Nanotechnology is evolving fast and commercialisation is a priority. With so many centres of excellence around the world, the race to win the title of “Nanotech Valley” is on. Karen E Thuermer reports.

The world of nanotechnology is akin to Lewis Carroll’s Alice in Wonderland. Everything becomes very small and fantastic things begin to happen.

Nanotechnology involves working with materials on the nano-scale, 80,000 times smaller than the width of a human hair, a practice that has been around for centuries. Remember the alchemists? Yet, ever since IBM invented the Scanning Tunnelling Microscope and researcher Don Elgler arranged 35 atoms to spell “IBM” at the IBM Zurich Research Laboratory in 1989, the world has seen an unprecedented land grab for nano-technology intellectual property.

Nanotechnology is not one technology but an expanding set of technologies and sciences that enables the control and manipulation of the nature of all atoms and molecules. And for laymen? New products that will ultimately affect all aspects of industry and human life.

“Nanotechnology holds promise for breakthroughs in manufacturing, biotechnology, healthcare, electronics, aerospace and countless other applications affecting our national security, economy and society,” says Brock Hinzmann of SRI Consulting Business Intelligence, based in Menlo Park, California.

Applications

Inroads have already been made in medical, biotech and pharmaceutical applications as well as integrated devices, such as silicon wafers.

“The technology is quickly evolving from the mythical to one that is robust and proliferates product development,” says Charles Ostman, chairman of the NanoElectronics and Photonics forum of NanoSIG, a northern California organisation that fosters nanotech’s commercial development. “We now are exploring how to mix and match nanotechnology with existing fabrication methods to create foundries of the future.”

Research already combines biotechnology and nanotechnology in such ways that new foundries could someday be in a petri dish.

Expensive goal

Commercialisation is a top priority of nanotech research. Yet reaching that goal is an expensive proposition. Laboratory equipment costs millions of dollars. And, while researchers often work independently and in competition with one another, they must share findings to foster nanotechnology’s advancement. To be in the game, government support coupled with private funding is imperative, as is patience. While scientists can dedicate their entire lives to research, investors anxiously await earnings.

The work of Dr Ralph Krupke at the Physical Properties of Nanostructures Institute for Nanotechnology in Karlsruhe, Germany, exemplifies the problem.. He has been involved in separating the natural web of metallic carbon nanotubes into single strands, a major breakthrough that will bring the semiconductor industry one step closer to nanotechnology applications.

Yet Dr Krupke admits that to reach that level, success is dependent on advancements with systems that are not yet compatible. It is difficult to predict what research will reach the end game and who will take it to commercialisation. As a consequence, government funding is critical for the embryonic development of nanotechnology.

“Government funding for R&D gives one the opportunity to have a nucleus of projects from which technologies suitable for commercialisation will develop,” says Norm Wu, managing director of Alameda Capital, LLC, in Pleasanton, California. “So it’s not surprising that the national and regional governments around the world are in a race to codify, focus and increase their funding programmes.”

Equally critical are companies that are willing to take a gamble on such disruptive new technologies. “This calls for a readily available pool of management and technical talent, an entrepreneurial culture, an infrastructure that makes it easy to do business (lawyers willing to help start a company on speculation, banks that know how to work with venture capital backed start-ups that are not likely to make money for years) and, importantly, a strong local venture capital community that is not afraid of complex technologies and roll-up-the-shirtsleeves hard work,” says Mr Wu.

Angel investors

Finding capital to get products to market is challenging. With the investment markets doing badly, most new nanotech firms are being formed by “angel” investors – friends and family willing to take an even higher risk.

“Companies that start with $1m will not make it,” says Dr Stephen Empedocles, director of business development at Nanosys, a nanotech company in Palo Alto, California.

Alan Marty, executive-in-residence at investment house JP Morgan Partners estimates that, although $500m was invested in nanotechnology

start-ups in the US in 2002, a large gap exists between the laboratory and the marketplace.

