Friday, December 8, 2017

Silicon Valley Wants to Solve Our Water Problems


Despite a ​lack of VC ​funds, ​there’s a ​steady flow of ​entrepreneurs. ​

Gary ​Kremen—​the founder of ​Match.com, ​former owner of ​Sex.com, and ​serial ​investor—​is into water. ​

The ​entrepreneur ​started ​investing in ​water tech ​startups a few ​years ago. ​Today ​he’s an ​elected member ​of Silicon ​Valley’​s ​water district , an ​agency that ​manages water ​and flood ​control ​for 2 million ​people. ​Earlier this ​year, he helped ​craft ​a proposal to build ​a tunnel under ​the Sacramento-​San Joaquin ​River Delta ​that could ​improve ​drinking water ​reliability for ​cities from San ​Jose to San ​Diego. ​

Following ​several years ​of ​investing in ​energy and ​solar startups, ​Kremen became ​attracted to ​water problems, ​he says, ​because ​it’s an ​issue ​that’s ​yet to be ​solved. “​Water is so, so,​ so, so hard,​” he says.​ “We need ​to focus on the ​hard things.​” ​

A small ​fraction of ​venture capital ​dollars ​currently goes ​into tech to ​manage or clean ​water. Analysis ​from research ​company ​Cleantech Group ​finds that ​total dollars ​and deal volume ​for water tech ​startups in ​2016 were down ​70 percent ​and 65 percent,​ ​respectively, ​from a ​peak in ​2013. Many ​water ​investments are ​now coming from ​family offices, ​corporate ​investors, and ​philanthropy. ​

But despite ​the investing ​challenges, ​there’s ​still healthy ​interest from ​entrepreneurs, ​who are ​drawn in ​by issues such ​as California’​s drought, the ​Flint, Mich., ​water crisis, ​climate change, ​and population ​growth. ​The number of ​tech accelerators ​focused on ​water issues ​jumped from 14 ​in 2013 to 26 ​in the first ​half of 2017, ​according to ​Cleantech Group.​

At the same ​time, water-​intensive ​industries ​looking to ​conserve ​resources ​and comply with ​regulations are ​increasingly ​turning to ​software to do ​so.

Robin ​Gilthorpe, ​chief executive ​officer of ​seven-year-​old ​WaterSmart Software Inc. , says he ​now sees “​a good steady ​flow of capital ​and entrepreneurs ​into the water ​sector.” ​His company, ​which was ​Kremen’s ​first ​investment, ​uses data to ​help water ​utilities ​improve their ​operations. ​

“Three ​years ago, ​‘digital ​water’ ​wasn’t a ​thing. ​Today ​there’s a ​lot of talk ​about it,”​ says ​Gilthorpe, who ​entered the ​field ​after a career ​in big data and ​analytics. ​

Silicon ​Valley even has ​its own water-​focused tech ​accelerator,​ ​ImagineH2O . The ​company began ​eight years ago ​and has worked ​with more than ​80 companies, ​including ​WaterSmart.​ ​Leveraging ​water data is ​one of the ​bigger trends ​for ImagineH20’​s companies, ​says its ​president, ​Scott Bryan. ​“​Entrepreneurs ​are applying ​what they ​learned in IT ​and biotech to ​the water space,​” he ​says. ​

Some argue ​that the ​greatest ​opportunity to ​invest in water ​is in ​industrial ​applications, ​not municipal ​water use. ​

The 50,000 or ​so U.S. water ​utilities are ​both highly ​regulated ​and ​conservative ​when it comes ​to buying and ​installing new ​technology.​ ​Gilthorpe ​of ​WaterSmart—​which does ​sell to ​utilities—​contends ​that these ​utilities are ​conservative ​with good ​reason. “​Water is so ​essential to ​life; you ​can’t ​take risks with ​it,” ​he says. ​

But even the ​market for ​managing ​industrial ​water has its ​challenges. In ​recent years, ​the oil and gas ​sectors have ​pulled back ​from buying ​tech that’​s used to ​manage ​wastewater. ​That has ​contributed to ​a drop in ​venture capital ​investment in ​water tech ​startups in ​recent years, ​say analysts ​at ​Cleantech Group.​

Some startups ​have managed to ​find buyers ​despite the ​difficulties. ​Earlier this ​year, ​Monsanto Co.-​owned Climate ​Corp. ​acquired a ​startup called ​HydroBio, which ​was using data ​to help farmers ​manage ​irrigation. ​Climate Corp. ​now offers the ​software ​to customers in ​Europe and ​plans to expand ​sales to ​farmers in the ​U.S.

“Water ​will continue ​to be a ​challenge in ​agriculture. ​Digital tools ​will help ​growers make ​more informed ​decisions,​” says ​Climate Corp. ​CEO Mike Stern. ​

Kremen has ​had more ​success than ​most with his ​water ​investments. In ​addition to ​putting one of ​the first ​checks into ​WaterSmart, he ​also backed ​Aquacue ​Inc., a leak ​detection ​company that ​was bought by ​Badger Meter ​Inc., as well ​as a water ​treatment ​startup called ​HydroNovation ​Inc., which was ​acquired by ​Taiwanese ​company ​KemFlo ​International ​Co.

Despite his ​investing wins,​ ​Kremen ​remains ​unusually ​focused on ​water policy. ​He plans to run ​for reelection ​to ​his ​district board ​seat in 2018. More