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Nanotech frauds imminent, warns VC

Except the ones I've invested in, of course...

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Vinod Khosla, the co-founder of Sun Microsystems who wrote its first business plan, and one of the pivotal figures in Silicon Valley capital, has warned that nanotech frauds are on their way. The first IPO in the much-touted sector will shortly take place, with the flotation of Nanosys, a Silicon Valley company which has gained over $50m in capital and filed over 200 patents, as premature. For Khosla it's a problem that he can't evaluate what it's actually selling.

"When people start investing in a technology as opposed to investing in an application [and] when people start hyping a technology, you're sure to have bad things happen," said Khosla. He said the sector would "almost certainly" create a bubble.

"And whether they are doing it knowingly or unknowingly, there is a reasonably high likelihood that they will defraud the public market," he said, referring to Nanosys.

It's not that he thinks that nanotech is bogus. Far from it: he's invested in two firms and regards nanotechnology breakthroughs in computer memory and batteries as inevitable in the next few years. But he doesn't think companies should go to market without a product and he's dubious that old companies have been able to repackage themselves as fresh nanotech startups.

Nanosys itself has licensing agreements with Intel and Matsushita (Panasonic) to exploit its portfolio. Nanosys' CEO Larry Bock has a slash-and-burn reputation with startups: of twelve biotechnology companies he took public in 2001, four have gone bust and the not one of the remaining eight is making money yet. ®

A partner at Kleiner Perkins Caulfield and Byers, Khosla has invested in optical networking and silicon companies in recent years. You can find an account of his early years at Sun here - it's worth a hundred airport kiosk business paperbacks.®

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