Very small Business

By Eric Roston

Technologist Eric Drexler envisioned a future in which machines far smaller than dust motes would construct everything from chairs to rocket engines, atom by atom; in which microscopic robots would heal human ills, cell by cell. Sixteen years after the publication of Drexler's book Engines of Creation, the molecular-scale technologies most immediately available to consumers are somewhat less fantastic: stain-resistant khakis and more durable tennis balls.

Much of the hype is gone from nanotechnology, the term Drexler popularized for his world of very small wonders. But something more interesting has crept in: sales. The khakis and tennis balls are bringing in money, as are dozens of other new products made and enhanced through nanotechnology. To be sure, most nanotech companies are still investing more in R. and D. than they are collecting in revenue. But many commercial applications are in advanced stages of development or already on sale: handheld devices that can sense anthrax spores, hand cream that can protect us from them and computer chips that are faster, cheaper and cooler (we're talking temperature here, not hipness) and retain data even when the power is shut off. Says Richard Smalley, a Rice University professor and Nobel-prizewinning chemist: "We are only beginning to see the things nanotechnology can do."

Nanotechnology takes its name from a nanometer (nm), a billionth of a meter, or about one one-hundred-thousandth the diameter of a human hair. In common usage, it refers to an array of new machines and materials whose key parts are smaller than 100 nanometers and to the new tools, such as Veeco Instruments' atomic-force microscopes and Nanometrics' inspection tools for semiconductor makers, that allow the tiny parts and particles to be observed and manipulated. It is a mysterious realm in which the laws of classical physics yield to those of quantum mechanics, in which the powerful bonds between atoms overtake the effects of gravity that rule the big world. Yet scientists have moved beyond the basic exploration of nanotech to its exploitation. The National Science Foundation foresees a $1 trillion market by 2015 for nano products, and businesses and governments around the world are rushing to cash in.

The White House has proposed that $710 million be spent on nanotech research next year--a 17% increase over the 2002 budget--on the development of everything from water-filtration equipment to military uniforms made from "smart" materials that can guard against germ warfare. Governments in Asia and Europe are investing $2 billion in similar R. and D., according to CMP-Cientifica, a research firm in Madrid. "Nanotech is a three-legged race right now," says Mark Modzelewski, executive director of the NanoBusiness Alliance, based in New York City.

Even enthusiasts like Modzelewski caution that no one should expect an overnight nanotech revolution. The technology will evolve--"radically," he says--as its benefits seep into virtually every crevice of human industry, from toys to tanks. And even professional investors are cautious. "True venture capitalists are not investing. They are watching," says Glenn Fishbine, author of The Investor's Guide to Nanotechnology and Micromachines. Only a handful of "pure play" nanotech stocks exist, including Nanophase Technologies, in Romeoville, Ill., which makes nanoscale powders, among them zinc oxide particles for sunscreen that won't turn lifeguards' noses white. Still, investors in behemoths such as Intel, Samsung and Dupont have been indirectly funding nanotech development for years.

Five sectors surveyed here--consumer goods, computers, pharmaceuticals, energy and cars--deserve particular attention for the progress they have made toward bringing profitable products to market.

TIRES AND TOYS

Physicist Harris Goldberg wants to revolutionize the $1 billion tire-sealant business, but until that goal is realized, he will settle for tennis balls. InMat, Goldberg's seven-employee company in Hillsborough, N.J., regularly ships to Wilson Sporting Goods 55-gal. drums filled with an environmentally safe liquid containing 1-nm-thick sheets of clay. When the material coats the inside of a tennis ball, it traps air far more effectively than standard rubber alone and doubles the life of the ball. Wilson's Double Core, which made its debut more than a year ago, sells at a premium in U.S. tennis shops and this year became the official ball of the Davis Cup competition.

InMat will take in just $250,000 this year, but Goldberg expects to double that figure in each of the next few years, largely on tennis-ball business. Meanwhile, he is working to convince tire manufacturers that by sealing their wheels with his technology instead of butyl rubber, the current sealant, they can produce tires that run cooler and safer, are lighter and increase a car's fuel efficiency. The U.S. Army has asked InMat to develop gloves that will protect soldiers from chemical agents. Goldberg's funding has come mostly from an angel investor and grants, which means he is still on the prowl for cash. "It's been a battle," he says. "It's still a battle. But we're looking at enormous growth prospects."

A chemical process that adds "nano-whiskers" to cotton fabrics and renders them wrinkle and stain resistant explains new products from Eddie Bauer and Lee Jeans. The fabrics were developed by Nano-Tex, a Greensboro, N.C., company that is 51% owned by Burlington Industries, a textile firm that is struggling to emerge from bankruptcy. Nano-Tex has also developed active-wear fabrics that disperse and dry sweat. Later this year, it will launch a line, destined for socks, underwear and T shirts, that will channel body odors through the structure of the fibers.

