Friday, April 19, 2013

Water deals

It's been said that water is the new gasoline--I hope not, it will be hard to drink. ;-) I am a big believer in water investments; in the US we pay a fraction of a penny per gallon of water, while in the rest of the world it is priced by market forces--many times higher than here. As it did in telecom, deregulation will hit this industry and fortunes will be lost and made. In my real estate investments I have a partner who has been in bottled water for years, and is seeing a disproportionate escalation of water-related real estate values (i.e., land with springs and no waterfront). About 10 years ago I helped a friend with a European water bottling outfit differentiate his product using laser marking--there’s a stretch of technology. ;-)

In China and India, clean water is on the top-10 list of key infrastructure needs for the future. Coming from Australia, which is almost always in drought, I have a keen appreciation of how critical water is. Israel is a source of exceptional water-related technologies because, as with most things, need drives solutions. So far I have seen quite a few water deals, but I am having trouble finding the killer app/technology. There are membrane technologies that filter the water, specialty plumbing systems that recycle gray water and use it for non-potable applications, and there are software suites that model and optimize flow. It's a really large and fragmented industry; it's hard to make sales and they are usually consultative and long, with slow-moving technology adoption. Sound familiar?

So we laser jocks or telecom experts should be good at this area…maybe.

So many of the areas we plan in have this same characteristic, but the water industry exacerbates all the usual obstacles to selling for a startup: you are small and they take a long time to make a decision (you may burn through two rounds of financing before they put you in a field trial). If you win the field trial, then you have to support it, and if you get a design win, then you have to convince them you can supply and you'll burn through a third round of funding just doing that. But then you can ride the wave. :-)

There are some great, venture-investible technologies that help the water ecosystem, despite its fragmentation and selling difficulties. Acoustic leak detection systems using sonar, fiber-optic pipeline monitoring, unique algaes and chemicals that simplify and improve water purification, and also new electrolytes and electrode materials that make electrolysis easier to separate H2 out of water driven by solar energy. As with Palm Oil, water may be seriously undervalued--but we had better hope people don’t start turning it into energy for fear of making life's vital quantity-priced like gasoline...

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