TCS Daily


Beyond the Nano-Hype

By Glenn Harlan Reynolds - April 28, 2004 12:00 AM

It's big nanotechnology news: Nanosys has announced the industry's first Initial Public Offering. As the trade publication Small Times reports, this is the first genuine nanotechnology IPO:

Forget the 1997 debut of Nanophase Technologies Corp. (Nasdaq: NANX, News, Web). Or last week's Immunicon Corp. (Nasdaq: IMMC, Web) initial public offering. No, this is the big one. . . . "This is the first real real nanotechnology company to go public," said Juan Sanchez, a nanotechnology analyst with investment bank Punk Ziegel & Co. of New York. "It's great news for the whole sector." . . . By "real real" Sanchez means that, with Nanosys, the complexity and functionality of anything it makes -- and therefore the so-called "value add" -- is in the material itself. Think of nanostructures that convert light to electrical power, conduct electricity or perform other useful work. Sanchez prefers that definition to lesser forms of nanotech, where the value add is in an entire system, where the nano part is merely one component among others.

We're still a long way -- technically, and perhaps chronologically -- from Drexlerian molecular manufacturing. But Nanosys isn't just a company with "nano" in its name. It's a company that's doing real, creative work at the nanoscale. It's likely to be followed by a number of other companies that represent so-called "pure nanotech plays." Right now there's a lot of interest in these companies from investors, notwithstanding that -- based on past experience in other new technology areas -- it's a near-certainty that most of them will fail.

Nanotechnology blogger (and journalist) Howard Lovy points to the statement of risks listed in Nanosys's registration statement, as a comprehensive list of what can go wrong. It is, of course, though the legal CYA involved in drafting such statements means that they tend to be rather comprehensive. (I've heard of statements listing the possibility of lethal asteroid strikes, or Biblical Judgment Day, as potential risks to investors' returns, though that may just be the lawyer's equivalent of an urban legend), Still, as I look over the risk statement, I see one item that, to my mind, looms large.

Nanosys notes the risk from "government and environmental regulations" and "legal restrictions due to ethical concerns or export regulations." These are big risks and from the standpoint of the industry as a whole, as opposed to any particular company, they represent a very large risk indeed.

What's more -- as I've noted here on several recent occasions, the nanotechnology industry's public-relations approach makes such risks worse than they need to be. In my opinion, the industry's short-term focus on pooh-poohing long-term dangers is likely to backfire, and badly, unless changes are made in the near future. So although NanoSys's notation of these risks is no doubt legally adequate, a fuller explanation might read something like this:

Popular responses to advanced technology are often marked by hysteria and spasms of overregulation in response to unreasoning public fear.

The risks posed by such responses can be limited by adequate public education and public relations on the part of the industries involved. Unfortunately, there is no guarantee that the nanotechnology industry will be able to undertake such education and PR efforts, and considerable reason to believe that, at present, the industry and its representatives are not up to the task.

The good news is that IPOs like this one, and the ones to follow, will focus more attention on the industry, and probably serve to open up what has been, up to now, a rather clubby and inbred environment to more sophisticated players and attitudes. That's likely to encourage a more mature approach over the long term. Let's hope so -- not just for the future of the industry, but for the sake of all of us.


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