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Investing in pre-IPO nanotech firms gets harder

Small investors who want to invest in nanotech startups have for years turned to publicly-held venture group Harris & Harris Group, which has focused on private companies in nanotech and microsystems.

With the economy down, and initial public offerings (IPOs) more rare, this strategy is changing.  Brian Gormley of the Wall Street Journal’s Venture Capital Dispatch explains:

In a June 28 letter to shareholders, Chief Executive Douglas Jamison said many of its private holdings are maturely nicely. Even so, volatility and risk aversion in the public markets are making it difficult for these companies to go public…

“With the lengthening time between investment and return on investment in private venture capital-backed companies, we need to find a way to generate returns with greater frequency,” Jamison said in the letter.

“As a public company, we should not count on investors to wait five years between liquidity events. We will seek to position our investments so that we can demonstrate positive returns on investments on an annual basis.”

The firm is therefore turning its attention to public companies with market capitalizations below $50 million. Many of these companies have exciting products enabled by nanotechnology and microsystems, Jamison wrote, and several are a year or two ahead of comparable venture-backed companies.

This means less investment will be available to pre-IPO nanotech companies, at least for now.  Not good news, but near-term nanotech can’t be expected to escape the economic downturn.  Sigh.  —Chris Peterson

6 Responses to “Investing in pre-IPO nanotech firms gets harder”

  1. Over 2000 nanotechnology businesses? « FrogHeart Says:

    [...] announced its new nanotechnology company directory, Christine Peterson at the Foresight Institute posted an item about a venture capital group known for investing in nanotech and microsystems, Small investors who [...]

  2. Instapundit » Blog Archive » INVESTING IN PRE-IPO NANOTECH FIRMS gets harder…. Says:

    [...] INVESTING IN PRE-IPO NANOTECH FIRMS gets harder. [...]

  3. John Plunket Says:

    I think your headline should be “Financing” gets harder for pre-IPO nano firms. With investors’ target range being narrowed, it is arguably EASIER for them to invest. What’s harder is for the smaller firms to attract investment, ie, to finance.

  4. John Plunket Says:

    Having re-read, I now see your point –fewer opportunities for small investors to put their capital into the smaller firms. My bad, sorry.

  5. William O. B'Livion Says:

    What is hurting Nanotech is hurting all the other sectors that rely on angel and venture capital.

    Heck, it’s even hurt the more established businesses that rely on lines of credit from banks.

    Elections matter. Many in the Silicon valley area have for years voted for the people and the party that now glories in having it’s boot on their neck.

    I just hope they come to understand what they did to themselves. I doubt it though.

  6. TexEd Says:

    OK, fine! But, how do I identify pre-IPO companies in either category in which to invest?

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