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April 14, 2005 — If there’s anything I took away from the Stephens Nanotechnology Investors Conference last week in Pasadena, Calif., it was this: If nanotech ever takes on Wall Street in a big way, it will appear to happen suddenly.
For starters, the nanotech learning curve is steep. Investors are not going to get comfortable with nano firms during the short course of a road show, the time before an IPO in which startup executives pitch their companies to investors. By the time the road shows come along many investors will already know that they’re interested, or that they’re not.
Second, startups won’t want to wait around and be publicly dissected by the media and analysts — not to mention competing entrepreneurs, investors and executives — any longer than they have to. They’ll file, and then try to get the offering done quickly. Attention during that time can help, but it can also hurt. Companies in registration to do an IPO are restricted in what they can say to defend themselves. No reason to be in that situation any longer than absolutely necessary.
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Third, as last August showed, IPO windows can slam shut with little advance notice. No one wants to get their fingers caught on the sill. And there’s no reason to think that nanotechnology companies, with perhaps a few exceptions, will be treated as anything but risky — that is, the types of companies investors will back away from most rapidly when fear strikes. So expect nano companies to be as opportunistic as they can — to file for an IPO if the market seems ready and to follow up as rapidly as possible with the offering.
When this will all happen, of course, is another matter altogether. It may never. Three nano companies went public last year — Immunicon, Lumera and Cambridge Display Technology — despite the fact that a critical mass of nano offerings didn’t emerge.
That’s only likely to happen when institutional investors get more educated on nano — when they’ve explored the vast variety of technologies being used and markets being addressed and when they’ve gone past any initial infatuation to reach a comfort level with nano’s array of companies and business models.
That could happen this year, but I’m thinking it’s more likely in 2006. The institutional investors I spoke with at the Stephens conference, which attracted 120 attendees representing about 60 investment firms, certainly see nanotech as intriguing … but not necessarily investible.
Many were at the conference to get educated. They will get more comfortable with nano. And nano firms will get better at communicating their stories to Wall Street’s ears. If and when those two trends meet in an environment conducive to risk, you’ll see nano finally catch a tailwind on Wall Street. It will appear to have whipped up suddenly, but in truth it’s been gathering momentum for years.