May 12, 2003 -- Randy Bell knows that if a nanomaterials company wants to become profitable, it can't just scatter the small stuff into the wind and hope somebody buys. It needs to focus. That's why one of his first moves at the helm of Nanotechnologies Inc. was to redirect the company's sales strategy from "calling on a multitude of industries" to "approaching companies that have an actual need."
"A year ago we were trying to blanket the market," said Bell, president and chief executive of the Austin, Texas-based nanomaterials firm. "We have moved away from spending a huge amount of time in the laboratories of major businesses running tests to determine if our product is something they might be able to use."
Now, the company has narrowed its field of vision even further, focusing mostly on businesses that have a present need for its products.
"We spend a lot of time in the market for energetic materials [explosives and propellants], because it has established needs," Bell said. "One of the areas we really have a keen eye on is homeland security and national defense."
Founded in 1999 by Dennis Wilson, a former University of Texas mechanical engineering professor who currently is chairman, Nanotechnologies specializes in production of powders made from pure metals, including aluminum, zinc, tin, gold and silver. These nanopowders make metals stronger, create conductivity in materials that normally insulate and make protective coatings transparent. This year the company expects revenues will be approximately $2 million.
Partnerships, according to Bell, are the key to survival for pure-play nanomaterials companies because small firms do not have the resources to successfully market their products on their own. Maintaining a mix also is important. "If you focus solely on electronics, you're going to be starving for revenue." he said.
Nanomaterials makers invariably are part of a supply chain, so reliability is essential. "Continuity of supply is critical," he said. "Large companies must be assured they'll have a continuous supply of what they need. It's a huge issue."
Nanotechnologies has partnerships in each of its five areas of specialization: electronics materials, transparent optical coatings, photovoltaics, energetic materials and antibacterial agents.
The company uses a proprietary process involving a plasma reactor to make the nanoparticles. It bombards pure metals with high energy to break atoms apart. The reactor chamber is cooled quickly and the resulting substance is nanopowder. The company will not disclose how it achieves particles of a very precise and consistent particle size that stay separated.
According to Leo O'Connor, director of research for the Technical Insights division of Frost & Sullivan, the market for nanophase materials (powders) is more promising than for many other nanotechnologies, including nanotube applications. Frost & Sullivan predicts about 5 percent growth annually in the nanophase market once the economy recovers and begins to expand, he said.
"Their process can produce materials in relatively high volume and with good control over particle size and composition flexibility," O'Connor said. "If this is in fact the case, it puts them in a very good position because these are important assets in that marketplace."
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Nanotechnologies was founded in September 1999 by Dennis Wilson, a mechanical engineering professor at the University of Texas.
Small tech-related products and services
Nanotechnologies has created a process to custom-engineer the attributes of nanoparticle-based materials. The metal oxides, nitrides, nanopowders and other compounds developed at the company can enhance the quality of customers' existing materials with regard to strength, conductivity and transparency. The firm is targeting five applications: optical coatings, electronics materials, solar cells, anti-bacterial substances and "energetic materials" (e.g. explosives, propellants).
In April 2000, the company completed a $4 million first round of funding, with participation from Convergent Investors (round leader) as well as individual contributors. Nanotechnologies completed a $6.3 million private placement round in May 2002, with involvement from Convergent as well as Capital Conceptions, Castletop Capital, Eyes of Texas Partners, Garage Technology Ventures, Harris & Harris Group Inc. and Techxas Ventures.
Barriers to market
The company is functioning in an increasingly crowded niche.
Short-term: Financial self-sufficiency and positive cash flow. "We are working very diligently to make this a company that does not require additional venture financing," said CEO Randy Bell. Long-term: "To prove the viability and value of nanomaterials in enabling and changing many of the existing applications out there today."
Why they're in small tech
"We believe small tech will be the most rapidly growing business area over the next decade. And it is not one that is saturated or dominated by any single player today," Bell said.
What keeps them up at night
"Long-term financial viability."
-- Research by Gretchen McNeely