“Federal funding in this area has typically been lacking,” he recently told the US Congress. “Except for the National Institute of Standards and Technology’s Advanced Technology Program (ATP), no government programmes properly address this vital timeframe in the cycle of research and business. This period is one that competing nations in Asia and the EU are particularly attuned to addressing and are providing a life line to many US start-ups, which sends growth and profits abroad.”

Dr Empedocles says he has received at least 10 times more calls per week from Asian investors and potential corporate partners than from US investors and businesses.

The long view

“Asian businesses are convinced that nanotechnology will save their economy,” he says. “They don’t look at next quarter’s earnings, but decades. I think that is a real difference. Even a three-year time frame is aggressive for commercialising nanotechnology. Yet, most US companies are interested in investing in technology that will cuts costs and help earnings next month.”

With the help of an ATP three-year grant, Hybrid Plastics of Fountain Valley, California, for example, is researching ways to reduce the costs of Polyhedral Oligomeric Silsesquioxanes (POSS) feedstock so that it can be made from ordinary sand. POSS is the first chemical feedstock to be introduced since DuPont launched Kevlar in 1965. Hybrid Plastics also has teamed up with the Air Force Research Laboratory’s (AFRL) Propulsion Sciences and Advanced Materials Branch to apply POSS technology to rocket, aero and space vehicle systems.

Now AFRL and Hybrid Plastics are pursuing collaborative programmes with corporations for civilian applications. Already Hybrid Plastics has found a potential partnership with Pentron Corp, a dental supply firm in Wallingford, Connecticut, that plans to use POSS technology to create a new dental bonding agent.

Commercialisation

Nearly as important as government funds is the formation of nanotech centres and business alliances that share laboratory equipment and research, and bring nanotech entities together to promote commercialisation. Dr Meyya Meyyappan, director of the Center for Nanotechnology at the NASA Ames Research Center and one of the early movers and shakers who brought nanotech awareness to President Bill Clinton’s Administration, believes the US is at the forefront of promoting nanotechnology.

“We started the Nanotech Initiative, so we were ahead in funding,” he says. “But now the Japanese are catching up. At this point, Japanese funding in nanotechnology is comparable to that of the US. The Europeans are slightly behind.”

The Japanese government has been increasing its nanotech R&D funding at a faster rate than that of the US and has a budget that has exceeded that of the US, at least at the national level.

“But the efficacy of that research dollar may not be as strong as in certain parts of the US, especially where early stage venture capital is active,” says Mr Wu. “Indeed, the start-up culture is not as established or accepted in Japan as in the US or in certain other parts of Asia. Thus, while I see good nanotech research being conducted around the world, I would continue to place my bets on the US as the place where the confluence of nanotech research and start-up culture/infrastructure creates a strong cluster of successful new companies. As these technologies mature, larger companies around the world will seek to license or acquire such technologies to enhance their existing businesses.”

More funding

Nanotechnology will soon be pumped with more funding. The US Congress has passed legislation that approves the spending of $2.4bn in the next three years to foster nanotechnology research. Congress expects White House approval. The UK’s Department of Trade and Industry just announced a cash injection of Ł90m over the next six years to help industry to harness the commercial opportunities offered by nanotechnology. The money will be spent on collaborative research and a new network of micro and nanotechnology facilities.

Market opportunities

The National Science Foundation (NSF), an independent agency of the US government, “conservatively” predicts a $1000bn global market for nanotech products and services over the next 10 to 15 years, employing some two million workers. While some proponents are sceptical of these figures, they do concur that this small wonder has far-reaching implications.

Early-stage nanotech research has already resulted in bi-products. UK-based NanoMagnetics uses nano-materials to increase dramatically the storage density of hard disks and other magnetic media. The company raised $9.5m from two funding rounds from investors that include Amadeus Capital Partners and UBS Capital.

Germany’s Nanogate Technologies is using chemical nanotechnology to develop a new generation of ski wax products that it supplied to 2002 Winter Olympics skiers. The company joined forces with chemicals concern Loba to form Holmenkol Sport-Technologies & Co. A year earlier, the company received $9.3m in venture capital from high tech ‘angel’ investors 3i and equinet Venture Partners AG, investors in high-growth tech companies.

