Corporations should spend more than $3.8 billion on nanotechnology, the science of building devices on the molecular or atomic scale, reported Lux Research Inc., a New York-based research and consulting firm focused on nanotech. Venture capital spending on nanotechnology should be about $200 million.
Governments remain the leader in nanotechnology spending with an estimated $4.6 billion in research and development to be spent this year, according to an annual report on the field by the Lux research firm.
Despite a new U.S. law that will inject $3.7 billion into nanotechnology research over the next four years, the private sector should outspend the public sector in the field starting next year, Lux reported.
The growth forecast adds to a heated debate about the potential of nanotechnology, which has been both promoted as the "next big thing" and derided as hype. Environmentalists have even attacked nanotechnology as potentially dangerous, saying it could introduce tiny toxic particles into the air.
Nonetheless, Lux Research said evidence that nanotechnology is a major opportunity for companies and investors is abundantly clear. Top nanotech start-up companies focusing on specialty chemicals, pharmaceuticals and semiconductors are reporting $10 million to $20 million in annual revenue, it said.
Applications such as a "nano-enhanced" coatings to protect ceramic surfaces from stains and scratches are quickly making their way into the marketplace, Lux reported.
In view of the growth in spending in nanotechnology globally it appears that the Government of Israel and the country's universities plan to invest $11.3 million in nanotechnology research in 2004-2005 is an "eyewash". Anyone close to technology companies knows that that $11m. is rarely enough to fund a company to the market.
Furthermore, a five-year plan calls for investing $25-30 million in nanotechnology infrastructure.
If all of the universities were to add nanotechnology courses to their programs of study we seriously doubt that it would cover the cost of lecturers and laboratory equipment. Under the present conditions it will take only a few short years for the Government to discover how far behind the rest of the world Israel has fallen in this field.
High-Tech Exports up by 17% in First Six Months
"The long crisis in the global high-tech industry has ended. High-tech, Israel included, is growing again," according to Elisha Yanay chairman of the Israel Association of Electronics and Information Industries (IAEI).Yanay predicted that growth would continue throughout 2004, although he was unable to say whether the high growth rate of the first half of 2004 would continue.
Figures compiled by the IAEI show that the trend towards recovery and growth in high-tech exports also continued in the second quarter. Exports grew 17% in January-June 2004, as compared with the corresponding period last year.
Growth was substantial in all sectors. Exports were up 10% in software, security equipment, and medical equipment; 15% in communications equipment and electronic components; and 40% in industrial electronic equipment. A major proportion of these exports was by the semiconductor industry, indicating a worldwide recovery for demand in this market. Yanay believes that if the Israeli high-tech industry continues growing at a similar pace in the second half of this year, exports could approach the record set in 2000.
Venture Capital
There was a 14.6% decrease in the number of companies that raised capital, 70 companies in the second quarter as compared to 82 companies in the previous quarter. The average investment in a company during the quarter was $4.65 million, a 52% increase as compared to the previous quarter ($3.1 million).
Computer technology remained attractive for venture capitalists. Software makers saw $1.2 billion in investment for the quarter, spread among 212 companies. Semiconductor investment rose 17 percent to $437 million. Investment in networking rose slightly, while telecommunications investments fell from the previous quarter.
In the first half of 2004, the technology sector raised a total of $661 million, a 37% gain over the capital raised by the sector in the first half of 2003. "The data indicates continued recovery in the sector," said IVC research director Efrat Zachai. "We expect the scope of financing in 2004 to be 20% higher than in 2003 and to reach $1.2 billion."
Zeev Holtzman, IVC's chairman and CEO of venture capital fund Giza, said that more then 15 Israeli venture funds are currently raising money for new funds. He reported that Pitango, which recently raised its fourth fund, has already begun investing, while three or four other management companies are nearing completion of the fund-raising process for new funds and are slated to begin investing in the coming months.
These funds' successful financing efforts will make $1 billion a year in local equity available for the next several years, Holtzman said.
According to the Marker Israeli startups raised more than $600 million in the first half of 2004, versus $482 million in the same half of 2003, according to a survey by TheMarker and IVC studies of last year.
According to The Marker's report, in the second quarter Israeli companies raised more than $300 million, while in the first quarter the fund raising was $321 million. At that level the it would reach $1.3 billion in 2004, compared with about a billion dollars in each of the previous two years.
BigBand Networks was a leader. It raised $25 million; The company then acquired the cable division from ADC, turning into Israel's biggest startup with 350 employees and anticipated annual revenues of about $100 million.
StarHome with a $20 million financing round, followed by Horizon Semiconductors, which secured $16 million, were among firms that raised substantial sums.
During the quarter six Israeli companies were acquired, even though they had not begun to market any product. The six combined were sold for $265 million .
Cisco Systems returned to the Israeli arena in the second quarter, buying Riverhead Networks for $39 million. Cisco subsequently acquired another Actona Technologies for $100 million.
Zoran Corporation (Nasdaq:ZRAN), acquired Emblaze Semiconductor from Emblaze (LSE:BLZ) for $54 million. Mercury Interactive (Nasdaq:MERQ), Israeli too, bought Appilog for $49 million. Magnifire was bought for $29 million. XTend found itself bought by Vyyo (Nasdaq:VYYO) for $20 million and M-Stream was taken over by Broadcom for $10 million.
PowerDsine, which raised $58 million on Nasdaq at a company valuation exceeding $200 million and was the best IPO in the quarter.. It was the first Israeli startup to break the IPO drought of three-years.
Sequel funds did well, too. Pitango secured pledges for $350 million for its fourth venture capital fund. The Dovrat group's secondary fund, Vintage, scored $65 million. In parallel, Gemini, Giza, Genesis and Concord each raised $150 million. IDB and Infinity also began raising money for a $75 million investment fund that will focus on China.
Reuters recently quoted a report that worldwide research and development spending in the emerging field of nanotechnology should rise about 10 percent this year to $8.6 billion.
MoneyTree: VC-Backed High-Tech Raised $326m. in Q2 2004
The findings of the MoneyTree Survey conducted by Kesselman & Kesselman PricewaterhouseCoopers (PwC) indicate that high-tech companies backed by venture capital funds (where one of the investors in the financing round is a venture capital fund) raised $326 million in the second quarter of 2004, a 28% increase over the previous quarter ($255 million), and a 34% increase as compared to the corresponding quarter in 2003 ($242.6 million).