Artemis Water Strategy

Water resilience for a thirsty future

Profiles in Utility Leadership: Who will drive the next wave of start-up success?

 

Water Energy Nexus Image- bulb_water-300x241Our research of the Artemis Top 50 shows that the biggest utilities leading the industry in research and pilots have not been the best customers for water tech solutions. For start-ups strapped for cash and driven to building a wide scale customer base, the biggest utilities can be quicksand in the march through the “valley of death” on the way to market.

The leaders in cutting edge research are the biggest utilities in the US. They have ambitious teams of researchers and large budgets for piloting. Unfortunately, purchasing new technologies often falls under a different team focused upon day-to-day operations. Budget for application of new technology is measured in years. Not a few of the most promising start-ups have proven their technologies, only to die waiting for these big utilities to buy product.

Many of the early leaders that we are seeing graduate from the Artemis Top 50 to scale revenues to $10M, $20M and beyond started with projects with small clients. Identifying the utilities and industry water users that are ready to act is a critical challenge.

At WEFTEC in October, and in a series of forums with its advisors, Artemis is defining the profile of first mover utilities.
-What is driving these utilities to adopt new solutions? Regulation? Infrastructure breakdown? Water scarcity?
-Who are the leaders within the community of mid-sized utilities that are prepared to act first within their region?

Please send us your feedback to help define the leading edge in utility management
.

Unbinding Water Innovation

America is falling behind in the race to build the “high tech” water economy that will drive economic growth in the next decade, according to Mike Dimitriou of Water Remediation Technologies. “We stifle innovation with too many roadblocks,” Dimitriou noted earlier today at the marquee conference for the water industry, ACE 13.

Dimitriou noted that the new wave of advanced water tech ”is coming at the right time because we face unprecedented challenges in preserving water quality, finding enough water for all our needs, reducing costs, dealing with aging infrastructure, and meeting the demands of a smaller and younger work force, as well as growing public concern and involvement.”

What are the watershed events that will be the tipping point for water tech?

Disaster scenarios have driven new tech into the US water industry, but there are other drivers simmering below the surface.

Most important, there will be the first great tech start-up success.  I saw the impact of the first runaway tech successes in Israel in the 1990s.   The inventor of the software firewall, Checkpoint, stands out as the start-up that lit fierce competition in the nascent Israeli software community. A year after it was founded, Checkpoint closed its first strategic partnership in 1994 .  Two years later, it was worth $3.5 B at its IPO.  Rather than champagne and great patriot pride, the mercurial success of Checkpoint’s uncorked the wrath of programming nerds in Tel Aviv.  The general response was “If those clowns at Checkpoint could sell $50 M a year, then my company can do twice as well.”

Once the bounty of a great start-up was concrete, fierce competition bloomed in the desert of Israel.  It wasn’t just the smug faces of the Checkpoint staff emerging from their shiny offices, or the fancy cars they drove away, it was meeting them at family weddings, or at a coffee house. Israeli men serve in their old units on reserve duty several weeks a year, so the men who wanted to compete with the founders of Checkpoint had to suffer the pain of working side-by-side with them for weeks. Programmers coveted the success of the founders of Checkpoint.

During the 1990s, dozens of Israeli start-ups broke through the “glass ceiling” that had held back Israeli tech companies for decades.

In 2012, The Artemis Top 50 charted over 100 high potential start-ups.  We are waiting to see the first Checkpoint of water tech spark a new age of leadership in water.

Why Now?

Two questions that tell us when the time has come for high-tech water
Water technology is destined to be one of the great tech investment opportunities of the next decade. With a limited amount of water on earth, the population continues to grow while businesses develop.  Investing in water is emerging as one of the most promising real assets for investment.

But early-stage investments in water technology start-ups to date have not reflected that promise.  Recent analysis by Bessemer Venture Partners showed that of 183 firms that had invested in water, all but 31 did not make an additional investment, and only seven made more than two investments.  Historically, water has accounted for only 2-5% of overall cleantech investments. The few water tech investments that have been made have yet to yield venture quality returns.

