Nanotechnology is a good example of a budding area of science that has much promise, but appears to be just scratching the surface of possibility. Progress appears slow to those of us reading the glowing, science fiction-like predictions of future applications. Curiously, many of the predictions I have read ignore applications in medical, semiconductor, and materials technology, the largest areas of increase in research funding in the past couple of decades (link). Many center instead on the idea of tiny robots with sophisticated, autonomous functions, a concept which may never come to pass given the limits of physics. This may be part of the perception that progress is not what many are hoping for, but the reality may be more that, while much research is going on, there are a number of factors slowing progress, most related to funding and investment.
A significant problem is that radical new technologies like nanotechnology are heavily dependent on basic research, which typically must be funded by government. Unfortunately, government funding in the U.S. has been steady or declining in recent years (link), and increasingly stressing application and commercialization rather than basic research. Because of its long time horizon, large capital requirements, and disconnection from relatively short term profit opportunities, basic research is rarely funded privately except as a joint venture with public institutions.
Privately-funded nanotechnology research activities most often focus on narrow, achievable, short term goals. This is because privately-funded labs can more easily justify pursuing development of applications that provide profit opportunities to investors in less than a decade. An example is Nanosys, Inc. (link), which is pursuing higher efficiency solar cells, more dense memory chips, and applications of nano-enhanced surfaces such as medical sensors and miniature fuel cells (some of these projects in joint ventures with larger, better funded organizations). As a result, I believe finding private investor financing at a time when nanotechnology is in an early stage, and in the current economic climate, is understandably difficult, and made all the moreso by a shortage of funding for basic research and the high cost of research and development in this arena. Also, private funding is undoubtedly frequently insufficient when found, no matter how committed.
Aggressive, high risk technological development is not that attractive to the biggest sources of private funding such as venture capital funds. Unfortunately, these are the very sources capable of providing the amounts of funding needed for rapid development. Deep pockets and a tolerance for risk are both requirements in the funding of new and radical technologies. Unfortunately, risk increases at an increasing rate as we estimate the future, and the expectation that nanotechnology won’t provide significant profit opportunities for at least a decade presents perhaps too long a payback term for venture capital funds who have more mundane but immediate and lower risk opportunities. The venture capital funds with the deepest pockets often have responsibility to pension funds and similar sources of funding that have specific timetables within which they want an exit from their investments, and within which they demand significant returns. As a result, few venture capital investors can afford to let their pay-back horizons extend beyond a decade, especially in the current climate of relative economic uncertainty (which is easy to see in our current financial market volatility). Individual investors may have less sensitivity to the risk of waiting longer for significant returns, as they can be ideologically motivated or just have longer time horizons than venture funds or corporate investors, but few individual investors can provide the level of funding needed.
Public funding for basic research (link), a critical need during the early phases of development of a new technology, has shown little growth outside of the area of medical technologies since 1999, though the Nanotechnology Research and Development Act was signed in 2003 (link). It is clear there has been a shift in basic research to put more resources into nanotechnology, but I don’t think it is well known to the general public. This is undoubtedly because the pharmaceutical industry sees great potential in nanotechnology and has what appears to be an inordinately loud voice in Washington (possibly related to lobbyists from that industry being reportedly the single largest lobbying group). Basic research has also not been helped by the huge federal deficit created in large part by the current military involvement in Iraq.
Foreign investment is unlikely to produce a significant increase in nanotechnology funding in spite of the falling dollar, in part because a close relationship of venture funds with the companies they invest in is a necessity, and requires geographical proximity, and in part because venture funds have been slow to acquire a presence outside of their home countries. Also, as American economic problems drag down the world economy, foreign nanotechnology development programs will suffer the same limitations as those in North America.
Large-scale private funding such as venture capital tends to focus more on applications research than basic research, as it can project sales and profits for the investors, something that is much more difficult with the results of basic research. A 2007 study (link) indicates that venture funding has seen only slow increase in the past year, with funds tending to invest in their home countries even in the face of the expectation that investments will trend towards a more global focus. It also notes significantly that venture capitalists expect to invest in the United States in cases where R&D is a significant need, as the U.S. still has the biggest base of entrepeneurism in the world. Unfortunately, that R&D needs input from basic research efforts, which the U.S. government has not made a priority in the past 8 years.
Another hurdle for nanotechnology is in the availability of appropriate tools. Tool development is essential to the advancement of any new technology, and is taking up a significant proportion of funds available for both private and publicly-funded research. The cost of tool development is often high, and development is usually carried out in concert with basic research, but the tools are critical for applications development as well as basic research. This suggests that, under current economic conditions and government levels of support the tools needed by privately-funded nanotechnology programs will be relatively slow to come.
To summarize, it appears that nanotechnology development is going to move slowly in the near future, until the kind of large-scale research funding typically provided by government comes into play. The lack of basic research also means slower development of new tools needed to develop nanotechnology applications. Private funding in nanotechnology development will continue to be mostly applications-focused, addressing specific narrow product categories. Venture capital funding will remain slim due to payback timetables, risk aversion, and the poor economy in the U.S., where the majority of entrepeneurial activity would attract such investments. Individual investors generally don’t have the deep pockets capable of funding aggressive high technology research, though they may have more will to do so than corporate and even public entities.
Hopefully the turnover of political leadership in the U.S. will change the picture, but, in the meantime, individual citizens need to keep lobbying their representatives for increased basic research funding. One thing that could help, however, is a new political leadership ready to pursue a peacetime technology race similar to the competition between the West and the Soviet block that took place between the time of Sputnik and the Apollo missions to the moon. Large amounts of basic research required for the space program produced rapid technological advancement in the lives of average people, and significant increases in productivity for business. The improvements from those years are still coming into our lives, though at a decreasing rate, and another technological spurt like that is needed now to help us move more quickly towards sustainability.
As always, I don’t claim to be anybody’s expert, but welcome your comments and any input that might “wise me up.”