Optiva liquidates: Nanotech’s first big fameout?

Optiva, the nanotech company that developed a way to laminate flat-screen television sets, is shutting down and selling its assets after failing to raise additional financing, according to VentureWire today (sub req). It carries some lessons for all, both venture and individual investors.

We’re not aware of other major nanotech failures thus far, in this sector that is all the rage — though granted we haven’t followed this too closely. Founded in 1997, South San Francisco’s Optiva was among the more mature nano companies, and ate through $41.5 million in venture capital along the way, including from folks like JPMorgan Partners.

Here’s what happened….

Like most other nanotech companies, Optiva took a while to get its product out. It shifted focus, its technology changed, as did the market. Its “polarizer” technology was supposed to be sold for use in wrist watch, calculator and PDA displays, but as VentureWire reports, suddenly the people who already made the displays found a glut of scrap material, which was also suitable, thus resulting in a rapid drop in market prices.

Markets can change, and they will change. Two years ago, Elizabeth Corcoran of Forbes reported that JPMorgan Partners had taken 18 months to survey 300 nano business plans and invested in only one: Optiva. That’s quite a bit of research by an investor. The assumption at the time was, coating liquid crystal displays for flat-panel sets or computer monitors cut enough steps out of the old laminating process that it would mean major cost reductions in all kinds of products. “This is real industry, not a dot-com phenomenon,” Peter Grubstein, managing partner of Ngen Partners, told LA Times readers two years ago. His venture firm also backed Optiva. But wait, what about all the other competitors who saw the same thing? Forget scrap metal, which turned out to be good enough. Look at all the other nanotech companies in the display sector. A year ago, PE Week’s Carolina Braunschweig didn’t take long to list several other players: Eikos, of Franklin, Mass.; FlexICs, also in Silicon Valley (Milpitas); Southwest Nanotechnologies, a University of Oklahoma spinout; Polymer Vision, a Royal Philips Electronics initiative; Dow Chemical’s in-house patents; the list of others goes on.