April 23, 2004 2:49 PM PDT

Nanosys files papers for IPO

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Nanosys, the reigning celebrity of the nanotechnology market, filed preliminary documents Thursday for an initial public offering with the Securities and Exchange Commission, in what will likely be a closely watched saga.

Nanosys specializes in designing molecules that could conceivably lead to better solar panels, flexible screens or dense computer memory. Technically, nanotechnology refers to the science of making products with components that measure less than 100 nanometers (a nanometer is a billionth of an inch), but space considerations aside, what interests researchers most is that the properties of matter begin to change at those tiny dimensions. Gold, for instance, no longer is gold in color, while silicon can be used to retain, rather than conduct, electricity.

In the small but growing world of nanotech, the 34-employee Nanosys has emerged as one of the most visible and well-connected companies, and its ability to go public will likely be seen by some as a barometer of the future for nanotech.

Palo Alto, Calif.-based Nanosys has already struck development deals with Intel; several government agencies; DuPont; and IN-Q-Tel, the firm started by the CIA; among others. It also has licensing agreements that allow it to try to commercialize intellectual property coming out of labs at Harvard, the Massachusetts Institute of Technology, the Hebrew University of Jerusalem and other institutions.

Members of the scientific advisory board include Charles Lieber, a professor of chemistry at Harvard and one of the leading proponents of nanowires, and Paul Alivisatos, a University of California professor who also directs the Molecular Foundry, a multimillion dollar research effort funded by the Department of Energy. Lux Capital, Venrock Associates and Arch Venture Partners are early investors.

Now comes the difficult part. Designing commercially viable molecules takes years, and the company will probably have to contend with larger competitors and other start-ups, regulatory changes, public suspicion of nanotechnology and intellectual property disputes, according to Nanosys.

Plus, the company is not selling products yet.

"To date, we have not successfully developed any commercially available products," the company wrote in the S-1 form it filed with the SEC. "We are currently in the investigation phase of all of our potential products. We do not anticipate that our first products will be commercially available for at least several years, if at all."

Since its founding in the middle of 2001, Nanosys has lost $17 million.

Revenue, however, is growing. It rose from $283,000 in 2002 to $3.1 million in 2003. Most of the revenue currently derives from conducting research. In-Q-Tel, for instance, has agreed to pay Nanosys up to $3 million for research, while Intel has made a similar commitment for $1.9 million.


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