SMALL WONDERS
Josh Wolfe, co-founder of Lux Capital, a venture-capital firm, and editor of the Forbes/Wolfe Nanotech Report, says a number of firms are “nanopretenders” – companies that put a “nano” in their names but actually do things at larger scales. One of them is Nanometrics, a company in Milpitas, California, that makes tools at the microscale (1,000 times larger than the nanoscale). Another is Nanogen, in San Diego, which creates gene chips far larger than the nanoscale. Its share price has been volatile. Even professional investors can get the sector wrong. Merrill Lynch, an investment bank, was left red-faced after the launch of its nanotechnology tracking index in April 2004 when some of the firms it had picked turned out not to be nanotechnology companies after all and had to be dropped. At the time the index was announced, every company in it got a boost, but six months later share prices were down by a quarter. The same thing happened to the shares in a nanotechnology index launched by Punk Ziegel, another investment bank. At kpcb, Mr Khosla is worried about indices. “When companies like Merrill Lynch start having a nanotechnology index, I think that is getting into the hype cycle for which a lot of people got into a lot of trouble during the internet bubble.” When people start getting interested, he says, fund managers decide that some proportion of their investment should be in nanotechnology. A bubble gets going when everybody starts piling in, trying to buy stocks that do not exist, he adds. “To me, an index is just an example of hyping.” If there is one thing everyone agrees on, it is that nanotechnology is neither an industry nor a market. Lumping together different nanotechnology firms may be as sensible as assembling a group of firms whose names start with Z. A company selling nano-improved fabrics has little in common with one developing solar cells. To add to the problems, some of these indices include big companies for which nanotechnology is only one of many activities. It is easy to see why a nanotechnology bubble might form, but if so, it will be nothing like as big as the ill-fated internet one, for several reasons. One of them is offered by Steve Jurvetson at Draper Fisher Jurvetson, a venture-capital firm based in Menlo Park, California: the number of people who can enter the business is limited by the number of science graduates available. In America, there is currently a shortage of science phds. Business school graduates working in banking or consulting cannot start nanotechnology companies in the way they created new internet companies.
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