May 06, 2004

nanoRisk

Another report which will definitely cause ripples is to be issued by one of the worlds largest reinsurance companies within the next two weeks.

Insurance companies like to quantify risk, it allows them to set their premiums. Good drivers of compact cars pay lower premiums than good drivers of Porsches, the reason being that driving a high performance sports car is inherently more risky. Even the worlds best drivers, Michael Schumacher for example, would pay more to insure a Ferrari than a Fiat Uno. (Before anyone asks, yes, Formula One teams are very interested in nanotech).

The report looks at the risk posed by nanotechnology and tries to determine whether nanotech is inherently risky. If so, then all the companies now claiming to be ‘nano’ may face a big hike in their insurance premiums.

But this raises a wider question, and one that we have been addressing for some time - Nanotechnology may have a finite shelf life as a brand.

Environmental groups and lawyers alike have already latched on to something called “the nanotechnology industry,” something that we have long held does not, and will not exist. Furthermore, it is dangerous to take businesses as disparate as Nano-Tex, IBM and BASF and lump them all together.

Why?

Well just consider what would happen if there were to be a nanoparticle related accident somewhere in the world resulting in deaths, chronic illness or babies being born with major defects. All the companies above are nanotechnology companies. So an accident at a previously unknown Chinese manufacturer of nanoparticles causes consumers to turn their backs on nanotextiles, wipes a few billion of the value of IBM, and causes Nanosys to pull out of their IPO.

Because of a label, ‘nano’ the widows and orphans, as well as the VCs and fund managers all lose out.

We then find ourselves in a scenario where insurers refuse to cover nanotechnology companies unless they have data showing their products are safe. VCs refuse to fund nanotech startups unless they can be sure there will be no potential liabilities, and the lack of insurance cover compounds this fear. The startups can’t raise the money to perform the safety testing and a whole range of diverse cutting edge technology companies get strangled at birth. Or they do in North America, Europe and Japan.

This is the reason the smart companies don’t put a nano in their name. We have been through this before with perfectly good companies tacking a dot com onto their names and getting wiped out in the mass cull of internet companies. After all the excitement of the late nineties, are there any ‘internet companies’ left?

Within five years, we won’t see many nanotech companies left, but we will see plenty of companies applying nanotech for commercial advantage.

Posted by Cientifica at May 6, 2004 10:00 AM | TrackBack
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