Water Incubators & The Entrepreneurial Valley of Death

valley of death

By Michael Warady

The water industry has long been considered one of the least innovative, most lethargic industries in the world. The reasons given for this particular reputation vary based upon who you are speaking with, but range from: a lack of innovative thinking by water managers, the necessity for deliberative action in an industry that is so critical to broader public health, to the belief that an industry led by ‘natural monopolies’ has no reason to take risks to improve customer service.

Regardless of the chosen answer, it is clear that in the United States, the water industry is in need of new technologies and processes to tackle the water quality and quantity concerns of today. From extreme droughts in the Southwest US, to historic floods in the SE, to emerging contaminants such as pharmaceuticals, our next generation of water professionals is going to need 21st century technology to tackle 21st century problems.

This is why water technology incubators must play a pivotal role in water innovations of the coming decades. Incubators are, today, popping up all over the world. From WaterStart’s pilot fund in Las Vegas, to Accelerate H2O’s role in Hurricane Harvey relief efforts, to Hutchison Kinrot’s seed fund in Israel, water incubators are fast becoming a network of water Meccas – drawing together water entrepreneurs from all over the world and providing them with financial assistance, office space, and the opportunity to quickly deploy their technologies to solve real world problems.

These vectors of water ingenuity accelerate an entrepreneur’s ability to validate a technology, develop proof or concept, create marketing channels to local municipalities, and do so in just 18-24 months. If a novel drip irrigation technology finds itself incubated at the WET Center in Fresno, Calif., builds a pilot, tests this pilot with local farmers, and proves that it is able to reduce water costs by 20 percent in the first year, the firm has suddenly gone from a start-up without any track record to a validated, de-risked, company with huge growth potential. Water investors need only speak to the customer ‘guinea pigs’ to determine the first steps in understanding the technology’s future growth potential.

Every day I have the opportunity to speak with water entrepreneurs from all over the world. These individuals, in response to current industry areas of interest – THMs, HABs, desalination, real-time monitoring – have developed hundreds, if not thousands, of solutions. But investors, rightly, are not willing to simply throw their money at any new technology that emerges as a cure-all. Venture capital and private equity aren’t ‘chomping at the bit’ to take on these technologies and deploy them to a multi-billion-dollar market because the risk is too high and the adoption timeframe is too long. Thus, the entrepreneurial valley of death has taken on a reputation of almost mythical proportions in the water industry, as thousands of entrepreneurs take their great ideas and eventually simply run out of cash as they wait for market adoption.

Increasing adoption and decreasing the ‘valley of death’ across the broader industry is going to require a concerted effort by several groups of industry players, and incubators have begun to fill the most important gap. Governments, in turn, must seek to increase regulatory enforcement and implement new regulations as needed.

Large water utilities must actively seek out opportunities to pilot newer technologies through slip streams and pilot sites in order to remain on the cutting edge of water treatment. And incubators must continue to grow and de-risk technologies through funding of pilots and outreach to potential customers. Financiers, then, must rid themselves of presuppositions related to ‘blue’ technology of decades past and begin investing into this sector at rates similar to the ‘green’ revolution.

When these industry players begin to work together, rather than in overlapping yet oftentimes contradicting platforms, it is clear that the industry will be able to take an immediate step forward in solving our current water quality and quantity issues.

 


Michael Warady is a project manager at aquaTECTURE LLC, a multi-strategy firm focused on water. Warady is responsible for investing growth-stage capital into proprietary water treatment technologies and the development of large-scale water infrastructure projects. He is also a board member of the International Desalination Association Young Leaders Program.

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