Rod MacGregor, a high-tech entrepreneur, runs NanoMuscle, an Antioch, Calif., company that makes 3-in. motors suitable for everything from power windows to dolls with nuanced facial expressions. "I like to be on the wave of the next insanely great thing," he says. His motors work because the alloy nitinol can assume different shapes as its temperature fluctuates. An electrical current causes a nitinol wire in the device to shorten, allowing the linear motor to contract like a human muscle but at 1,000 times the strength. That's a simple task but an important one, and one MacGregor believes can reach markets worth $3.8 billion. The NanoMuscle, which costs less than $1 to make, qualifies as nanotech, the company says, because of the size of its nitinol crystals, not the wire or motion. MacGregor compares his product to $40-to-$100 small motors made by potential competitor RMB, of Biel-Bienne, Switzerland. Hasbro, a major investor in MacGregor's start-up, expects to deliver its first nano-powered toys by Christmas 2003. NanoMuscle's challenge, like InMat's, will be to stay afloat long enough to sign companies on as clients.

SMART SOOT

Like MacGregor, Greg Schmergel is a serial entrepreneur. If his company, Nantero, in Woburn, Mass., is successful, it will eventually add about five minutes to everyone's day. The company wants to build an "instant-on" computer that doesn't need to boot up.

In a year, Nantero expects to produce a commercial prototype for a chip with "nonvolatile random-access memory" (NRAM), which means its chips won't forget how to run all its programs when the power is switched off. The technology uses arrays of 2-nm strands of carbon atoms, called carbon nanotubes, that convey electrons faster than copper and are 100 times as strong as steel at a fraction of the weight. Pairs of tubes store data by locking together when a current runs through them and stay together even when the computer power is switched off and back on. The tubes remain linked until separated by a countercurrent, so their memory is retained. And these chips have other advantages. Schmergel says that within three years, Nantero can bring to market chips with NRAM that can store 10 times as much data as a silicon chip the same size while operating faster and with less heat. "They're not saying much publicly about their approach," says Steven Glapa, president of the nano-consulting firm In Realis, "but what they're promising sounds pretty breathtaking."

Nanotubes could be the first commodity in the nanotech economy. Dozens of companies around the world already pump out mounds of the stuff--affectionately called soot--and sell it to some of the world's largest companies and labs for research: IBM, Hewlett-Packard, Samsung and NEC. Nano-Lab, in Brighton, Mass., is one of the few nanotech companies turning a profit. It sold $200,000 worth of made-to-order nanotubes in 2001 and is on track to more than double that amount this year. Last week HP researchers unveiled a way of manufacturing molecular-scale circuitry that will be cheaper and use less power than current silicon chips and have the potential to store entire libraries of information.

CANCER BUSTERS

Professional athletes won't find Richard Smalley's soccer balls quite as novel as Harris Goldberg's tennis balls. In fact, without an atomic-force microscope, they won't find them at all: the naturally occurring structures are composed of just 60 carbon atoms. Yet Smalley's discovery is expected to help treat AIDS, cancer and Lou Gehrig's disease, and it earned him and two colleagues the 1996 Nobel Prize for Chemistry.

These molecular structures are called fullerenes, or buckyballs, in honor of the American architect and inventor Buckminster Fuller. Smalley sits on the board of C-Sixty, a biotech company that builds fullerenes into molecules that researchers hope will attach to and deactivate HIV molecules and blow up cancer cells on cue. "Buckyballs are not quite like nanosubmarines that target deadly diseases"--as seen in the 1966 film Fantastic Voyage--"but because of their size and shape, they are well suited for drug discovery," says Stephen Wilson, co-founder of C-Sixty, based in Houston.

C-Sixty's hypothesis is that buckyballs offer a master-key approach, functioning as a universal molecule that can be, in a sense, weaponized to attack any enzyme or receptor that plays a role in a disease's development. C-Sixty is assembling libraries of new buckyball-based molecules that it will test for potential therapeutic value. Early next year, it will conduct human trials of fullerene-based drugs for HIV and Lou Gehrig's disease. With about one-tenth the toxicity of the current HIV drug cocktails, the company's molecule targets new strains of the constantly mutating virus that are no longer susceptible to treatment. In the case of Lou Gehrig's disease, a degenerative nerve illness, the drug prevents or repairs neurological damage. C-Sixty has no revenue yet but will soon announce a partnership with "one of the top three pharmaceutical companies," says its president, Uri Sagman.

Other researchers are building nanoinventions so small that they can slip inside diseased cells and halt their development. Dr. James Baker, head of the University of Michigan's Center for Biologic Nanotechnology, is developing nanoscale molecules called dendrimers to target cancer cells. He says that "nanotechnology gives us a totally new set of tools to diagnose and treat disease," including an ability to eliminate cells before they become cancerous.

