March 2004

Nanotech's First Blockbusters?

Nanosys hopes to become the first successful nanotechnology company by blitzing the market with supercheap solar cells, faster and lighter computer displays, and supersmall lasers and sensors.

By Chuck Lenatti

If you drive east from Highway 280 on Page Mill Road in Palo Alto, CA, it's hard to miss Hewlett-Packard. The giant computer maker's stately headquarters sprawls along the right side of the street, overlooking a maze of parking lots. Harder to spot is Nanosys, a small nanotechnology startup tucked away in a low-slung bungalow across the road.

But Nanosys's humble facade masks the bubbling excitement of one of nanotech's hottest startups. Emerging from conference room Selenium-rooms here are named after elements in semiconductor materials-Stephen Empedocles, Nanosys's cofounder and director of business development, and Erik Scher, a Nanosys chemist, produce two small vials of what looks like snow cone syrup, one glowing blue and the other red. In the vials are "nanocrystals," tiny semiconductor particles. Since the crystals are too small to be seen by the naked eye, Scher switches on a computer that displays their magnified images; spheres, stars, and thin rods fill the screen. Nanosys is betting that these particles will be building blocks of the coming commercial revolution in nanotech.

Because the particles are engineered on the nanometer scale, Empedocles says, many of their fundamental properties-chemical, optical, electronic-can be precisely controlled. Nanosys researchers believe that by manipulating the crystals' composition, size, and shape, they can make a wide range of nano-based devices optimized to conduct electricity, sense chemical reactions, or convert energy from one form to another. Nanosys is beginning to use these resources to design novel products: supercheap solar cells that will show up in construction materials in the next few years; faster, lighter, and more efficient computer displays that could be commercially ready within five years; and nanoscale lasers, sensors, and computer chips that, farther down the road, could have widespread applications in electronics.

That's the promise, at least. And while dozens of other startups are also vying to emerge as the first successful company to develop nanodevices (see "Other Startups in Nanoelectronics," below), Nanosys appears to be in a particularly strong position. The company has signed on some of nanotech's leading academic researchers and has built up a body of scientific expertise reminiscent of powerhouses like Genentech in the early days of the biotech industry. And with more than $70 million in financial assets, including venture capital investments, corporate partnerships, and federal research grants; the rights to some 150 patents; and alliances with large manufacturers like Intel, Nanosys also seems to have the business resources to play a leading role in transforming nanotech into a viable industry.

"What Nanosys is doing is very important," says R. Stanley Williams, director of quantum science research at HP and an expert on nanoscale electronics. By targeting specific products, like solar cells and computer displays, the startup has focused its know-how on real markets. "They're taking this core expertise that's being developed around nanotechnology and finding an economic niche for it by inserting it into something that's already used or needed today," says Williams.

For the fledgling nanotech industry, however, the window of opportunity will not stay open indefinitely. After several years of hype over its potential, if nanotech fails to meet expectations to "get the first real products out in the next couple of years," says Empedocles, "the industry could be in trouble." And the clock is ticking for Nanosys in particular, since its financial backers are counting on a return on investment in another three to five years. While no one expects Nanosys to compete with the HPs and Intels of the world anytime soon, it does need to hit the market quickly to prove itself-and help dispel the notion that nanotech's potential is overblown.