The best venture investments were made when technology markets have looked as water does today.  Water services are highly regulated.  The business of water is dominated by a few behemoths.  Major customers choose the most well proven solutions and work with the same service firms that they have worked with for decades.

Similarly, twenty years ago telephony meant a landline, not a diverse industry of wide-ranging options, from cellular and Voice Over IP to satellite.  Before the communications revolution, “messaging” was done by fax or the US Postal Service.

The trick for early-stage investors is to identify the moment in which technology can bring about a new era of water management.

In five years, venture capital history will tell of a few visionary investors who identified the right technology at the right time in the market.  The best investors are asking two questions to define whether now is the time for the future water tech leaders to emerge, and where the critical opportunities lie to drive start-up success.

1)    What recent scientific or engineering breakthroughs have redefined how well a technology solution can tackle critical problems?

Some examples are new polymers for selective absorption of pathogens, hydro fracturing, which has made significant domestic shale gas reserves economical for drilling, new chemical/pathogen detection capabilities that are driving to new regulation.

 

2) What market forces are changing to raise the value of a tech solution?  

In the past few months, water scarcity, pollution and infrastructure breakdown have been forcing the most conservative water users to seek out innovative approaches.

Even Texas is limiting the amount of water for drilling for oil, or “Texas Tea” so that it provide water for its citizens.

 

Following Up with 2011 Winners

Continued Success by Top 50 Water Tech Competition Winners

Final applications for the 2012 Top 50 will be sent out to the jury this week, who will soon begin to evaluate water tech companies based on their technology, application of that technology and business viability.  Last year’s winners have achieved much success since the awards- let’s take a look at what kind of crowd this year’s applicants are hoping to join.

Epuramat was named a 2012 TiE50Energy/Cleantech Winner and a 2011 GoingGreen Global 200 Top Private Company.  They secured a number of new contracts and released a new model of their containerized wastewater treatment plant, Box4Water.

Hydrovolts is on its way to becoming a go-to technology in international development; it was named a Top 10 Innovator by Launch and has been nominated as a 2013 World Economic Forum Technology Pioneer.

NovaThermal Energy LLC, marketing a sewage geothermal system, was selected as a Global Top 30 semifinalist by Global Cleantech Cluster Association.  This spring, NovaThermal was awarded its first contract in the United States, a story that was covered by Erica Gies in Forbes’s Green Tech.

Read this blog for more success stories or view a complete list of 2011 Top 50 winners.

Chris Morrison on Business Viability

This morning, Chris Morrison, VP of Strategic Sales at Nalco, an Ecolab company, spoke at the Top 50 Fellows’ Forum.

Chris is the Chairman of the team of judges assessing the business viability of the companies contending for the Artemis Project’s Top 50 Water Tech Awards.  He led a discussion on what it takes for promising water tech start-ups to grow and lead the industry.

To assess and predict business viability, Chris explained that he examines how companies articulate how they go to the market, the market analysis, the sales force, the team, and a company’s potential to differentiate their product line.

Many start-ups that have had successful initial product sales are not able to maintain momentum and grow from “emerging” to “succeeding” if their business plan and marketing are not executed properly.

Chris, like many others, is also dubious of companies stuck in the “valley of death” before hitting the market; ones that have not moved forward from pilot testing after many years may not be good at making money.

Instead, Chris used Nalco as an example of how new investments and product introduction to market should look.  At Nalco, everyone with an idea is invited to present a product proposal, of which a few are given money for bench-work testing.  After proven pilots and a complete market analysis, more financing is provided for a full-scale pilot.  If successful, they identify every potential customer in order to anticipate production details and profitability.  Chris emphasized that all of this moves very fast.  Although there is a big difference in Nalco, a large company constantly looking to invest in R&D, and a startup with one great new idea they are attempting to bring to the market, the same principles for success are necessary.

Chris will be evaluating the business viability of Top 50 applicants, along with Peleg Chevion of Syngenta, Reinhard Hübner from Skion, and HP Michelet of ERI.  Other experts in the field will assess companies based on their technology and their application, and a list of the Top 50 Water Tech companies will be compiled from their analyses.  The Top 50 winners will be announced in September.

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