This April, Nano-Tex, based in Greensboro, northern California, announced that Alamac American Knits was the newest licensed fabric manufacturer to use NANO-TEX™ fabric enhancements. Nano-Tex’s nanofibres wrap around fibres making clothes stain-proof, wrinkle-free, absorbent or more comfortable. Burlington Industries, with its research centre in Emeryville, California, is the company’s majority owner. Burlington sees huge advantages to being involved in the research because its results could, almost literally, knock the socks off its competitors.

“Nanotechnology could affect the relative competitiveness of any company and that should be of concern to any politician with industries to protect,” says Mr Hinzmann.

With the world awakening to the vast potential for nano applications, many are seeking a nanotech version of Silicon Valley as command central for global competition in the industry.

“Companies want to know from where the next big development is coming and from where to hire people with the innovation and creativity to make it happen,” Mr Hinzmann says.

Northern California, Boston and Los Alamos in the US; Montpellier, France; Zurich, Switzerland; Cambridge, England (UK); and locations in Germany, Taiwan, Japan, South Korea, India and even Israel already boast prominent high-tech clusters. With their eyes on the prize, politicians and economic developers are building their case for why nanotech companies should locate in their towns, regions and states.

“They want to create jobs, a tax base and standard of living necessary to keep themselves in good standing with the people that elected them,” says Mr Hinzmann. “They all feel their location is attractive, has a good lifestyle, great universities and government incentives. However, some human magic still has to happen.”

Leonard Pritchard of Avogadro Partners, a venture development and investment firm based in the US city of Seattle, for instance, promotes Washington State as an up and coming nanotech centre. He points to the Battelle Memorial Institute and Pacific Northwest National Lab (PNNL), which established the Joint Institute for Nanoscience at the University in Seattle, and the Center for Nanotechnology at the University of Washington.

European activity

Research coming out of Europe’s institutions is also heading to market. In France, University Montpellier II’s GDPC lab spawned Nanoledge, Europe’s first large-scale producer of carbon nanotubes. “Our R&D activity is led in a narrow collaboration with the laboratory, which is world famous in that field,” says Julien Roux, Nanoledge business development manager. “We are also helped by national grants.”

Switzerland allocates about 0.8% of its GDP to basic research – almost twice as much as the US and Japan. The country’s approach to nanotechnology is different from that of the US in that it involves more collaboration and support between government and academic institutions. Consequently, it harbours a number of national programmes. In addition, private, semi-public and public research laboratories participate in nanotech networks.

Switzerland offers high tech companies a favourable tax environment. “We can also call local authorities to solve problems and obtain economic support,” says Dr Loris Scandella, formerly a physicist at Basel University and now in charge of marketing at Nanosurf, a start-up from Basel University. “Plus, we enjoy a high quality of life.”

Nanotech firms operating near Basel have the additional benefit of being part of the Tri-National Bio Valley, which includes Freiburg in Germany and Mulhouse in France.

In Germany, the Federal Ministry of Education, Science, Research and Technology (BMBF) provides substantial national support for nano-technology programmes to the tune of $50m a year. The ministry has set up six competence centres of nano-technology, which provide advice and support for start-up nanotech companies. Two of its largest projects are CESAR, a $50m science centre in Bonn (equally sponsored by the state and federal governments with about one-third of its research dedicated to nanoscience) and an institute for carbon-reinforced materials near Karlsruhe that was funded with $4m between 1998 and 2001.

The Fraunhofer Institutes, Max Planck Institutes, and several universities have also formed centres of excellence in the field.

In Sweden, a nation recognised for offering the highest R&D per capita expenditure worldwide, nanotechnology is taking a lead. Just a few years ago, efforts were limited to the universities in Lund and Göteborg; this has now spread to the universities of Stockholm, Uppsala, Linköping and Umeĺ, where each has its own specialty.

In addition, Nano Network, a volunteer organisation, has been established to tie together university research with that of industry with the aim of increasing interaction and influencing decision makers to make use of and support nanotechnology and nanoscience.

