24 January 2011

Water Investing on the Brain

Impact of water in a water-surface
I've got water on the brain these days. Especially water investing opportunities. In part, because I'm moderating a panel on water investment this week.

The panel is a mix of private and public market experts, including Judson Hill of NGP Global Adaptation Partners, William Brennan of Summit Global, Kevin Brophy of Meidlinger Partners, and Karl Kyriss of Aqua America. 

You can register for the event, which takes place on Thursday, January 27th, 11:00-1:30 PM, in Philadelphia, here.

One of the topics of our conversation will be the perceived barriers to entry in water investing.

Many investors simply don't understand the water space and that keeps them out.  Some feel the barriers to entry are too high.  For example, here are three things commonly heard:
1.) "The water business is too fragmented to allow new technologies to scale."
2.) "Water is a highly conservative, public sphere" – even investor owned utilities seem to have that stigma – and "the sector lacks innovation and money."
3.) "Water technologies take too long to be adopted" in the sector (thus, water doesn't fit well into the typical VC model).

While water is a $500 billion/year industry, it garners a little over $120 milllion in venture capital funding, according to Global Water Intelligence.  This can only grow if investors are educated to reduce their fears of getting their feet wet in water investing.

And like the surge in energy interest over the past decade, I think interest and money will eventually flow into water and flood over time. (Pun intended.)

Increased awareness about water shortages and scarcity is driving innovation as everyone looks for ways to use water smarter and more efficiently.

Other innovations that seem poised for potential investment include desalination, water management devices, reuse and recycling, filtering, leakage sensor technologies, and agriculture.

Demand for clean water in developing countries is on the rise – and will be increased if climate change impacts snow pack, glacier-fed streams, and aquifer recharge.

Water is getting more expensive and is increasingly being seen as a valuable commodity rather than a cheap, easily dispensable resource. As a colleague in the space said to me a few weeks ago, most of this is being ignored by the investment community other than a handful of big players. 

And most of those are not based in the US, with the recent exception being some of the biggest names in the VC business: Khosla, Kleiner Perkins, and Draper Fisher Jurvetson. 

Assuming others will try to catch their wave, Jud Hill may be right in saying that "Buckets, buckets of money" can be made in water," as he told a meeting of bankers and investors in Geneva last November.

The event is jointly presented by Cleantech Alliance Mid-Atlantic and the Greater Philadelphia Alliance for Capital and Technologies, and sponsored and hosted by MorganLewis.

(Disclosure: I am a co-founder and board member of the Cleantech Alliance Mid-Atlantic, a business network for cleantech professionals.)

Enhanced by Zemanta