Assessing the potential for funding innovation in the water sector

By Thierry Noel, published in IDA Global Connections (September 2018)

“The people who are crazy enough to think they can change the world are the ones who do.” — Steve Jobs

These words of wisdom have always carried special resonance for me.

Innovation is fundamental to face the challenges and opportunities of our industry, to meet new requirements, provide better solutions to unarticulated needs, and bring to existing markets better technologies, products, services and business models. In a fast-moving and globalized world, entrepreneur-led start-ups are a growing source of innovation in all industries.


So, how is the water industry doing in supporting its entrepreneurs? It is a known fact that venture capital is pulling back from the water sector. The number of cleantech-focused VC  companies is thinning. If you are a non-digital start-up, you will probably have a hard time capturing VC interest.

Water represents less than 20% of the cleantech funding market. Capital deployed for start-ups in water is typically less than $100m per year for between 30 to 50 deals. If you look at the total venture capital pool, water represents less than 0.2% of it.


If you believe that the amount of funding in an industry reflects the innovation taking place in that industry, the conclusion would be that there is no innovation in water – yet we know that is not true.

Surprisingly, our entrepreneurs have done reasonably well. An interesting analysis published recently by Global Water Intelligence looked at how the Artemis Top 50 start-ups of 2011 are doing today in 2018. Out of 45 companies, 10 are successful having provided an exit or having reached an estimated +$50m valuation. Another five are doing OK, and the rest are dead or barely breathing. In other industries, nine out of 10 start-ups fail, so well done to our entrepreneurs!

Does the water industry therefore attract funding? Despite its being a large, growing and global market with strong drivers and good entrepreneurs, it does not.


As we raise funds for start-ups, we hear repeatedly that the industry is too risk-averse, has no incentives to innovate, that the sales cycles of the water industry are too long, that hockey stick curve revenues in water are not real, and that business plans and cash needs are usually underestimated.

Unfortunately, it is all true. We estimate that it takes as much time to take a technology start-up though the valley of death and across the chasm to become commercial success in water, as it does for the pharma industry to put a new drug on the market.

As a consequence, we are finding that the industry brings almost no funds for Series A fund-raising, a bit more for Series B but just a bit, and not much for Series C. We are experiencing this as I write these words, while raising funds for a game-changing start-up that is bringing to market the first large scale UV-LED solution to the municipal and industrial market. We all have LED lights at home, and all our plants will have UV-LED tomorrow. There is excitement from investors, but unfortunately, most of them are coming from outside the water industry.

Another interesting source of funding for innovation and entrepreneurs is corporate venture capital. The intensity of corporate venture capital in an industry is seen as a good indicator that an industry is leaning into a different future, one where corporate cash is enabling innovation and positive outcome for clients and society.

According to the Global Corporate Venture Symposium, there are over 1,300 corporate venture units. In the water industry, we have only counted three: Suez, Danaher, and Dow!  Thankfully, several corporate ventures of companies whose core business is not water are investing in our industry. Amongst others they include Total Energy Ventures, and BASF Ventures, which did very well with NanoH20. Saudi Aramco Ventures has invested in Oxymem, ALIAD (Air Liquide) in Water Planet, Unilever Ventures is supporting Voltea, etc.

Water is a big topic. It is one of the largest industries at over USD$900b and it is growing. Innovation has huge potential impact. So how can we collectively fix this funding gap for innovation and better support our innovators and entrepreneurs in accessing funds, accelerate the long and arduous commercialization phase, and provide a well-deserved reward to them and the investors who have backed them? This is one of the missions we have set for ourselves at Amane Advisors. The return on innovation will always outweigh the risks.


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