You may be surprised to hear that $2.6 trillion worth of manufactured goods are expected to incorporate nano-technology in their supply chains by 2014.
Nanotech is not the narrow sub-sector it once was – it is now a key differentiator of growth and efficiency across a broad range of industries (see point 4 of the World Economic Forum comment about emerging technologies in related content).
These include semiconductors, water treatment, agriculture, energy efficienc, oil and gas exploration, medicine, and alternative energy. The breadth of applications for nanotech account for its sharp upward growth rate – expected to hit 18% globally on a compound basis between 2010 and 2013.
This relatively recent lift-off is reflected in the fact that the nanotechnology cycle has moved from a discovery phase, dominated by research and a high drop-off rate among companies, to a commercialisation phase where more proven technologies are ready for international markets.
Such companies are now hungry for the capital and networks to access those markets. Nanotech, like all sectors, experienced a funding squeeze in 2009, with venture capital investment in start-ups dropping by 42% from a record $1.4bn the previous year.
But it has since begun to recover, aided by sustained government investment. Nanoresearch firm Cientifica estimates that, since 2000, governments have invested more than $65bn in nanotech research, lead by the US, China and Russia.
Opportunities in the Commonwealth of Independent States (CIS) made up of part of the former Soviet Union – where our co-managed nanotech fund is focused – are widespread and include a range of different interactions for corporate partners.
Large enterprises in the CIS have suffered from losing access to the government research institutes that formerly drove innovation. This has suppressed technological development and created the opportunity for venture-driven technology transfer into the region.
An example is seismic and electric oil-exploration techniques, which are needed as the efficiency of oil wells reduces over time. Another need is for both oil and gas processing, and gas-liquefaction technology, the latter to capture the large amount of natural gas across Russia and Kazakhstan.
The ability to site pilot plants in the region represents an obvious co-investment opportunity for corporations, especially alongside smaller funds that do not wish to underwrite capital-intensive facilities on their own.
Corporate investors should be particularly interested in technology that can be applied across sectors, such as reverse-osmosis processes for nanofiltration- filtration being a $300m market in the Russia alone, which is already experiencing a growth rate of 15%.
Filtration processes can be applied across the oil treatment, food and energy sectors, as well as water treatment, including desalination. Indeed, we expect cheaper, nanotech-driven desalination to be a big opportunity in water-poor regions such as Kazakhstan, where investment is already flowinginto desalination plants.
Other multi-sector opportunities include the development of composite nano-materials, which combine strength and low mass. Here we are already benefiting from a corporate partner testing new materials in its US facilities before our fund commits money.
Medicines are another growth area, especially in the area of diabetes treatment. We see an opportunity for such drugs to be rolled out in CIS countries first to help drive often time-consuming and expensive US certification, and expect this to attract the venture arms of pharmaceutical companies into the region.
Lastly, there is clean-tech. Nanotechnological advances in semiconductor technology could, for example, more than double the efficiency of light-emitting diodes to over 200 lumens per watt – creating a huge impact on municipal lighting and an opportunity for the right corporate buyer.
Nanotech-supported materials will also improve efficiency across a range of renewable technologies – from lighter, more efficient and cheaper photovoltaic panels to lighter and stronger blades for wind turbines – while nano-enhanced catalysts will serve to drive corresponding efficiency increases from biofuel generation.
Nanotechnology does come with considerations, notably environmental, health and safety issues. But correctly managed such risks do not stand in the way of nanotech’s economic and industrial future.
Editor’s Note: I2BF Global Ventures and VTB Capital recently launched a $100m nanotechnology fund focused on Russia and Kazakhstan, with cornerstone commitments from sovereign-backed entities Rusnano and Kazyna Capital Management.