When Will Venture Capital Dip Into Water Investments?

Published on September 19th, 2009 | by

Venture capital has been flowing into green energy and cleantech for decades. While it was a trickle at first, recent focus on technology as a way to do something about climate change and the growth of green businesses shows that the ecological need and the economic opportunity are creating a delta of green investment. But when will this venture capital begin flowing into water issues and technologies?

Photo Credit: tyskis When Will Money Be Invested In Water?
When Will Money Be Invested In Water?

According to a 2007 Earth2Tech post about the state of water investment, Stephan Dolezalek, managing director at VantagePoint Venture Partners, saw much uncertainty in the sector:

“We certainly have come to a perspective which I’ve heard echoed time and time again that says ‘We keep looking at water deals, we keep getting closer to pulling the trigger, but we haven’t yet made that first water investment.’…There hasn’t been a particularly elegant solution to some of these very tricky problems.”

Jeff Lipton, Managing Director of North American cleantech investment banking at Jefferies & Co., echoed Dolezalek’s sentiment:

“I think people continue to struggle with finding opportunities that they can invest in and participate in…I think that people have a hard time determining what the business model is and how companies will make money.”

2 years later, Steve Westly, Managing Partner at the Westly Group, a cleantech venture capital firm in Silicon Valley said something similar to Reuters:

“We have looked at a number of companies, and we have not seen one yet that is close enough to commercialization and that where we like to play. But it is just a matter of time- it is coming up quickly.”

On one hand it seems to be an issue largely of not knowing what constitutes a solid water investment. There are also political considerations in larger scale water investment or technology opportunities- rivers that cross borders or incredibly complex sets of local, regional and national water rights issues can make investment a cloudy proposition. The current controversy within the U.N. about whether access to clean water is a basic human right will affect how water’s political significance as well.

One major stalling point is that an innovative water technologies may address issues that could be solved by new legislation, making them risky investments.

“If I invest in a technology that is supposed to solve that problem, then next week a politician comes along and solves it through legislative change, then I am out of business,” said Dolezalek.

This may or may not be the case, but the fact that such a seasoned and successful venture capitalist is shying away from water technology investment because of policy possibilities is telling. Venture capitalists did indicate an interest in integrated technologies, like desalination plants run on solar or wind power.

“If you are able to do water purification with some kind of energy source that is not conventional, that could be an industry that is very strong,” said Steven Chan, chief strategy officer for Suntech Power Holding Co Ltd.

For my part, I can imagine neighborhood greywater systems for regions with drought issues or individual water purification systems for areas where rivers are ravaged by pollution or frequently carrying disease. After all, Water at a Crossroads tells us that “Half of the world’s hospital beds are occupied by children and adults suffering from water-related diseases.”

Certainly an issue worth investing in a solution for.

It appears it will be some time still before investors are ready to get their feet wet backing new water technologies, but while business treads water, the thundercloud of crisis swells.


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