Harris & Harris (NASDAQ:TINY), a venture capital firm specializing in nanotech-related investments (and a Motley Fool Rule Breakers recommendation), yesterday announced that it had participated in two large nanotech-related private financings.
The first involved a $2.5 million follow-on investment in Molecular Imprints, a world-leading manufacturer of nano-imprint lithography equipment, which has already sold some of its equipment to Hewlett-Packard (NYSE:HPQ) and Motorola (NYSE:MOT). The second $1 million investment involved Kereos, a St. Louis-based company that's developing targeted therapeutics and molecular imaging agents to detect and attack America's top two killers -- cancer and cardiovascular disease.
In the case of Molecular Imprints, the semiconductor industry is now operating at the 65-nanometer range. Within a few years, it will need to operate at the level of 20 nanometers. Molecular Imprints will undoubtedly face a good deal of competition in the race to offer practical solutions at this nanoscopic level, but at present I don't see any other company capable of offering the resolution, speed, or low cost Molecular Imprints is promising.
Harris & Harris' payoff for its investment in Kereos, like Molecular Imprints, is also a few years away. In the case of Kereos, this is because many of its products have either not started clinical trials or are still in the early stages, with regulatory approval off in the distant future. However, if its MRI agents can detect cancer tumors or unstable plague (a leading cause of heart attacks) earlier than today's best treatments, the payoff will be significant.
I'm bullish on Harris & Harris because many of its portfolio companies have already attracted the attention of major corporate partners. For instance, Motorola has invested in Molecular Imprints, and Genentech (NYSE:DNA) and Royal Philips Electronics invested in Kereos. And it's these corporate partners that will ultimately help TINY's portfolio companies succeed by offering them a clearer path to commercialization.
A few weeks ago there was an excellent post of the day that offered a dissenting opinion on TINY and explained why the company is overpriced and, therefore, an excellent candidate to short. I disagree with the author's assessment, but I strongly encourage anyone who has invested in TINY or is thinking about so doing to read the post because the analysis is solid and well thought out.
Investing in such promising nanotech companies is exactly why TINY remains a Rule Breaker. Of course, there's always the possibility that the technology of these portfolio companies will not work as promised, or that a better technology will come along. But if you believe as I do that the semiconductor and pharmaceutical industries are moving toward the nano-scale, its investments in Molecular Imprints and Kereos make TINY a good way for individual investors to make a play in the field of nanotechnology.
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Jack Uldrich has been thinking small since grade school. He is the author of The Next Big Thing is Really Small: How Nanotechnology Will Change the Future of Your Business and can be reached at [email protected].Jackdoes not currently own shares in TINY. The Motley Fool has an ironclad disclosure policy.
