Nanotech -- Old Rules for a New Science

As the earlier stories in this series on nanotechnology mentioned, finding an investment strategy around this emerging field is anything but straightforward.

To recap, nanotechnology isn't new, but it promises to become a nexus of innovation. It isn't an industry unto itself -- despite the growing crowd of companies labeling themselves as nanotech companies -- but the technology will affect nearly every industry. There are nanotech products on the market, but none to date are revolutionary enough to generate a pile of profits.

Between the actions in the stock market today and the inevitable economic growth that will be driven by nanotech lies an ocean of uncertainty. That may be good news for daytraders, but for more thoughtful, long-term investors it makes it harder to come up with a strategy.

Talk to investors and executives who have had their heads in nanotechnology for years and you'll hear the same old chestnuts of investment advice you get in any other area of the market: Spread your investments across diverse companies, large and small, and in different industries; know what you're investing in; don't put money in companies led by people you'd never invite to dinner or a ball game; check out the product and determine whether there's a market for it.

Familiar advice, perhaps depressingly so for people looking for a new area in which to invest. The nanoscale may introduce radically different laws of science, but it doesn't change the rules of investing.

"If you have full information on companies, you can do research on who's talking smack," says Warren Packard, a venture capitalist at Draper Fisher Jurvetson, which holds investments in private nanotech-oriented companies.

"We use a framework that works anywhere," Packard says. "The most important thing to look at is the people who are there. Read their bios. Do they have accomplishments or an ambiguous past? Is there a customer need for what they're selling? Do they have anything more than intellectual property? Is it a big market? Are competitors breaking new ground?"