Peter Griffin: Thinking small tipped to be huge

COMMENT



In any New Zealand tech company's business plan, $2.75 million is a decent capital injection. But in the vast field of nanotechnology - the next industrial revolution where you need an electron microscope just to see your building materials - how far can it really go?

At least as far as first prototype phase, says Christchurch nanotechnologist Simon Brown.

And that is far enough to prove the technology he and his company, Nano Cluster Devices, are developing. Enough to get the ball rolling towards more funding, commercialisation of its technology and potentially the country's first thriving nanotech business.

But here's the thing - everyone is piling into nanotechnology and bringing with them billions of research and development dollars.

The US Government alone has set aside US$3.8 billion ($5.8 billion) for projects using nanotechnology, which simply described is the manipulation of material on a molecular scale.

The Americans are so keen on nanotech that they backed President George W. Bush's 21st Century Nanotechnology Research and Development Act, which guarantees the funding and continued support for nanotech research.

It is like the post-World War II rush to build on the scientific secrets stripped from bombed-out Nazi laboratories; a sort of arms race but with much more commercial objectives.

From Intel to General Electric, IBM to Mitsubishi, big business is serious about securing nanotech patents to provide future revenue, with each intent on making its products cheaper to build and more attractive to consumers.

Wall St had an initially tepid relationship with nanotech but is now warming to it. The IPOs are stacking up. Last week, Merrill Lynch formed a nanotech index in which it will track 25 companies expecting to derive much of their revenue from nanotech.

Short on capital and staff, and far from the action, can we jump on the nanotech bandwagon in any meaningful way?

Brown is confident we can, by doing what we've always done in technology - focusing on niches that no one else is developing.

We've proved we can do it in software. Peace Software has built a sizeable business employing hundreds of people by concentrating on the US energy market.

A cluster of companies, including Software of Excellence and Orion, focused on healthcare IT. In hardware, the likes of Rakon, Navman and PulseData found their own niches.

The nanotech niches are all over the place - it's just a matter of finding one that has a chance of being commercialised in a reasonable timeframe.

Brown isn't fazed by the nanotech feeding-frenzy elsewhere.

"It's misleading because relatively small amounts are spread across all fields," he says of the US Government funding splurge.

He argues that Nano Cluster Devices is no different to fledgling companies born out of universities in the US who all claim their own tiny sliver of that huge pie.

For Nano, one of its niches is in hydrogen sensors. Hydrogen, widely used in industry, is highly flammable, hence the need for sensors to keep track of it.

The US Department of Energy says North America alone uses 90 billion cubic metres of hydrogen a year.

That's a lot of hot gas, used in everything from extracting nitrogen from the air to produce ammonia for fertiliser, to hydrochloric acid production, welding and in fuel cells for Nasa's space rockets.

Even if Nano concentrates on just one area of hydrogen sensor development, the market is huge.

And Brown reckons other nanotech companies aren't sniffing around his area of research in any meaningful way. Nano is working on a unique way of clustering atoms to form "nanowires" that can conduct electricity.

Getting the atoms to stay together in a chain is the key and Brown claims he has some unique techniques here. The rest of the world is apparently using carbon "nanotubes" that are incredibly fiddly to keep in place.

Another key to success is hooking up with US companies in the thick of the venture capital market and close to the centres of industry. Brown says Nano Cluster has a joint venture with NanoDynamics, a company tipped for big things by the likes of Merrill Lynch.

Nano has its other niches - Brown is confident the company's work on magnetic read heads will draw interest from the world's computer hard-drive makers.

The numbers are so huge in this game, the sights can be set low, so to speak.

"Even 0.1 per cent of the world semiconductor market is so huge the figure is meaningless," says Brown.

But are we, as a country, doing enough to fund nanotech development? Brown, for his part, says the Government funding has been reasonably generous.

Nano Cluster can tap into the resources of the MacDiarmid Institute for Advanced Materials and Nanotechnology, which last year received Education Ministry funding of $23 million. About $10 million is earmarked for buying world-class equipment.

MacDiarmid, named after Masterton-born Nobel Prize-winning scientist Alan MacDiarmid, has become the hub for nanotech development locally.

Nano Cluster received its private funding last week, sewing up a deal in which Christchurch investor Nuon takes a 50 per cent stake for its $2.75 million.

The rest of Nano is held by Canterprise, the commercial arm of Canterbury University, and individual shareholders such as Brown.

Should we pour hundreds of millions into nanotech? Probably not. It needs to be high on the nation's priority list, but is an emerging industry and as risky as they come in the start-up phase.

Yet nanotech can't be the next dotcom. Sure, it has gimmicks to hook venture capitalists: the ant hauling around a flake of microchip; Cornell University professors making a model of the White House 510 micrometres across; IBM making its logo out of 35 argon atoms.

It also has the astronomic extrapolations - a US$1 trillion industry by 2015, says the US National Science Foundation, with US$200 billion by next year.

But it's tangible technology, employing the same physical materials we use today but at a deeper level.

The dotcom industry fell on its butt because it was trying to sell new methods of delivery for essentially the same thing. Only in the painful shake-out did we realise the web has great limitations to go with its great advantages.

This time round, you won't be able to sell your nanotech start-up on the basis of a 10-minute venture capital pitch. Business fundamentals are back in vogue and the barriers to entry in nanotech are high.

But even when you strip out the hype, nanotech has the potential to touch our lives in everything from consumer electronics to medicine, from fashion to heavy industry.

Even a tiny commercial toe-hold would put us on the map in a way the NZ tech sector has never seen.