Baker and his team created a company called NanoBio. An $11 million Pentagon grant allowed the team to develop a cream that can penetrate and kill infectious microbes, everything from the fungus that grows on toenails to flu viruses to anthrax spores. The military version, called NanoDefend, is a liquid designed to decontaminate clothing and surfaces that have come into contact with anthrax, Ebola or smallpox. A creamy gel or goop, called NanoGreen, can be used by the military to decontaminate skin--and may eventually have topical and vaginal applications for consumers, according to NanoBio CEO Ted Annis. The firm, which hopes to partner with existing companies, is preparing to submit seven products to the FDA for approval, a process that takes several years.

Some companies will simply help common drugs work more efficiently. Elan Drug Delivery, located in King of Prussia, Pa., pulverizes existing drugs to a size that maximizes the body's ability to absorb them. Naproxen sodium, a pain medication found in products such as Aleve, can take as long as two hours to exert its pain-relieving effect. Nano Systems has developed a crystal version of naproxen, still in clinical development, that works in 15 to 20 minutes. "Using NanoCrystals has not made naproxen a better drug"--just seven to eight times as fast as the commercial product, says Larry Sternson, president of drug delivery at Elan, the Dublin-based drugmaker that is the parent company of Elan Drug Delivery.

Detection and analysis are also enhanced by small technology that is not strictly nano-scale. MesoSystems, a young but profitable firm, sells to fire departments handheld devices that collect biological particles 0.5 to 10 microns across--anthrax, for one--and preserve them in a liquid for identification. MesoSystems supplies Lockheed Martin with an air sampler it uses in its Biomail Solutions product, a biohazard detector in field testing at some federal agencies. MesoSystems made about $250,000 last year on revenues of $7 million and this year hopes to gross more than $10 million.

CLEANER ENERGY

As an alternative to fossil fuel, everyone loves hydrogen fuel cells, which produce clean energy out of hydrogen and oxygen. But hydrogen, while abundant in the air, isn't widely available in refined form. And machines that run on hydrogen are equally scarce. Researchers at the Tokyo Institute of Technology have been working on the first problem, automakers on the second. The Tokyo group has developed a way to "crack" hydrogen, using a mesh of thin carbon fibers studded with molecules of a nickel compound. The filter breaks down natural gas into carbon and hydrogen that is pure enough for use in fuel cells.

Another impediment is the cost and supply of the platinum particles that catalyze, or kick off, the process. Think of them almost as matchmakers, encouraging every oxygen atom to mate with two hydrogens, releasing valuable energy with each reaction. That is the heart of the fuel cell.

Because of the current size of these catalyst particles, about 10 nm, and their tendency to clump together, platinum is not used efficiently. The world's entire annual output of platinum would not meet the demand if fuel cells were used by only 10% of cars produced worldwide. Hydrocarbon Technologies--which is owned by Headwaters, an alternative-energy company based in Draper, Utah--says it has found a way to create nanoscale platinum particles that won't clump together and slow down the process, as current ones do. The new particles are expected to keep fuel cells running in a stable, efficient manner and stretch the platinum supply. Tim Harper, founder of CMP-Cientifica, says these particles show how "nanotechnology can make previously uneconomic processes viable" for businesses.

OPEC has more than fuel cells to worry about from nanotechnology. Last month China's largest coal company licensed U.S. technology that will enable it to build a $2 billion coal-liquefaction plant in Inner Mongolia. The heart of this new technology is a gel-based nanoscale catalyst that improves the efficiency of coal conversion and reduces the cost of producing clean transportation fuels. If the technology lives up to its promise and can economically transform coal into diesel fuel and gasoline, coal-rich countries such as the U.S., China and Germany could depend far less on imported oil. At the same time, acid-rain pollution would be reduced because the liquefaction strips coal of harmful sulfur. Given current world oil prices (about $27 per bbl.), turning coal into gas is economical in China. "A $4-to-$8-per-bbl. increase in the price of oil would make it economically attractive in the U.S. too," says Theo Lee, CEO of Hydrocarbon Technologies.

PLASTIC CARS

Every big carmaker promises that any year now, it will have a fuel-cell car on the road--a vehicle that will cruise silently, spit drinkable water from its tail pipe and provide power to your house when you plug it into the garage. In the meantime, auto manufacturers are putting nanotechnology to work in other ways. Toyota was the first to experiment with strong, lightweight nanocomposite materials in the late 1980s, and U.S. automakers are starting to move nanocomposites out of the lab and into vehicles. General Motors is using advanced plastics to make step assists for 2002 GMC Safari and Chevrolet Astro vans. The new materials are stiffer, lighter and less brittle in cold temperatures than other plastics. Improvements in strength and reductions in weight lead to fuel savings. The next step is for GM to use nanocomposites in car interiors and bumpers and eventually in load-bearing structural parts, such as vehicle frames.

As nanotechnology produces more products and processes, will the technology ever catch up with Eric Drexler's theories? Says Steve Bent, a Washington patent lawyer for nanotech firms: "That will be the research agenda for the rest of the century." --With reporting by Jennifer L. Schenker/Paris

With reporting by Jennifer L. Schenker/Paris