(Presentation for JETRO/NSF/EU Tokyo Nanotech Conference Feb. 2003)

Dakota’s focus is in the applications of nanotechnology. Nanotechnology, contrary to most beliefs, is not nor will it ever be an industry: it has to be considered a general technology platform, a rather large one at that. Nanotechnology is the ability to work at a scale, atomic/molecular, where the basic sciences converge and as such one is able to harness properties and phenomena which are otherwise neutralised, through probability distribution, and unobservable in the higher scale regimes and obey classical laws. Nanotechnology lives at the outer boundaries of classical laws and in quantum territory. The ability to observe, measure and manipulate coherently and consistently basic building blocks is nanotechnology.

At its most basic, nanotechnology is about materials:

· Their structural identity

· Their chemical composition

· Their spatial identity

and the properties and functionalities derived therewith.

Hence, nanotechnology applications have the ability to impact everything we encounter in our daily lives and for the most part in a way that is transparent to the end user, from textiles to semi conductors and everything in between.

Revolution is not too strong a term, although misused often in the last 10 years, to describe the potential impact of nanotechnology and its applications. It will not impact technology for technology’s sake but will impact and benefit the end user at large because of its wide ranging applications and transparency; the clothes we wear, the way our car feels, looks and functions, the way our homes look, feel and function, the way healthcare becomes more efficient and relevant, the way we travel, communicate, educate, reduce the use of our natural resources and the impact on our environment and so on. (Fig.1 and Fig.2)

Can a venture fund focused on nanotechnology derived applications be considered strictly a technology fund? Probably not. Does it need to focus on specific segments? Definitely. In the next 10-20 years applications will mostly be for replacement or enhanced functionalities products as well as the continuous drive towards miniaturisation. Industries will not be created but rejuvenated by enabling mature sectors to go back to a growth pattern through new manufacturing methods and processes, efficiency of use of raw materials, improved economics, enhanced products and such.

Dakota focuses on one basic segment: Next generation materials

The “sub segments” which make up the rest of the investment focus are declined directly from this segment:

· Electronics/semi conductors

· Bio/IT convergence: drug delivery systems and tools, medical devices, diagnostics and sensors.

· Energy: fuel cells and photovoltaics

Investments in next generation materials based applications have to meet a number of criteria:

· Strong and protected IP

· Commercial understanding of the potential market for applications and focus on the one or two markets which are most likely to generate revenues initially (necessary due to resource constraints)

· Build a management team more akin to traditional industry than a technological company, such as software or telecom hardware provider, and which is relevant for each phase of the company’s development

· Investors which can support the investment financially and operationally especially early on as management capacity is lacking and needs to be built up coherently

· Cross border and cross industry strategy from the very beginning due to the need to fully exploit the IP base either through partnerships, licensing or joint venture agreements

These ingredients need to be present as a whole and not individually and therefore investors need to have the ability to assess, support and intuitively judge their presence. This requires investors with strong technological, operational, financial and cross border skills and experience as well as a relevant international network. The multi disciplinary nature of nano-scale applications requires the skills enumerated above to assess technological and inherently the commercial risks early on, IP worthiness and potential markets and so on. In simplistic terms the Dakota team will have to assess and decide on the following points regarding any investments:

· Is it true?

· Is it good enough?

· What are the key drivers and sensitivities (commercial and technological)

· Is it realistic? (commercially and technologically)

· Is it optimised (commercially and technologically)?

· What is the strategy going forward (commercial, IP and technology)?

· What are the likely changes in markets/ trends in the next 3-5 years?

· What skill sets are required in the company’s management team at various phases of growth (pre prod, industrialisation, production, sales etc..)?

· What are the likely exit scenarios and how do we prepare for them efficiently?

Furthermore, because the deal flow is and will continue to be, almost exclusively, spin offs from Universities and research centres, the need to have continuous relationships with scientists and technology transfer offices is an essential and integral part of the Dakota model rather than just a luxury. An ever-increasing number of Universities and Research centres are embarking on programs of international cooperation. They have done so for several reasons:

· Need to be competitive outside of their domestic markets as excellence is increasingly judged on licensing revenue and spin outs criteria

· The very fact that IP is now the currency and hence the dissemination of research findings is much more ring fenced

· The need to fully exploit IP on a global basis rather than merely administering it

· The continuing pressure from governments and the European Commission to emulate the US model of job creation through innovation in a consistent manner and the incentives associated with these actions

In order for these relationships to be established, developed, nurtured and worthwhile the Dakota team needs to be credible vis-a vis these people on a technological, operational and international level.

Dakota’s management team has been built with these requirements/criteria in mind, not because it was convenient to do so but because it was necessary.

We have been able to forge relationships and attract attention not merely because we can be a future source of funding but because we have demonstrated to our counterparts a clear and thorough understanding of technology and the requirements to successfully develop and grow early stage spin offs as well as the problems faced by Universities and Research centres in creating, consistently, spin outs and associated IP. (Fig.3)

The cross cultural and international aspect of Dakota’s management team not only insures the ability of the team to access an extensive international network to help future portfolio companies but also the ability to put together, from the very beginning, international syndication for investments and reinforce the international scope necessary for efficient IP exploitation and the creation of exit opportunities.

Dakota’s team meets the requirements needed to answer the challenges posed by investments in nanotechnology due to the multi disciplinary, multi cultural, skills and cross cultural aspects of its individual members.

Fig.1 Nanotechnology based start-ups by area

Fig 2. Corporates with nanotechnology R&D programs

Fig 3. GE Global Research Nanotechnology Presentation (used by permission)