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Small Wonders
Peter Hébert
04/01/2004
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Bust Soon, Boom Later
The buzz around nanotechnology is deafening. Stocks
with “nano” in their names are surging. The Forbes/Wolfe Nanotech Report’s index
has outperformed the Nasdaq by 226 percent since March 2002. According to Lux
Research, in 1995 there were 700 mentions in the media of the word
nanotechnology. This increased to nearly 7,500 in 2003. That is not growth; that
is an explosion.
Precedents of similar technology booms, like the Internet
craze, suggest that nanotechnology’s economic impact will be overestimated in
the short run but woefully underestimated in the long run. Scientific and
technological innovations—railroads, electricity, telephony or, more recently,
biotechnology and the Internet—have often underpinned sweeping economic
revolutions. These revolutions often take decades to run their course.
Nanotech’s effect will be bigger than the Internet and more far-reaching. It
will create vast new wealth and it will destroy a lot of old wealth. It will
shake up just about every business on the planet.
Despite this promise,
nanotech will not be immune to technology’s traditional boom and bust investment
cycle when reality falls short of overinflated expectations. The vast majority
of today’s venture capital deals in nanotechnology have been in nano-materials,
where the path to profitability from revenue-generating products is clear. By
dollar value, however, venture capital firms have been putting the most money to
work in nanobiotechnology, where the time frame for return is significantly
longer. Government support and patience on the part of the venture capitalists
is required for these longer-term investments to come to fruition.  | Peter Hébert is cofounder and managing partner of the New York venture firm Lux
Capital and a contributing editor to the Forbes/Wolfe Nanotech Report. |
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