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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 theproduct 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?"

Complicating things is the fact that most companies involved in promising work regarding nanotechnology are either too large to be considered pure plays or too small to go public. Among the latter, many will fold up shop or be bought out before they have a shot at an initial public offering. And going public isn't a guarantee of growth:

Nanophase Technologies

(NANX)

went public in 1997 and hasn't posted a profit since then.

"You're going to see many more companies failing than going public," says Charles Harris, CEO of venture capital firm Harris & Harris. "You may even see more get acquired than going public."

For investors with less than a few million dollars in net worth, a publicly traded VC shop like

TheStreet Recommends

Harris & Harris Group

(TINY)

provides a way to invest in a diverse array of private nanotech-oriented companies. (There are also a couple of mutual funds in Europe that invest mostly in public companies, including the

Activest Lux NanoTech Fund

and the

DAC Nanotech Fund

).

But Harris is clear that the risk in nanotech start-ups is as high as any other area in which VCs invest. "Because we're invested in high-risk start-ups, we've lost money on more than 50% of our investments," he says. "That's just an unfortunate part of the business."

The ability to spot a company that can turn a scientific breakthrough into a commercial product isn't the only risk investors need to watch for. There are signs that nanotechnology could face the kind of public backlash that genetically modified organisms faced. After groups raised concerns about potential environmental and health effects of GMOs, many companies cut back on their research budgets in that area.

"It's in the interests of nanotechnology's own future that companies be up front about this," says Steven Currall, a business professor at Rice University. "A lack of transparency about the health or environmental effects of nanotechnology will surely impede the development of commercial applications."

As with the controversy over GMOs, the emerging debate over nanotechnology's potential harms is louder in Europe than in the U.S. People breathe nanoparticles that are in the atmosphere every day. But the concern is how synthetic nanoparticles from, for example, incinerated products containing carbon nanotubes will affect human health and the environment.

Last year, in stating its position on nanotechnology, Greenpeace U.K. said: "Greenpeace has concerns about the use of 'nanoparticles' .... We want to see a moratorium on the release of nanoparticles to the environment until evidence that it is safe (for the environment and human health) is clear."

Observers point to areas such as the chemical and semiconductor industries, in which the risk of toxic substances is limited by the companies' interest in and ability to contain them. For companies that ignored the risk of a public backlash, the financial costs can be high. Currall points to

Monsanto's

(MON)

refusal to engage with critics, a stubbornness that led to boycotts and regulatory barriers of its products around the world.

"That's a sure way to kill trust," says Currall. "It's bad business because it hurts you commercially."