Nanotech Is Living Large

The first big nanotechnology success story may be already sitting in the portfolios of millions of investors.

Some traders have soured on the search for a nanotech start-up that can repeat the success that Intel saw in semiconductors, Microsoft saw in software and Google has seen in Internet search. Judging from the scarcity of big names that have emerged after decades of nanotechnology research and years of hype, some have concluded that the science is just one big fizzle.

Reading between the lines of a new report by New York-based market research firm Lux Research, it's hard to avoid the conclusion that those frustrated investors are simply looking in the wrong place. It's the large, established companies that are investing in nanotech, doing the homework to turn the science into marketable products -- and they're the same ones that will be the first to harvest the results.

The report, titled How Industry Leaders Organize for Nanotech Innovation, underscores a point that many in the science have been making, often in vain: Nanotechnology isn't an industry per se, but a realm of innovation, materials and science that could potentially change many existing industries by making possible new products and new efficiencies.

That explains why, according to Lux, corporate R&D spending on nanotechnology is more than nine times greater than institutional venture-capital funding. In 2005, the 1,331 companies in 76 industries that Lux tracked invested $3.2 billion in nanotech and sold $32 billion in products that incorporate some form of nanotechnology.

While $32 billion is barely a drop in the $14 trillion bucket of revenue for those same companies, it's more than twice as much as the $13 billion in nanotech-related revenue in the previous year.

Of course, the bulk of those investments are in industries that are R&D intensive to begin with, including medical devices, aerospace and defense. General Electric, which has always had a sensitive antenna for promising innovation, earmarked $50 million for nanotech research last year, or 1.6% of its total R&D budget. CEO Jeffrey Immelt has ranked nanotech with personalized medicine and renewable energy as top priorities.