Water Technology Offer A New Frontier For Startups

By Mark Boslet

When it comes to clean-tech investing, water conservation startups haven’t produced a flood of success.

One company, Energy Recovery, went public in a 2008 IPO and several others have found M&A exits. But the list of liquidity events isn’t long.

Still, there may be more promise in the sector than venture capitalists commonly think.

That’s because of the law of large numbers. In California, for instance, 19 percent of the state’s energy is used to transport water from the north to thirsty southern cities and farm fields. Finding ways to move the water more efficiently could bring big benefits and substantial cost savings.

And while water is cheap, a lot of it is used in Central Valley agriculture and for the cooling of commercial buildings and data centers. So even modest steps at conservation can bring large rewards.

A small cadre of VCs play in the space, such as Will Coleman of Mohr Davidow Ventures and Victor Hwang of T2 Venture Capital. There is room for more.

Obviously “there are bigger fish to fry in the clean-tech area,” said Rick DeGolia, CEO of irrigation technology developer Green Wireless Systems, Tuesday at the SDForum sponsored “World Water Crisis: Technology Based Solutions.” “It doesn’t mean there aren’t opportunities.”

According to Coleman, some of those opportunities include filtration and membrane technologies for power generation and consumption. Smart metering is another area worth exploring, especially as water companies begin to implement tiered pricing with higher prices for larger volumes.

Improving the efficiency of data-center cooling is another spot were the demand for new technology could be high.

Water investing isn’t necessarily a perfect fit for venture investing, says Hwang. Companies can take decades to germinate and aren’t always fast growing.

What’s more, the lack of a national water policy means that conditions and markets can vary state to state.

But with VCs looking for new places to make financial bets, water technologies are a thoughtful option. With global warming threatening to disrupt natural water cycles across the globe, the size of the potential payback may be something no one can accurately predict today.