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It's not exactly the dawn of the Nanotechology Age, but given how stingy venture capitalists have been regarding investing in nanotech, it passes for good news: A handful of the earliest nanotech start-ups appears to be bearing fruit -- and VCs are lining up to get in on the action.

During the peak of the tech bubble, VC firms were more than eager to put their ample funds into nanotech (VCs hasten to point out that there's

no nanotech industry, but a science that may bring innovation to many industries). In 2000, 50 start-ups with a claim to using nanotechnology in their businesses raised $654 million, according to researcher VentureOne. Similarly, 2001 was another banner year for funding nanotech, with 58 start-ups netting $571 million. Like many of the dot-coms of those years, several of those companies raising money were simply very big ideas that showed promise in research labs.

But tech's lean times caused nanotech financing to slow. Last year, 41 companies raised $373 million, fairly even with the previous two years.

However, in the first quarter of this year, VentureOne says, 12 companies raised $155 million, nearly as much as was raised in the previous three quarters combined.

Venture funding is lumpy in general, but what's also encouraging is that many of the investments in the first quarter were the third or fourth rounds of fundings, which usually happens to companies that are actually selling products and expect to sell more.

"The first wave of nanotech companies are starting to spread out a little in the pack," says Alexander Wong, a partner at venture firm Apax Partners. "We're seeing a few of those early companies being funded at a higher level while others are falling back."

Among the recent nano-related venture investments are


, a Woburn, Mass.-based maker of memory chips, which raised $15 million from Globespan Capital Partners and Draper Fisher Jurvetson; and


, which raised $3.3 million from firms like Morganthaler Ventures,

Harris & Harris


and DFJ.

Also in recent weeks,


, an Emeryville, Calif.-based maker of stain-repelling textiles, took in $35 million from investors such as Norwest Venture Partners and the Howard Hughes Medical Institute. And


, a maker of carbon nanotube-based sensors that is also based in Emeryville, garnered $16 million from Harris & Harris Group and Apax Partners.

Many of those investments were oversubscribed, so potential investors had to be turned away. So what's the difference between them and other start-ups starving for venture money? Simple: They are making and selling stuff.

"These venture capitalists are only looking at nanotech companies that are making real money," says Barry Weinbaum, CEO of NanoOpto, whose components are found in telecom equipment and in consumer electronics such as cell phones and DVD players. "These are companies that have the technology risk behind them. They're manufacturing products with customers behind them."

NanoOpto's third round of investments in March came more than four years after its initial funding. Unlike the first two rounds of investments, when Weinbaum needed to coax money from VCs without the lineup of customers it has today, NanoOpto was turning away investors in its latest round.

"The companies that are surviving are showing a degree of diversification," Weinbaum says, as NanoOpto branched out of its initial telecom focus into consumer electronics.

For venture capitalists, risk is as commonplace as oxygen -- and just as vital for their success. The risks of companies using nanotechnology are twofold: Will the technology pan out and will it sell profitably?

If this first generation of nanotech start-ups is indeed coming of age, that means, yes, the technology has been turned into a product that others may buy. The trick now is to get more people buying it.

The $155 million invested in nanotech start-ups is only 3% of the $4.6 billion in venture financings in the first quarter, giving life to the cliche that VCs are falling over themselves to invest in nanotech. While the later-stage investments in companies like Nantero and NanoOpto suggest that some early nanotechnologies are hitting the marketplace, many VCs remain cautious.

"We have to look at a commercial business in a three- to five-year horizon," says Steve Krausz, a partner at U.S. Venture Partners. "If you can bring it out of the lab within five years, that's of interest to us. But you're not going to see much of a nanotech boom until much later."

Krausz pointed out that the discovery of the transistor came in the late 1940s, nearly three decades before



made a big impact with semiconductors. "The time cycle has been compressed, so instead of taking 30 years, it will probably take five to 10," he says. "But that's still a lot further off than many people are expecting."