Cluster of effort

Efforts to foster nanotechnology as a cluster is ongoing in the Řresund-region between the south of Sweden and Denmark. “The Řresund region, with the cities Lund, Malmö and Copenhagen, is an important region containing 12 universities, 140,000 students and many research intensive companies,” says Professor Samuelson Leader of the Nanometer Consortium at Lund University and vice-director of MIC, the Microelectronics Institute at DTU in Copenhagen.

“We are tying together efforts by creating shared and differently profiled nanotechnology facilities in the region and by co-ordinating and sharing research and education,” he says.

Pale in comparison

All said, other regions still pale in comparison to northern California. Helping to promote nanotechnology there is the Northern California Nanotechnology Initiative (NCnano), which is involved in joining the extensive research, development, manufacturing and capital resources of the San Francisco Bay area to create synergies with other nanotechnology centres worldwide.

“Companies like Intel, Agilent, Genencor and NEC have tremendous initiatives under way to maintain and increase their competitive positions in fields were nanotechnology holds enormous promise,” says Chris Piercy, NCnano chairman. “Companies like Nanosys are developing the nanotechnology products of tomorrow.”

Nanotech valley

So where is the best location for the Nanotech valley?

“Probably everywhere,” says Mr Hinzmann. “Countries from Switzerland to China that make instruments and equipment have a reason to say they will be important. The companies and industries that have discovered they have been doing nanotech for decades will want support to stay competitive.

“Many start-up companies, venture capital and great technology come out of the UK. But after more than 30 years, Great Britain has yet to produce the kind of important large companies that Silicon Valley produced,” he says.

Regis McKenna, the well-known marketing guru of Silicon Valley, may have said it best: “Silicon Valley is a state of mind.” But Mr Hinzmann asks: “Can you duplicate that state of mind in Shanghai? Maybe yes, given the history of that city; maybe no, given the Chinese propensity for copying rather than creating.”

A study by the The Brookings Institution on biotech centres of excellence in the US came up with conclusions that might serve as a warning to nanotech investors. It found that regions that were not already established as biotech centres would have a hard time building a cluster from the ground up. It’s a thought worth considering.

IBM

Besides being considered the birthplace of nanotechnology, the IBM Zurich Research Lab in Rüschliken, Switzerland, takes the technology to new heights with its data storage device Millipede, which eliminates spinning disks and could lead to data storage densities up to five times greater than the expected limits of magnetic storage.

“The technology has huge implications for personal digital assistants, cellular telephones and watches,” says Peter Vettiger, a leader of the IBM research team.

Powerhouse of creativity

Already IBM boasts of more than 700 nanotech-related patents. And that may be just the tip of the iceberg. The IBM Zurich Research Lab is a powerhouse of creativity. Some 300 researchers from 25 nations work there in accordance with external partners to cover physical sciences and work in communications and technology systems.

“What is done in the lab is transferred faster to product than it was five to six years ago,” says Rolf Allenspach, manager, physics and nanoscale systems at the lab.

IBM Research worldwide employs about 3000 individuals in Almaden, Austin and Yorktown Heights in the US, Haifa in Israel, Delhi, Beijing and Tokyo, in addition to Zurich.

“Much of our work today is on security-related research,” according to Matthias Kaiserswerth, lab director. “The research centre creates more synergies and makes its possible to work more closely to develop products with original equipment manufacturers. I feel this gives us more autonomy.”

IBM has been conducting research from Zurich since the end of World War II. “Switzerland was deemed a good place to attract European researchers because of its central location and neutrality,” says Mr Kaiserswerth. “We find this still holds true today. Not everyone wants to live in the US.”

