[QuantumSphere - Energetics and Power for Advanced Applications] January 2006

Venture Capital Pours into Nanotech, but Exits Are Uncertain; Nanotech Venture Capital Totaled $480 Million in 2005, Bringing Total Investment to $2.0 Billion
Lux Research, Jan. 9, 2006

Venture capital (VC) funding for nanotechnology start-ups has been more notable by its absence than its presence to date. But investment is steadily rising: Institutional venture capitalists put $480 million into nanotechnology start-ups in 2005 – bringing total investment since 1995 to $2.0 billion – according to a new report from Lux Research entitled “Making Sense of Nanotech Venture Capital.”

“Venture capital investment for nanotechnology rose strongly in 2005 due to large, late-stage funding rounds for firms like Aspen Aerogels, Nanomix, and Nanosys,” said Lux Research Vice President of Research Matthew M. Nordan, lead author of the report. “But venture capital still remains a drop in the bucket of total nanotech investment, outstripped by corporate R&D; spending and government funding by a factor of 19x. The reason is that the success of nanotech venture investing is still too early to call: Only 9% of venture-backed nanotech start-ups to date have achieved exits.”

To assess nanotech venture capital, Lux Research built a comprehensive database of all institutional venture capital investments in nanotech start-ups since 1995, covering 258 investments into 143 start-up companies spanning 13 countries. The deals include both publicly announced transactions as well as undisclosed investments sourced through Lux Research’s proprietary network. In addition, the report team spoke with partners at a representative sample of 28 top-tier venture capital firms to understand their experiences and expectations with nanotech start-up investments.

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