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Feb. 2, 2005 — The amount of money invested by venture capitalists in U.S. companies commercializing nanotechnology fell a precipitous 35 percent last year. However, the number of companies receiving funding increased 32 percent, to the highest level Small Times has tracked in data going back to 1995.
Investors put $196.4 million into nanotechnology companies during the calendar year 2004, according to a Small Times analysis released today of the MoneyTree Survey by PricewaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association. Much of 2004’s nano funding occurred in the fourth quarter, when investors put $74.3 million into 15 companies.
Early stage attracts renewed interest
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On a dollar basis, the year’s funding is down sharply from the $301 million invested in 2003. On a deal basis, however, investors participated in a record 45 nanotech funding rounds in 2004, up from 34 in 2003. The previous record high on a deal basis was 2002, when investors participated in 41 nano rounds.
A renewed interest in early stage rounds — which are usually for smaller amounts — pushed the deal flow up despite fewer dollars. Venture investors also returned to funding startup/seed stage nano companies in the fourth quarter of 2004 after eschewing the category for three consecutive quarters.
As a result, early stage funding accounted for 36.4 percent of all nanotech funding, up from 26 percent in 2003. Expansion stage funding was responsible for 45.5 percent and later stage funding for 13.6 percent, compared to 47 percent and 18 percent, respectively, in 2003. Meanwhile, the two startup/seed stage companies funded in the fourth quarter accounted for 4.4 percent of the year’s deals, down from 9 percent in 2003. (Figures do not add up to 100 percent due to rounding.)
Q4 pumps up nano funding
During the fourth quarter of 2004, investors put $74.3 million into 15 companies commercializing nanotechnology. On a deal basis, that accounted for 2 percent of all U.S. venture funding while on a dollar basis it accounted for 1.4 percent during the quarter.
The fourth quarter saw investors funding companies commercializing a variety of nanotechnologies, including membranes with engineered nanoscale structures, nanoscale catalysts, roll-to-roll photovoltaics, inorganic nanomaterial assembly technology, nanofabricated sensors, carbon nanotubes for thermal management, carbon nanotubes for sensors and electronics, custom nanopowders, OLEDs, organic electronic structures and quantum dots.
Small tech follows similar trend
In the broader category of “small tech” — encompassing nanotechnology, MEMS and microsystems — venture backers invested $865.2 million in 126 deals during 2004, down from $982.5 million in 2003. However, the 126 deals were up slightly over the 114 done in 2003.
On a deal basis, the 126 deals accounted for 4.4 percent of all venture funding in the year, up slightly from 4.2 percent in 2003 and the second highest percent of overall yearly deal volume tracked by Small Times going back to 1995. (The highest was 2002’s 4.7 percent.) On a dollar basis, small tech accounted for 4.1 percent of all funding for the year, down from 5.4 percent in 2003.