Despite our reverence for the cleantech venture community, the first quarter 2010 investment numbers speak nothing of the opportunity for water technology.
Water companies raised $65.6 million in venture capital across 14 deals, up 49 percent from the fourth quarter 2009, and continuing an increasing trend of investments since the second quarter 2009 (see Cleantech hits VC deal record in 2009).
To be clear, however, this share of cleantech venture funding is a mere blip in the quarterly total of $1.9 billion (see Cleantech VC reaches $1.9B in 1Q10).
When considering required investments in water efficiency technology, the venture story very quickly does not add up.
By some estimates, water conservation improvements will require spending in the amount of $50 billion to $60 billion annually over the next two decades. Private sector companies will account for about half of this, with the rest allocated to government.
Others have estimated that the global cost to fix aging infrastructure will total $40 trillion over 25 years. Included in this figure are the costs of pipes and concrete that support the delivery of water as well as natural water infrastructure such as wetlands, drinking water, and wastewater.
While infrastructure projects do not traditionally fall into the domain of venture funding, utilities could greatly benefit from a water smart grid that could bring visibility to and prevent the 25 percent to 30 percent world water loss that results from invisible leaks and bursts in water infrastructure. This quarter, for example, Israeli-based SPC Tech received funding for its smart pressure control system that prevents leaks (see Water analytics – yet another intersection of cleantech & IT).
The business opportunity in water conservation technologies across all sectors and global regions is immense. For food and beverage companies, the agricultural industry’s 70 percent share of global water use represents significant water risk exposure as their products are dependent on agricultural commodities (see The rise of water footprinting: sizing up current progress). To that point, Khosla Ventures-backed Solum, for example, received funding this quarter for its field deployable measurement tool that brings visibility to soil nutrient needs (see A week’s worth of waste).
While sustainable water resource management is expected to require a significant effort from all stakeholders, it appears as though visibility around industry players’ water pain points will be key in driving investments.
In the future, we expect to see water efficiency technology in the power industry driving venture investments. The nexus between energy and water requires the management of both resources in concert. This symbiotic relationship implies that an increase on one equates an increase in the other.
Mia Javier is a San Francisco-based analyst for the Cleantech Group.
