Big Story in Nanotech for Last Decade: The Funding Gap

In a gesture to recognize its tenth anniversary, TNTLog asked its readers what has been the best and worst stories surrounding nanotechnology in the last 10 years.

In my estimation, the big story in nanotech would be the funding gap, or, as it might alternately be termed, the innovation gap.

It seems governments around the world are anxious to invest billions of dollars into nanotechnology and then leave the small start-ups that this investment germinates to die on the vine while they are left to search in vain for the funding that could bring their technologies to market.

While IBM and other large companies, especially in the electronics and chemical industries, have invested heavily in nanotech, and this likely accounts for a large portion of non-government investment in the field, funding for small to medium enterprises attempting to bring a product to market just has not been strong or effective enough.

I have argued that financial institutions that have typically funded start-ups like these, such as venture capitalists or other private capital institutions, just have not been effective at bridging the seven to ten year of funding that these start-ups need. 

I bring this all up because we have another cautionary tale of how a company with a promising technology and some initial funding, ends up in bankruptcy due to little more than under capitalization.

The story of Carbon Nanoprobes Inc.’s failure is presented to us in contrast to the success of Saladax Biomedical Inc. The story gives us no information on why Saladax was successful in raising more financing than Carbon Nanoprobes. It could be any number of reasons, but a very likely reason would be that the ROI horizon was so far off for Carbon Nanoprobes that it constituted a much riskier investment.

This has been the overarching issue for nanotechnology’s development in the last 10 years. A generation of investors has been so conditioned by the dot.com era and hedge funds fueled by derivatives and glorified Ponzi schemes that the prospect of having to wait 7 to 10 years for their investment to pay off is just beyond their attention span.

I suppose that some Darwinian-influenced economic theory would be plugged in right about now, i.e. these companies failed because they were not strong enough.

Fair enough. But we are facing challenges so grand now in terms of feeding our growing population, supplying energy and even having clean drinking water that maybe we should find some way of supporting innovation in areas where we desperately need it, instead of allowing those potential solutions to disappear because it presented too much risk for financiers’ portfolios.

Where are my solutions? I don’t have a solution of my own but I like the direction that both Andrew Maynard and Tim Harper are going with the innovation framework they are developing as part of their roles with the World Economic Forum. 

Perhaps there are better ways to separate the wheat from the chaff in emerging technologies than just letting the financiers decide.