The Great Wide Middle

The "great" small tech companies - and by that I mean the 10 or 20 companies that would be on anyone's list who understands startup investing and nanotechnology - are getting financed, finding sophisticated investors and moving forward. IPOs and M&A activity remains 6-36 months out in the mid 2006 to the end of 2008 timeframe; the exact area I've been targeting since late 2001.

10 or 20 companies! That's nothing.

What's different and a little surprising is that weak deals are getting done through reverse mergers, now. This type of activity is expected after some strong companies have successful IPOs or there is a "credibility event" that informs the market. Afterwards, it is common to see "all the turkeys fly" with 4th tier underwriters and RTOs of shells.

Not this time. Not with nanotech.

It seems that the great wide middle is being completely ignored.

While any list of public "nanotech companies" includes about 20 companies that are or are nearly bogus because either their science or technology are nothing much or not based on science at all, they are totally undercapitalized or are grossly overvalued. Interestingly, many of the names are all three! Such a deal . . .

There are, however, several dozen companies that are neither public nor in this super few, "great" category, and there are some real gems among them. Some have cool technology and a plan, but lack the ability to attract funding. Some have great teams and potential products, but are in the boonies. Some don't have the internal talent to move from technology to product or are stuck with weak CEOs. Some fall into "me too" categories and are ripe for roll-ups, but ego will out until death knocks on the door.

And be sure of one thing; Death will come knocking hard on the Great Wide Middle of nanotech and small technology companies in 2006.

The Model NanoCo is . . .

There will be platform companies, IP library companies, biotech, semiconductor and specialty chemical companies. Nanotech startups and IPOs will and already do look like instrument companies and computer companies, electronic device, software and basic materials companies.

More than look like them, they are them.

But what does the model nanotech company look like, one that we can point to today, and say with some degree of confidence, "now that's one that works; 'that's what I'm talking about'"?

The answer, for me, is simple. It's Nano-Tex.

Spun out from supposedly, stodgy Burlington a few years back, investment and business giant, Wilbur Ross, created a nanotech-based, industry and manufacturing-congruent moneymaker. Most importantly, the company and its products solve real world problems (keeping stains, static, moisture, odors, off of ties, shirts, skirts, trousers, carpets, upholstery . . . ). The science and technology are solid, but where Nano-Tex really shines (outshines everyone, really . . . Nanofilm is a close profile . . but that's another story) is where the tire meets the road (or in this case, where the catsup meets your shirt).

They make money the old-fashioned way; they sell something that people actually (in this case, fabric and clothing manufacturers) want to buy.

Now, it's all very nice to, say, develop a new and wonderful tool or build a super-sensitive sensor, revolutionary platform technology or cure a horrible disease, but, from a business and investment point of view, give me the mundane. Give me the basic. Give me the frivolous markets like people who like music (iPod Nano), people who want good deals (Ebay, WalMart), heck, people who like hamburgers (McDonalds) . . . .or . . . people who wear clothes . . . Hmmmm . . . now that's something to get excited about.