Turning Water Problems Into Business Opportunities

Turning Water Problems Into Business Opportunities

California Governor Jerry Brown recently imposed mandatory water restrictions to combat severe drought that “demands unprecedented action.” Many investors have grown familiar with the global trends changing in the way water is supplied, transported, treated and used. Those mega-trends, however, have not translated into much action from the venture community.

The current drought in California has renewed focus on the Silicon Valley’s role in providing new solutions. The good news is that the commercial market for water solutions is bigger than you might think, and that venture-stage companies in water perform better than many investors and entrepreneurs realize.

Where Is The Silicon Valley For Water?

Just a few hours drive from Sand Hill Road, California’s major agricultural production areas require heavy water use to sustain production. Water wells serving hundreds of families in the Central Valley have run dry, leaving people without water flowing from their taps.

Yet the Silicon Valley for water remains in formation. Water and wastewater companies receive only a few hundred million dollars of investment annually — about 1 percent of angel and venture capital. That percentage has remained relatively constant in recent years, despite increasing attention to water needs.

An ongoing debate simmers over whether water represents an attractive investment area for the Silicon Valley. Proponents say water is the next oil. Naysayers cite challenges to hyper sales growth for innovative water products and services. A recent New York Times article noted that “the water crisis simply may be a poor match for the Valley’s skill set.”

Water startups have performed better than many tech startup peers.

This article won’t settle the debate. There has been no Facebook or Google of Water, and perhaps there never will be. On the other hand, water industry segments differ wildly. It might prove hard for a water startup to achieve hockey stick growth if it sells, say engineering construction services for dams. The hockey stick might be realistic, however, for a startup selling data analytics on water to oil and gas customers.

In a large and changing market, water startups have performed better than many tech startup peers. Let’s take a look at some surprising data and some promising companies
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