From the time it was first mentioned in the 1980s by K. Eric Drexler, the term ``nanotechnology`` has both morphed and penetrated the American popular consciousness. Although Drexler was specifically referring to the possibility of assembling functional machines at the molecular level, an idea first popularized by Richard Feynman in 1959, ``nanotechnology`` has come to describe a wide range of materials-based technologies that take advantage of unique properties that emerge at scales below about 100 nm.

This takes in a great variety of technologies, applications, and products, both old and new. And it is this very variety that drives the accelerating interest in nanotechnology in the US. A broad segment of the population is now familiar with ``nanopants`` that repel stains and colorless sunblocks that are enabled by nanoparticles, and fascinated at the prospect of hyperfast computers, clean energy sources, and super soldiers.

Over the past few years, this popular interest has translated into both political action and increasing investment, with notable acceleration throughout 2003 and into early 2004.

On the political front, the US enacted the 21st Century Nanotechnology Research and Development Act in December, 2003, driven by claims that nanotechnology would eventually become a trillion dollar industry. The Act wrote into law the National Nanotechnology Initiative (NNI) that had been announced by President Bill Clinton in 2000 and increasingly supported by presidential budgets since then. The NNI had originally been funded at $464 million in FY 2001 (September, 2000 through October, 2001) and had enjoyed increasing appropriations year after year to an estimated $961 million for FY 2004. The Act included budget authorizations totaling $3.7 billion for nanotechnology R&D through FY 2008. President George W. Bush's FY 2005 budget request for the NNI is $982 million.

Financial trends also show accelerating interest in nanotechnology despite lingering effects of the US recession in 2001. In 2003, a year when a 20-year US unemployment record was breached, the value of a publicly traded venture capital firm that specializes in nanotechnology investments rose from less than $3.00 per share to more than $15.00 per share, beating the S&P 500 by some 400% (Harris & Harris NASDAQ:TINY).

The year 2003 also saw some $304 million in venture capital funding for nanotechnology, a 42% increase over 2002. Although this represents a small portion of total venture capital funding, just over 3%, it is an increase over the 2% fraction in 2002. The composition of venture funding in nanotechnology is also changing. In 2001, some 75% of nanotechnology deals were startup and early stage rounds. By 2003, more than 60% of the deals were for expansion and late stage rounds. This in part accounts for the increased level of investment, and it is an indicator of progress in executing business plans, or at least progress toward a liquidation event. In fact, as of April, 2004, Nanosys, Inc., which garnered a $38 million late stage investment in the second quarter of 2003, has filed a registration statement in anticipation of an initial public offering.

There is reason to believe that the public financial markets are ready to invest in nanotechnology. Of course, there is the aforementioned financial success of Harris & Harris. More recently, Merrill Lynch established a ``Nanotech Index`` to track the growth of nanotechnology in response to intense client interest. The non-investable index is quoted on the American Stock Exchange (NNZ). It consists of 22 small to midcap companies whose future business strategy is significantly based on nanotechnology. The largest of these, in terms of market cap, is Cabot Corporation (NYSE:CBT), at just over $2 billion, and at its establishment the index included two companies with market caps below $100 million. Expressly excluded are large companies whose valuations are not influenced by their nanotechnology activities, however significant they may be. Thus, companies like IBM, Motorola, DuPont, GE and so on, are not in the index.

The heightened political and financial activity is certainly an indicator of Americans' broad based belief that substantial opportunities exist in nanotechnology. And they create conditions that foster accelerated development and commercialization of new products and processes that bear the nanotechnology label. Yet it is worth asking whether these opportunities are real, or just hype. Nanotechnology itself remains a diverse admixture of revolutionary applications and rather ordinary product improvements. Our purpose here is to review nanotechnologies as they relate to the Information Technology and Electronics industry and the Materials and Chemicals sector, and to add some detail to these emerging opportunities.

From the time it was first mentioned in the 1980s by K. Eric Drexler, the term ``nanotechnology`` has both morphed and penetrated the American popular consciousness. Although Drexler was specifically referring to the possibility of assembling functional machines at the molecular level, an idea first popularized by Richard Feynman in 1959, ``nanotechnology`` has come to describe a wide range of materials-based technologies that take advantage of unique properties that emerge at scales below about 100 nm.

This takes in a great variety of technologies, applications, and products, both old and new. And it is this very variety that drives the accelerating interest in nanotechnology in the US. A broad segment of the population is now familiar with ``nanopants`` that repel stains and colorless sunblocks that are enabled by nanoparticles, and fascinated at the prospect of hyperfast computers, clean energy sources, and super soldiers.

Over the past few years, this popular interest has translated into both political action and increasing investment, with notable acceleration throughout 2003 and into early 2004.

On the political front, the US enacted the 21st Century Nanotechnology Research and Development Act in December, 2003, driven by claims that nanotechnology would eventually become a trillion dollar industry. The Act wrote into law the National Nanotechnology Initiative (NNI) that had been announced by President Bill Clinton in 2000 and increasingly supported by presidential budgets since then. The NNI had originally been funded at $464 million in FY 2001 (September, 2000 through October, 2001) and had enjoyed increasing appropriations year after year to an estimated $961 million for FY 2004. The Act included budget authorizations totaling $3.7 billion for nanotechnology R&D through FY 2008. President George W. Bush's FY 2005 budget request for the NNI is $982 million.

Financial trends also show accelerating interest in nanotechnology despite lingering effects of the US recession in 2001. In 2003, a year when a 20-year US unemployment record was breached, the value of a publicly traded venture capital firm that specializes in nanotechnology investments rose from less than $3.00 per share to more than $15.00 per share, beating the S&P 500 by some 400% (Harris & Harris NASDAQ:TINY).

The year 2003 also saw some $304 million in venture capital funding for nanotechnology, a 42% increase over 2002. Although this represents a small portion of total venture capital funding, just over 3%, it is an increase over the 2% fraction in 2002. The composition of venture funding in nanotechnology is also changing. In 2001, some 75% of nanotechnology deals were startup and early stage rounds. By 2003, more than 60% of the deals were for expansion and late stage rounds. This in part accounts for the increased level of investment, and it is an indicator of progress in executing business plans, or at least progress toward a liquidation event. In fact, as of April, 2004, Nanosys, Inc., which garnered a $38 million late stage investment in the second quarter of 2003, has filed a registration statement in anticipation of an initial public offering.

There is reason to believe that the public financial markets are ready to invest in nanotechnology. Of course, there is the aforementioned financial success of Harris & Harris. More recently, Merrill Lynch established a ``Nanotech Index`` to track the growth of nanotechnology in response to intense client interest. The non-investable index is quoted on the American Stock Exchange (NNZ). It consists of 22 small to midcap companies whose future business strategy is significantly based on nanotechnology. The largest of these, in terms of market cap, is Cabot Corporation (NYSE:CBT), at just over $2 billion, and at its establishment the index included two companies with market caps below $100 million. Expressly excluded are large companies whose valuations are not influenced by their nanotechnology activities, however significant they may be. Thus, companies like IBM, Motorola, DuPont, GE and so on, are not in the index.

The heightened political and financial activity is certainly an indicator of Americans' broad based belief that substantial opportunities exist in nanotechnology. And they create conditions that foster accelerated development and commercialization of new products and processes that bear the nanotechnology label. Yet it is worth asking whether these opportunities are real, or just hype. Nanotechnology itself remains a diverse admixture of revolutionary applications and rather ordinary product improvements. Our purpose here is to review nanotechnologies as they relate to the Information Technology and Electronics industry and the Materials and Chemicals sector, and to add some detail to these emerging opportunities.