f you have not already heard how hot it is, nanotechnology stands poised to become a potential colossal gold mine - but how much actually translates into real applications or products? No longer are venture capitalists (VCs) falling over themselves to invest in this technology - the likelihood of a lucrative payback appears to stretch into an uncertain future.

James Von Ehr II put his money where his mouth is - more than US$30 million and counting - to demonstrate his conviction in the field's viability. Frustrated at the dearth of any credible nanotechnology companies back in 1997, he created a startup to translate technology into a concrete product. Seven years later, Zyvex Corp, still doggedly digging in its heels in the tough terrain, is beginning to reap the rewards of the initial investment.

He muses on the rise and fall of interest of VCs in nanotechnology. The tide peaked in early 2002 but plunged dramatically within a year. "There were hardly any VCs going to nanotech conferences in 2003," he remembers.

Von Ehr personally contributed US$2.5 million to the University of Texas at Dallas to set up its NanoTech Institute. "I did so not as a businessman expecting a return, but as a private individual being a good citizen, because I think it is important for our whole region to have a powerful research university. Eventually I may see indirect benefit - an environment like Silicon Valley, where entrepreneurs discuss nanotechnology startups over lunch. The direct benefit is that in the long-term, we will have smarter graduates looking for jobs at Zyvex. If we manage to start up a number of nanotechnology companies in the area, it will get easier to recruit good people."

Zyvex, the only nanotechnology firm in Dallas, began from scratch. Most US nanotech startups are spun off from universities with top-tier research. Von Ehr notes that in his experience, professors spinning off their own companies secure much better licensing deals from the universities than an outside company could get. He is adamant that the same deal terms should apply whether "you are on the inside spinning out, or on the outside trying to license."

Currently, most companies are working on basic nanomaterials that range from polymers to tools and various forms of carbon. Some are focusing on solar energy and the interface between nanoscale science and biotechnology - nanobiotechnology. Von Ehr reckons that the US alone has over 1,000 companies working in this area.

Zyvex has taken a mechanistic approach to molecular nanotechnology - direct manipulation of molecules. To reach down to the nanoworld and manipulate nanoscale things - moving materials around and testing them electrically and mechanically - requires specialised tools, and the company has rolled out a range of products to enable this feat. The product lineup, primarily for nanoscale research and development now, will be expanded into the semiconductor tools business in the near future. Zyvex also does leading-edge R&D in the area of MEMS (microelectro-mechanical systems) - silicon micromachines - in order to make small machines that can build the next-generation factories to assemble a range of tiny products from watches to medical devices and personal electronics.

Von Ehr sees one growth area - forming ventures with companies that have good complementary technology but without sales and marketing resources. Zyvex will offer them a pathway to the market, complete the products if such is needed, and market them.

Even though it is a good start, the tools business is not a fast-growing sector. Materials, however, is another story. The US National Science Foundation forecasts that this area will be worth over US$300 billion in business by 2015.

Von Ehr believes long-term huge growth lies in nanostructures and nanodevices, which can be used to assemble things, an extension of MEMS technology. The dream is to put smart molecules together into smart devices - for instance, for medical devices, drug delivery, analysis, and embedding computers into objects. He expects nanotech devices within four years, and components of those such as sensors are already available.

Von Ehr maps out his firm's long-term plan: "Our ultimate goal is to build tools that can manipulate molecules - building structures and materials at the atomic scale. Right now, our tools are mainly for nanotechnology R&D."

Hewlett-Packard and several universities have bought Zyvex's nanomanipulator for test and research, and a number of big industries are in discussion about new tools for semiconductor probing and testing.

Because Singapore performs precision manufacturing, Von Ehr is considering working with Singapore's researchers to build new kinds of instruments, such as miniaturised versions of today's lab tools or miniaturised production lines to assemble parts smaller than a grain of salt.

No stranger to Asia - being affiliated with three universities in China as a visiting professor in business and entrepreneurship - Von Ehr is excited about the Chinese entrepreneurial spirit and is upbeat about the planned venture in Asia. In fact, he does not discount setting up R&D facilities in Asia since it is difficult to get the right people in the US.

Lamenting the unexploited large patent portfolios owned by universities and research institutes, the enterprising nanotech proponent is pushing for more transfer of technology to the industry. The canny technopreneur has asked the government to consider the best practices of different universities in the transfer of technology, figure out how to do so, and to teach other universities the process. "That is how industry works - we frequently look around and adopt the best practices we can find."

The US National Nanotechnology Initiative pumps a lot of money into the technology, but the funds get directed mainly into universities and government laboratories. The amount channelled to small businesses is relatively limited, but Zyvex was fortunate to have received some of the funding (US$10 million over 5 years), which enabled it to develop its microassembly technology into world-class capabilities.

Von Ehr notes ruefully: "Private investors don't make long-term investments. Sometimes I think I'm the only person on the planet with a ten-year investment horizon. My software company Altsys took ten years from startup time to the time I had a company worth selling." Altsys, which developed the popular FreeHand graphics software, was started on a US$7,000 investment and sold to Macromedia for over US$100 million in 1995.

He intends to build up Zyvex as a significant entity within the same timeframe. This is one wise entrepreneur who can look at the small stuff and visualise big things for the future.

For more information contact James Von Ehr at jvonehr@zyvex.com

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