One thing we discovered in looking at the numbers, though, is that while the dollar amount went down in 2002, the numbers of deals stayed steady. So, venture capitalists, at least the smart ones who have been following nanotechnology for years, are not just blindly throwing their money at it. They've been researching, carefully investing and now, with the economy picking up and some of the technology ready for the investment phase, you're seeing this increase.

But the impression that VCs are falling all over themselves to get in on the nano action isn't really true.

Government money, though, is a totally different story — DARPA, NIST ATP, SBIR, the whole alphabet soup. It's really not the private sector that's boosting the industry right now. It's government spending. And that's a fairly normal phenomenon for an industry in its early phase. The government props it up, encourages it, gets R&D moving in the lab, helps it along into the startup phase, and then the Darwinian world of business kicks in.

Even there, though, startups can live to see another day primarily through government grants. And right now, the military is where the money is at. Shop your nanomaterial around and tell a VC that your superstrong, superlight nano-enhanced polymer would be useful for garage doors, and you might be shown the door. But go to DARPA and say it can help reinforce tank or aircraft or cockpit doors and can stop a speeding bullet, and you might have an easier time getting some dough.

The difference now, though, is that public relations people have taken over the business of nanotechnology, and so there's a perception that VCs just can't seem to stop blindly throwing their money at anything with the n-word as a prefix. That's what creates buzz and gets nano names in the news during evening drive times.

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