is hardly the only one, however. The nanotechnology business community is anticipating the IPO of Nanosys Inc., likely to come in early August, according to the Nasdaq IPO calendar. In the meantime, lesser-known nanotech companies are taking the plunge.
Lumera’s value proposition is that it uses proprietary nanotech and related intellectual property to make wireless antennas and systems, biochips and electro-optic devices.
Its IP portfolio traces to three places: a sponsored research agreement with the University of Washington that gives it certain rights to the work of Professor Larry Dalton; licenses to a suite of patents owned by Arizona Microsystems; and, patents and trade secrets of its own. The company is in a quiet period and could not comment.
“They are claiming their polymers are oriented in a certain manner,” that is designed to optimize their electrical or optical properties, said Thiemo Lang, who has met with the company’s management.
However, Lang, a portfolio manager with Activest of Munich, Germany, and creator of the Activest Lux NanoTech mutual fund, pointed out that Lumera is at present “completely dependent on military contracts.”
Those contracts are part of what appear to be a plan to leverage military projects to develop technologies that can then be made into consumer products. That was the route followed by Microvision Inc., Lumera’s parent company, which developed a head-up display for the military that it is now transitioning into consumer use.
Both companies are University of Washington spinouts. They both take advantage of disruptive technology. (Microvision uses a MEMS chip in its display and bar code scanner products.)
And like Microvision, Lumera has picked itself up by its government-provided bootstraps. Lumera currently has two government contracts to produce polymer-based electro-optic devices for use in defense communication systems.
“Substantially all” of its revenue to date has been the result of development contracts with the U.S. Department of Defense and a government subcontractor, according to an SEC filing.
Despite being a Microvision subsidiary, Lumera has received over $27 million in venture backing. Investors in the company’s original 2001 $24-million round include Cisco Systems, Acorn Ventures, Barksdale Group Fund and WRF Capital.
The Lumera IPO would be the second nano-related one this year. In April, Immunicon Corp., a developer of blood diagnostic products that use magnetic nanoparticles, offered 6 million shares at $8 each.
The micro side is active, too: Last week, Motorola’s semiconductor unit went public as Freescale Semiconductor, which sells a variety of MEMS products.
Small tech companies have also been taking advantage of the secondary market. Tiny tech investors Harris & Harris Group Inc., nanomaterials maker Nanophase Technologies Corp., nanopharma firm BioSante Pharmaceuticals and nanomaterials vendor Altair Nanotechnologies all recently filed for or conducted secondary offerings.
Furthermore, the pipeline only seems to be filling up. Investors put $301 million into nanotechnology companies in 2003, according to a Small Times analysis of the PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association/MoneyTree Survey.
The $301 million was a significant increase over the $213 million invested in 2002, but the number of deals actually dropped from 41 in 2002 to 34 in 2003, reflecting a trend towards fewer but larger, later-stage rounds as companies prepared for possible exit opportunities.