Palo Alto, CA-based Nanosys, the nanotechnology startup that has struggled to regain altitude after a high-flying debut in 2001, is switching on the afterburners this week.

To finance a move to a larger facility where it will have more space to manufacture its nano-engineeered materials for lighting and digital displays, the company is about to close a $25 million Series E venture round, with $5 million more potentially to follow by October 1, CEO Jason Hartlove told Xconomy on Monday.

Samsung, the South Korean electronics giant, is supplying $15 million of the new equity investment through its affiliate Samsung Venture Investment Corporation. The rest is from the company’s existing investors, and the $5 million second tranche is reserved for new investors. [Correction: In an earlier version of this paragraph, the second tranche amount was listed as $10 million.]

At the same time, Nanosys is announcing two other agreements with Samsung. There’s a multi-million-dollar licensing deal that will give Samsung access to Nanosys technology that could help it manufacture more efficent thin-film solar panels. And Samsung will also fund work at Nanosys to develop new quantum-dot crystals—the core of the startup’s technology for lighting enhancement—that don’t contain cadmium, a toxic element whose use is restricted in Europe and other regions.

The deals are critical ones for Nanosys, which wandered for years without a commercial product and brought in Hartlove as a turnaround CEO in 2008 (see this July 21 profile). The agreements give the startup more resources to expand into the two markets—displays and batteries—where Hartlove believes it can most quickly commercialize its own work, while at the same time allowing it to cash in on unexploited parts of its patent portfolio, particularly in solar technology. “This is a strategically important deal for us,” Hartlove says.

Gearing up to move to new quarters has been one of Hartlove’s highest priorities. The company has won a contract to supply the quantum dot phosphors inside the “QuantumRail,” a component that increases the brightness and efficiency of LED backlights for mobile device displays, to Korea’s LG Innotek, and is pursuing additional customers. That means it now has to make the phosphors in industrial quantities. But in its current location—tucked into a Palo Alto office park with burgeoning Web and software companies such as Facebook a stone’s throw away—the startup is “basically out of capacity, really footprint-limited and fire code limited,” says Hartlove.

The company will use the growth capital round to open a new facility in a larger industrial park. “It’s here, still, within the Bay Area,” Hartlove says. “We haven’t announced a site yet, but that’s what the new capital is for, the capacity expansion to meet our 2011 revenue goals.”

The next problem is an environmental one. Manufacturers of smartphones and notebook computers can use the QuantumRail technology to tune the frequencies emitted by the LED backlights in their liquid crystal displays, resulting in a far richer range of colors. But there’s a downside—the quantum dots, which are actually nanocrystals made of cadmium selenide. Cadmium is a controlled compound under the European Union’s Restriction of Hazardous Substances (ROHS) directive, and to sell the QuantumRail to manufacturers who market hardware in Europe and other regions that follow the ROHS limits, Nanosys will ultimately need to eliminate cadmium from its chemistry.

Hartlove says Nanosys has a way to do this. Essentially, it will get the same efficiencies out of future quantum dot crystals by creating graded layers of indium phosphide and zinc sulfide. But that’s a tricky process that hasn’t been done economically on a nanometer scale, and Samsung has agreed to help fund the necessary R&D.

Finally, Samsung is paying Nanosys for a license to nano-engineered structures that the company investigated with the goal of making photovoltaic panels more efficient at converting sunlight into electricity. When Hartlove joined the company in 2008 and reviewed its intellectual property portfolio, he chose not to pursue the solar technology for commercialization within Nanosys, because “it didn’t make sense to us to jump in when a number of other companies were already in product,” he says. But Nanosys did form a wholly owned division called QD Soleil around the solar patents, with the goal of either selling the division or licensing its technology. That’s what Samsung is doing now.

“Samsung has made an announcement that they are going to spend $20 billion to go into the renewable energy and green technology fields, and they have a very aggressive plan in solar,” says Hartlove. “They are looking to invest heavily in that area to try to catch up quickly, and by licensing some technology from us, they believe they can do that. It’s mutually beneficial in that it gives them access to good nanoscale technologies in terms of wavelength conversion and efficiency improvements that they are going to be able to put into their products as they bring solar panels to market. And for us it’s a way to see the technology actually get deployed in a field we were not planning to enter ourselves.”

As I recounted in my July profile of Nanosys, Hartlove spent part of his own career in South Korea, turning around a struggling specialty semiconductor company called MagnaChip and orienting it toward more mainstream customers. He says the relationships he formed in Korea laid the foundation for the agreements announced today.

“I have known Samsung senior management people since about 2003,” Hartlove says. “I have been dealing with a lot of the same folks now, through this process. Knowing the Samsung company culture and business culture and how they are approaching these markets has been very helpful in securing this deal.”

Wade Roush is a freelance science and technology journalist and the producer and host of the podcast Soonish. Follow @soonishpodcast

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