TSG

What is your definition of nanotechnology?

At Alameda Capital, we view nanotechnology as the commercialization of technology that takes advantage of unique phenomena that exist at the atomic and molecular scale, giving rise to new and useful properties at the macro scale.

By your definition, how many nanotech investments have you made to date?

As we have not yet completed the fundraising for our fund, we have not yet made any investments. We have reviewed over 100 investments that fit our nanotech definition to provide feedback to entrepreneurs and other prospective investors, and to refer entrepreneurs to other sources of capital.

In a typical investment, are you the Lead Investor, Co-Lead, or part of a Syndicate? How is each role different from the others?

Many if not most companies involved with nanotechnology tend to be early stage, since much of the nanoscience research has taken place in the last few years. Because of the significant operating and entrepreneurial experience of our partner group, we have the ability, interest and expectation to lead a significant percentage of early stage investments we make -- perhaps 30-50%.

As things stand today, which nanotechnologies will you likely invest within the next five years, and why?

We are currently excited about a number of sensor and imaging technologies for security and medical diagnostics, new display technologies, next generation semiconductor devices (first memory and later logic), and certain alternative energy technologies.

How many new investments do you anticipate in 2005?

We anticipate making 4-6 investments a year, starting approximately mid-2005.

What is the typical initial investment size or range?

Because we are willing to consider investments at an earlier stage than many venture capitalists, we expect our initial investment to be as little as $200 thousand, or as much as $1.5 million. If more is needed at the initial investment stage, then we will typically seek to syndicate the deal.

What is the typical total investment size or range?

Our typical total investment in a company will be on the order of $4 million. In almost every case, we expect there to be multiple investors over multiple rounds, so the total funding for any one of our portfolio companies will be much greater.

What are the typical sources for deals? Outside referrals? Referrals by associates? Conferences & events networking? Blind submissions by Internet or mail? Other

We have an extensive global network of scientists, entrepreneurs, venture capitalists, angel investors, limited partners, consultants, lawyers, accountants and bankers who routinely refer prospective portfolio companies to us for consideration. We also evaluate many opportunities that come to us as a result of our extensive conference speaker schedule and media coverage.

What is your desired realistic time to liquidity?

Ideally, 3 to 6 years, with many around 5 years. This timeframe is driven by the kinds of returns that limited partners have come to expect over the ten-year life of a typical VC fund. It also gives us an opportunity to work with a management team over a number of years to add enough value to have an attractive liquidity event. There will be, however, some great opportunities we will have to pass on simply because the gestation period is too long.

Regarding due diligence: do you complete it in-house or use outside consultants for technology? Markets? Other?

Primarily in-house, which includes our Advisors. For technical due diligence, we have an extensive Scientific Advisory Board comprised of world-class experts in various nano- and convergent technology disciplines.

WIn your opinion, what is the single most important factor in investing? Entrepreneur? Team? Technology? Market? Investors? Other?

Definitely team. Any experienced entrepreneur or investor will tell you it is rare for the technology or the business to evolve according to plan. Management teams that have the passion, intelligence and teamwork to realize their vision will find a way to evolve their technology and adapt their strategies, plans and organization to make it happen.

Typically, what is your contribution to companies with whom you invest? Team Building? Strategic Alliances? Sales? Marketing? Strategic advice? Keep CEO focused? Other?

We help entrepreneurs build great success stories by providing a broad range of support. I've attached a description below of how we do that from our web site.

We Start with Experience

We are highly experienced in all phases of growing a company -- from concept, seed, and through all growth phases, private and public. We have worked with companies when the challenges appeared almost insurmountable.

We are Dedicated

Our Principals are dedicated to the premise that they will be proactive, and focused on a small number (maximum of 5-7) portfolio companies where we have a board seat or are a lead investor.

We have a Global View

Our broad and diverse experience leads us to have a comprehensive and global outlook on the prospects for growth of our portfolio companies. Our awareness of the timing of different opportunities around the world

We are Strategically Focused

One approach to globalization, particularly for small, fast growing companies, is through strategic alliances with foreign companies. We believe this is a critical element in the growth plan of most companies that are poised for global leadership.

Other Intangibles

Paradoxically, some of the aspects of a relationship that are most valuable are often intangible. For example, when the young CEO of a portfolio company is faced with a critical decision and a short timing fuse in which the decision must be made, he or she will want to have immediate access and mind-share from his or her board members and trusted advisors.

Connections to Large Corporate Customers

Most start-ups related to nanotechnology need to sell to or sell through major corporations as opposed to end consumers.

Overall, what do you like about nanotech as an investment area?

Nanotechnology, if commercialized on a timely basis, has the potential to transform large existing markets. It's usually not about creating new markets, although there is some potential for that too.

What advice do you give to individuals regarding investing in nanotech?

I assume we are talking about active investors in start-ups. Make sure you have access to the broad range of technology and commercialization experts who are needed to separate hype from reality and who can help predict true commercialization timeframe and capital needs.

What are some of the worst bits of misinformation when it comes to nanotech investing? Who perpetrates it, and why?

"Nanotechnology is too far out there to be interesting from an investment perspective." - this is too much of a generalization. Many areas of nanoscience research are indeed too early for venture investors with a limited time horizon.