Drip, drip: Water startups slowly tap a glacial industry
By Jeremy Wagstaff, Reuters
A woman fills her pot with water after pulling it out from an almost dried well in Bhaktapur in this April 4, 2013 file photo. Picture taken April 4, 2013. Photo: Reuters/Navesh Chitrakar
SINGAPORE - Innovation in water hasn't been entirely glacial. But when startups try to sell their technology to utilities focused on ensuring a regular and clean supply of water, new ideas take a back seat to safety and reliability.
"Failure is not an option with water," said Cindy Wallis-Lage, who heads the water business at engineering and consulting company Black and Veatch.
The conservatism, however, appears to be easing, industry observers and players say. Some utilities have started to experiment with new quality sensors to improve efficiency as water becomes increasingly scarce. The World Health Organization predicts that by 2050 more than two thirds of the globe's population will face severe water shortages.
Reuters is hosting a climate change summit this week, interviewing executives across a range of industries about changes they are making now to cope with effects such as dwindling resources and extreme weather.
As businesses are forced to change, technology offers ways to conserve water and improve efficiency.
The primary beneficiaries are startups focusing on data analytics plugging sensors into pipes, filtration systems and pumps and crunching that information to better monitor water quality, reduce leakage or measure usage.
Israeli startup TaKaDu, for example, has in the past few years found customers beyond commercial players to more conservative water utilities for its algorithm-driven analytics, said founder and CEO Amir Peleg.
"The industry is changing in the weight they put on software," said Peleg, who also chairs the Smart Water Networks Forum, a global industry grouping promoting the use of data technologies in water networks. "There's a limit you can put on devices."
This interest in data is in turn prodding industry mainstays which once just sold pumps, fire hydrants and valves to cobble them together with sensors and data analytics into so-called "integrated solutions". U.S.-based Mueller Water Products Inc (MWA.N), for example, last month received an award for its suite of water monitoring services.
That bigger players are now making the case for smarter water networks helps startups like Singapore-based Optiqua Technologies, which offers both sensors and software.
"If it's not the utilities then it's definitely the industry that's starting to see this, and is making investments in this area, and that's important for us," says managing director Melchior van Wijlen. Two years after commercially deploying its first sensor networks Optiqua has clients in Europe, Asia, South Africa and North America.
But those startups focusing on the treatment of water how to make it drinkable or suitable for disposal have had a rougher ride. There the business model remains more traditional and the field more crowded, forcing startups to improvise.
One problem is that many of these treatment technologies come out of university labs, where commercialization may be less of a priority. Singapore, for example, is one of the world's centers of water innovation and government funding places its two main universities, National University of Singapore and Nanyang Technological University, or NTU, at the top of Lux Research's league table of universities engaging in water research.
But not all those ideas can be absorbed by Singapore's national water authority, the Public Utilities Board. Some startups are therefore seeking an audience beyond Singapore's shores and being flexible about how the technology is commercialized.
Take, for example, Singapore-based boutique venture capital company New Asia Investments, which invested in a NTU spin-off that had developed sensors to monitor membranes.
Membranes are materials that filter out unwanted material from water, usually combined with biological treatment to create the membrane bioreactor, now one of the most established ways to treat wastewater.
In trying to find customers for Membrane Instruments and Technology (MINT) they realized that what potential clients in places like Vietnam really needed wasn't so much sensors as usable water away from the big cities.
By using MINT's integrity sensors they set up another company, De.Mem, and are now building small-scale treatment plants and pumps where there is a shortage of fresh water in a small industrial park, for example. The sensors can replace expensive or hard-to-find on-site engineers and make the operations more efficient. De.Mem has completed three plants and has signed deals to provide two more.
"Selling the sensors is an option," says director and partner Andreas Kroll. "But taking over the operations is a more attractive model."
Another membrane-related spin-off has also been forced to adapt to the ways of the market. Nano Sun founder, Darren Sun, has been studying membranes for 17 years, but it was only after taking on former DBS and Nomura banker Ann Chai Wong that his 3D printing membrane technology has found a foothold.
After government funding from 2005 ran out, they eventually raised money from private sources, and Leader Environment Technologies (LETL.SI). "We're not going to make the same mistake as last time where we spent all of (the funds)," says Wong. "We're trying to deploy some of our solutions." Clients so far include one in Indonesia, and pilots in China.
Getting paying clients will be key, says Paul O'Callaghan, who runs an Ireland-based consultancy called Blue Tech Research. "One of the challenges of these companies is that they need a lot of money to get them over the hurdle," he says.
While those who need less than $10 million will likely find suitors, others who need much more than that will struggle. "If it takes that much to kick-start things and get it up and running, that makes it a capital-intensive business."