Top 10 small tech hot spots in the US

1. California

2. Massachusetts

3. New Mexico

4. Arizona

5. Texas

6. Maryland

7. New York

8. Illinois

9. Michigan

10. Pennsylvania

Source: Small Times Magazine, March 2003

Top 10 nanotech companies poised to make a difference

1. Nanosys

2. Hybrid Plastics

3. Chemat Technology

4. Luxtera

5. Broadley-James Corp

6. Nano Devices

7. Insert Therapeutics

8. Rockwell Scientific

9. Cyrano™ Sciences

10. Gene Fluidics

Source: Larta, July 2002

Nanolayers

Numerous reasons point to why nanotechnology can flourish in Israel. Ben-Tzion Spitz, CEO of Nanolayers, an Israeli organic semiconductor technology company, says: “For one, the Israeli military is a major technological innovator. Multiple successful technology companies have grown out of army units that transferred their expertise and experience to the commercial sector.”

Also, the government’s Chief Scientist and Incubator programme invests a significant amount to support technology companies. “For example, an inventor with just an idea can receive an investment of $250,000 to get started,” says Mr Spitz. “The government has also succeeded in attracting Intel R&D and manufacturing here with a combination of grants, investment and tax exemption.”

Nanolayers was the first company to receive funding approval from Israel’s new Heznek programme, administered by the Office of the Chief Scientists. The programme matches venture capitalists’ investments dollar-for-dollar up to $1m.

Other pluses are Israel’s highly trained and educated workforce, entrepreneurial spirit and institutional excellence. There are top-notch research universities, such as Hebrew University in Jerusalem, Technion in Haifa, Weizmann in Rechovat, Ben Gurion in Beer Sheva, and Bar Ilan and Tel Aviv University in Tel Aviv. “All are within half an hour driving range, so researchers can meet frequently, collaborate and team up,” says Mr Spitz. “This aspect has been most critical for Nanolayers, which came into existence solely due to the multidisciplinary background of our inventor, Dr Shlomo Yitzchaik, and the support of Hebrew University.”

A critical element for nanotechnology to flourish in Israel is the influx of local and international funds. “Both Millenium Materials Fund and Intel have been instrumental in getting us going,” says Mr Spitz.

Nanosys

Nanosys is a leader in nanotech-enabled systems. It operates from the US bases of Palo Alto in California and Boston in Massachusetts, but will soon move its small advanced Bostonian research group to Palo Alto so that all functions are under one roof.

“We believe the San Francisco Bay area is the only place for a nano-technology company due to issues of academic prominence, availability of financial capital and talent, and established infrastructure supporting start-up companies,” says NanoSys CEO Lawrence Bock.

Choice location

“We located here despite numerous offers from other states and the fact that Boston was our original home,” he says. New York, for instance, offered incubation space and Chicago tax credits.

“Nanosys, which is focused on inorganic technology, deals in the industry on which Silicon Valley was built: silicon for semiconductors,” says Dr Stephen Empedocles, director of business development at Nanosys. “Here we have access to a talent pool that is second to none; local jobs shops and their resources that deal in new materials; top manufacturing facilities at Stanford and Berkeley universities; major corporate partners and key users, such as Intel; and people with entrepreneurial spirit and creativity for which there is no substitute.”

Nanosys’s goal is not to build just a nanotech company, but the leading nanotech company – “the one with the critical mass to break through the research-to-commercialisation barrier”, says Dr Empedocles.

The company has had great success in attracting venture capital. It began with $1.7m and has just completed a second round of attracting $38m, a mammoth amount given the current world economy.

Promises fulfilled

“We were able to raise this large amount because we have come through on our commitments,” says Dr Empedocles. “Our management team has been responsible for starting about 20 high tech companies bringing hundreds of products to market, particularly those in new technologies. We have established our first corporate partnerships with companies that are paying us to commercialise this technology.”

Participating in that round are well-known venture funds, such as UOB Hermes Asia Technology Fund and UOB Venture Technology Investments, Healthcare Focus Fund, and corporate strategic investors Eastman Kodak and HB Fuller.

“The Nanosys technology portfolio aligns well with Kodak’s focus on investing in disruptive info-imaging technologies that merge information technology and image science,” says James Stoffel, chief technical officer and director of R&D at Eastman Kodak. “Kodak researchers are continuously scanning the technology marketplace seeking innovative solutions that complement our core competencies.”