reportVenture capital funding
2.1 Venture Capital Funding of Nanotechnology
Start-ups and spin-offs are a vital means of commercialising research. New companies require finance to allow them to develop and grow their operations, which should be the point at which venture capital enters the fray. The best venture capitalists should also add value to investee companies beyond simply finance, providing industrial experience, contacts and – not least – momentum. This is especially so in nanotechnology, which often has longer development times and higher costs than an equivalent IT business.
The economic downturn has adversely affected new fund raising in the US and Europe, though not eliminating it all together. Other trends affecting all venture capital investment include a tightening of exit markets – particularly IPOs. There is some evidence that the value of individual early stage funding rounds is increasing, which may raise the threshold for receiving venture capital. The drop in fund raising may also be a consequence of natural funding cycles, with a number of VCs having already raised sufficient funds for the near term. Index Ventures raising of a €350 million fund in early 2009 also indicated that funding has not ceased altogether.
Investment in nanotechnology-focused venture capital in Europe has historically been a small fraction of that of the US. An annual average is of the order of €20 – 40 million, and this level appears to have been maintained in 2008 with four deals alone accounting for investments of €24 million. 2009 has already seen a substantial investment, with Oxford Nanopore (UK) receiving approximately € 16.3 million from a strategic industrial partner and an undisclosed private investor.
Increased investment will occur when the perceived likelihood of investment success increases. With that in mind, three successful exits in 2008/9; Nanoco, OptoGaN, and most notably A123 Systems provide some encouragement.
Investors themselves maintain an interest in nanotechnology not as an investment class in itself, but as one of a number of emerging technologies that affect other classes, such as clean tech or electronics. For the most part there are not nanotechnology-specific factors that concern investors; the primary issue for this, as with all areas, is that portfolio companies are able to withstand the current economic downturn.
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