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Nanotechnology investing: What VCs, angels and strategic investors look for

Written by: 
Frank Vinluan

Doug W. Jamison, John Glushik, Martin Sinozich, and Carol Marino
Doug W. Jamison, John Glushik, Martin Sinozich, and Carol Marino
As nanotechnology finds new uses ranging from engineering to medicine, a growing number of early stage companies are forming to bring new nanotech innovation into those markets.

But nanotech companies are clamoring for financing at a time when investor purse strings remain tight. Some investors are showing interest in nanotechnology investments, but that interest doesn’t mean that they approach these deals with any less caution. Nanotechnology investing was the topic of a panel discussion at the NanoTech Commercialization Conference in Durham, North Carolina. Here’s what two venture capitalists, a strategic investor and an angel investor had to say.

Focus. Harris & Harris (NASDAQ:TINY), a publicly traded venture firm that focuses on early stage nanotechnology investments, has done deals with a lot of companies that have platform technologies, said Doug Jamison, the firm’s CEO. But that broad potential can work against an early stage company if a technology’s application is not clear. ”Finding the focus is probably the most difficult thing and where we’ve failed the most,” Jamison said. John Glushik, general partner at Durham venture capital firm Intersouth Partners, said his firm sees a lot of platform technologies that did not clearly show where the technology would go. A company needs to define not only the market need, said Syngenta Ventures Vice President Carol Marino, but also how its technology addresses that need.

Angel investor, strategic investor or venture capital? Angels investors are typically the first step for early stage companies who are seeking outside funding. Martin Sinozich, president of the Piedmont Angel Network, said that he looks to see what a company needs beyond what angels can support. Angels will need to see that value is being created along the way because that’s what will get the company to the next stage. Glushik said that although Intersouth has traditionally followed angels, the firm is doing more deals alongside angels and may jump in before angels. Venture capitalists will be mindful of potential acquirers of a company and Glushik reiterated that VCs “want that universe to be as big as possible.” A large company such as Syngenta can take a different approach to investing in early stage nanotechnology companies. Syngenta can have a longer-time horizon for a developing technology because it doesn’t have limited partners to answer to, Marino said. But she added that Syngenta looks for focus and fit. Syngenta will do a deal if it supports the company’s R&D.

Proof of concept. Quickly. Glushik said that venture capital firms hearing nanotech investment pitches are also hearing pitches from Internet, consumer-focused companies that require less money. And that smaller amount of financing will last longer at an Internet company than it will at a nanotechnology company. Nanotech companies need to show that they can get to proof of concept quickly. Jamison said that Harris & Harris is always looking ahead. There must be clearly defined milestones that create value in the technology.

Management. Glushik said that many of the companies that present to Intersouth spend most of their time explaining the technology and less on how the company plans to bring that technology to market. The firm will assume that the technology works. But as an investor, Glushik said he’s looking for more than the technology. Intersouth is interested in the management team of a company and that team’s ability to bring new technology to the market. Intersouth will look at early stage companies who don’t yet have revenue, Glushik said. But the management team is key.

Source: MedCityNews