Nanotechnology investing

Nanotechnology, the study of manipulating materials on the atomic or molecular scale, has been around for a long time. The chief emerging technology advisor to Cedrus Investments,Thomas Kenny, explains why the technology is making a difference today. 


The modern era of nanotechnology began about 20 years ago, triggered by the invention of microscopy tools, such as the atomic force microscope, scanning electron microscope and transmission electron microscopes, which could see structures and materials at the atomic level.  

“It opened our eyes to a world which we have now begun to understand; how to manipulate materials at the nanometre scale and how to construct things with engineering intent and control,” says Kenny, a professor in the Department of Mechanical Engineering at Stanford University and expert in micro-electro-mechanical systems and micromechanical devices.  

Control and intent are the important factors, he says, because there are a lot of things that you can make by accident. “You can brew up a pile of junk and then go through and find that one really cool piece and then claim that’s nanotechnology. I prefer to talk about techniques and methods where you can make things on purpose and by control. And it is these tools and the ability to do analysis on that length scale in the last 20 years that opened that doorway.” 


Nanotech applications 

The application of nanotechnology is very diverse and can include anything from medicines to chemical sensors to all kinds of modern micro- and nanoelectronic devices.  

Kenny gives the example of carbon nanotubes, a cylindrical structure of carbon molecules. “Once we have learned to detect them and observe them and classify them we began to use them in a great many applications from strengthening of microscopic structures all the way down to nanomechanical single devices and electronic elements like resometres and switches.” 

Another perhaps more accessible example is water, which in itself is a nanotechnology material, says Kenny. The important thing about water is that it is fundamental to our survival. Because we are surrounded by it we perhaps take it for granted, he suggests. Capturing, filtering, processing and desalinating it are fundamentally nanotechnological processes and the proper way to handle these processes and to make them more efficient is to think about what goes on on the length scale of a water molecule, Kenny says.  

Removing the sodium ions in saltwater for instance is a process that involves interacting with atoms. “We can find a recipe that is pretty good at it, but if we really want to engineer it, the best opportunities are the ones that look at that on a nanotechnological scale,” he argues.  

Current desalination processes have a very high energy cost. “Nanotechnology is the way to think about the fundamentals of that process, of extracting the salt and other impurities from the water. Finding ways of doing it that are more energetically favourable is absolutely about nanotech.” 

Kenny does not want to classify different types of nanotechnology, because there are too many areas that overlap, but he agrees that certain sectors of nanotechnology are more mature than others. Biotechnology and medicine are both examples for more mature nanotechnology sectors.  

“Medicine is really all about molecules that interact with the blood, the body and other systems. It is everything about the molecule: what is its shape, what is its activity, how does it form bonds and how does it assemble? In medicine from DNA replication all the way through to synthetic chemistry, which has become very good at methods that allow you to build a particular molecule over and over again and have exactly the same molecule every time. That is a mature nanotechnology,” he says. 

“I can almost go on the Internet right now and type in the specifications for a molecule and there are dozens of companies that I can send that to that will then go and synthetically produce me a vial of a water solution which has 0.1 per cent of that molecule in it. That is just amazing.” 


More substance, less hype 

Today nanotechnology is much less of a media topic than it was five years ago. Kenny, who for several years acted as the funding agent with the Department of Defense, managing a $250 million portfolio on behalf of the US Defense Advanced Research Projects Agency, thinks this is a good thing.  

“People found that you could attract attention and raise money and attract opportunities just by using the word without necessarily knowing anything about it,” he says. “And that ran its course. A lot of people used up everyone else’s credibility and attention over a decade and what is left now are the people who are serious and the technologies that will matter and the hype has gone away.” 

Like with anything that is new, he believes, that after the hype bubble and a subsequent recoil the serious business starts. 

In his role as the chief emerging technology advisor for Cedrus Investments, a boutique investment firm focused on nanotechnology, he will have to discern the serious from the not so profitable business, and identify the best investment opportunities in this new sector for Cedrus and its investors.  

“The real opportunity going forward is to bring the knowledge I have of emerging ideas and opportunities in nanotechnology from the science and engineering side into contact with [Cedrus’] very strong expertise on markets and sectors and applications,” he explains. 


Nanotech as an investment 

Kelly sees nanotechnology as an exciting opening up of the doors. “We have just finished a report on rare earth markets and there is a lot of concern over the availability of certain elements in the periodic table and the ability to make magnets or batteries and things like that,” he states, referring to China’s control over parts of the rare earth market, a set of 17 chemicals in the periodic table. 

Until very recently, in order to make a high strength magnet one needed cerium and cobalt in large quantities.  

“What nanotechnology is now teaching us is that we can assemble structures controllably at the nanoscale,” Kenny says.  

“I can build up a crystal that may be an unnatural crystal but it has unique properties that are may be important for magnets. Because I can design at the atomic level and use the rest of the periodic table, instead of using an atom like cerium that has some unique properties, I can make a little crystal cell of a few atoms that are much more ordinary like nickel and iron, position those atoms and orient them in a way that I can replace the need for cerium, if I want to make high strength magnets,” he explains.  

“This means that nanotechnology is a pathway that gives us different approaches to very unusual properties and the ability to make some unusual combinations of properties that never existed in nature.” 

Even if such an innovation appeals in theory, it can be a long way from the initial idea to the execution on a commercial scale. To identify investment opportunities and assess whether a new technology has business potential is not necessarily a linear process, according to Kenny. 

The process often begins with a suggestion or some white paper level description of a technology, a material or a new device.  

“Typically that is described as a basic scientific description coupled with some hoped for application that it would make its first strong home run in,” Kenny says. “And then the analysis is first is the science right and do the numbers add up, are the equations properly grounded in physics and then further analysis of what is the established technical answer to that problem, what are the costs and trends for that technology, is it scaling upwards or downwards?” 

The subsequent analysis resembles that of a typical product and competitor analysis, in terms of how established technologies can defend themselves against the innovation through cost reduction for instance. In some markets, such as the rare earths market, materials availability challenges can be so severe that new technologies are going to have a real chance, Kenny argues. 

“I think it is just a matter of time before we see those things entering the market and displacing the more expensive rare earths.”