Nanovation Technologies Inc. is about to announce a $30 million round of financing and a joint development agreement with Motorola Inc. (NYSE: MOT), demonstrating that it's bouncing back from setbacks in recent months.

Those setbacks have included the dismissal of its previous CEO, Robert Tatum (see Nanovation's CEO Gets The Heave-Ho), refocusing of development work to less challenging materials (see Nanovation Comes Down to Earth), and the resignation of its CFO, Melba Chan, announced earlier this week.

All of these developments reflect a shift away from Nanovation's original plan, which was to go for an IPO last spring. That never happened, partly because Nanovation ran into trouble developing chips in its chosen material, indium phosphide. Nanovation's IPO also got all tangled up in a lawsuit relating to backdoor investments via Stamford International Inc. (see Nanovation Prepares the Ground for an IPO)

Under its acting CEO and president, Bob Chaney, Nanovation has now decided to buckle down to some serious work. "For the next 12 months, we're not going to worry about the IPO," says Chaney. "The strategy is going to be heads down in product development mode. We'll come up for air when we've got products and customers to show people."

The latest round of funding will enable Nanovation to hold its breath. "Financially, the company is in great shape. We've got $45 million in the bank," says Chaney.

Nanovation is still focusing on developing optical chips according to specific customer requirements. Its first two products will be a customized splitter and a chip that integrates splitters, switches, taps, and couplers on one piece of substrate. These will be based on silica-on-silicon, similar to the material used by startups such as Kymata Ltd. and Lightwave Microsystems Corp.. Chaney says samples of these products will be ready by the end of this quarter and production will start by the end of Q1 2001.

Motorola's support for Nanovation is significant in two respects. First, Motorola is putting is money where its mouth is. It led the recent round of financing, chipping in $10 million of its own cash.

Second, Motorola's 36-month joint development agreement with Nanovation "emphasizes indium phosphide" according to Chaney. In other words, Nanovation hasn't given up on developing optical chips using this rare earth material, which is said to have some unique characteristics. In particular, both active and passive devices can be made in it, facilitating the development of complete optical systems on a chip.

-- Peter Heywood, international editor, http://www.lightreading.com