2005 VC report: late stage funding pumps up nano numbers

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Jan. 30, 2006 – Venture capitalists invested more than twice as much money in U.S. nanotechnology companies in 2005 than they did in 2004, according to a Small Times analysis released today.

The investment amount reflects the maturing of the first generation of nanotech startups that were founded earlier this decade, many of which raised large later stage rounds during 2005.

Nanotech funding hit $434.3 million for 2005, up 121 percent over the previous year’s $196.4 million. The year’s performance set a new record for nanotech funding, according to a Small Times analysis of the MoneyTree Survey by PricewaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association.*

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Actual funding activity measured by the number of deals that took place during the year was up more modestly, from 45 in 2004 to 51 in 2005.

The large funding figure was fueled by large later stage funding rounds throughout 2005. The year started out strong, led by Nano-Tex, the maker of nano-enabled fabric enhancements, raising $35 million and Aspen Aerogels, which makes thermal and acoustic insulators, raising $30 million.

Investors maintained pace in the second quarter, led by Nanosolar and Neophotonics, each of which raised $20 million. Large rounds tapered off somewhat in the third quarter before picking up again in the fourth, which featured the largest nanotechnology venture deal of the year, Nanosys’ $40 million round.

In the broader category of “small tech,” which encompasses nanotechnology, MEMS and microsystems, 2005 was the first year since 2001 that investors deployed more than $1 billion, investing $1.06 billion in 122 rounds. In 2004, by contrast, the category attracted $865 million in 126 rounds.

U.S. Nanotech VC Funding

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Year No. of deals Dollars invested
1998 5 $16.8 million
1999 7 $44.3 million
2000 9 $171.4 million
2001 21 $119.3 million
2002 41 $212.7 million
2003 34 $301 million
2004 45 $196.4 million
2005 51 $434.3 million

* Small Times has a partnership with PricewaterhouseCoopers under which it performs a quarterly analysis of the MoneyTree survey for the purposes of tracking funding in nanotechnology as well as the broader category of “small tech,” which includes nanotechnology, MEMS and microsystems. Research by David Forman.

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