Safer Water: Will Health-Conscious Consumers Push Innovation in Water Purification?
Government investment into water purification innovation was already on the rise, largely driven by increasing global industrialization and concerns over:
· Water scarcity
· Water borne diseases
· Aging global infrastructure
However, in the wake of COVID-19, we are witnessing growing concerns over various aspects of water filtration, including how municipal water is cleaned, what domestic filtration options exist and the importance of water security for sanitation.
Already, the EU has committed almost $17 billion to support global partners in the fight against COVID-19, $3 billion of which support research, health and water systems in partner countries.Cleantech Group expects investment into water purification and filtration solutions to continue.
Water purification and filtration services are becoming smarter and more efficient with greater capabilities. The market for water purification stood at $53.3 billion in 2016, with an expected 8.4% CAGR over the next several years. The market is expected to increase to $110 billion by 2024. Already, the EU has committed almost $17 billion to support global partners in the fight against COVID-19, $3 billion of which will support research, health, and water systems in partner countries.
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Business Models
Water purification and filtration technologies can be used for the domestic, commercial, industrial and municipal markets and each of these sectors comes with different requirements and customers. At every stage, government regulations are rigorous because water is a critical public resource. Innovators need to prove they can meet these standards.
Advanced domestic filtration solutions and Nature Based Solutions (NBS) for industrial and municipal water purification are two business models which have gained multiple investment rounds this year as health-conscious consumers are taking a greater interest in how their water is cleaned.
Purifiers for domestic use benefit from replaceable parts in lieu of replacing entire systems. Several companies have recently focused on offering this replacement as an additional service to maintain repeat customers. Companies have also started to offer subscription services for replacement filters.
Many companies focused on domestic water purification have emerged in Q1 this year with seed to Series A funding.
These include:
• March 2020: AquaGuidance, the US-based developer of virus reduction water purification technology, raised $3 million in seed round. The funding aims to support growth for its prototype gravity-fed filtration system which can remove live viruses without the use of chemicals, power, or pressure.
• March 2020: Second Nature, the US-based provider of water filter subscription services, raised $16 million in a Series B round, led by investors MANN+HUMMEL, IDEA Fund Partners, Multiplier Capital, Lead Edge Capital, Arsenal Growth and Bonaventure Capital. Funding is to help launch a new product range of home filters.
• January 2020: LARQ, the California-based developer of self-cleaning water bottles, raised $6.3 million in a Series A round.
• January 2020: Mitte, the Berlin-based developer of smart domestic water use and purification systems, raised $1.1 million in a Series A round. This funding round was via crowdfunding on Indiegogo and supported by Kickstarter. This takes Mitte’s total investment to $14.1 million.
• January 2019: Flo, the California-based developer of smart water monitoring and shut-off systems for residential use, raised $28 million, taking its total raised to almost $40 million. Investors include Plug and Play Tech Centre, Echo Capital, Crosslink Capital and USAA.
Cleantech Group recently spoke to Steve Kloos, Partner at True North Venture Partners, who explained ”commercial, municipal, and industrial solutions vary significantly depending on locality,” adding, “many water systems are digitizing, implementing smart monitoring and slowly shifting to membrane water purification.” In comparison to domestic filtration solutions, municipal and industrial solutions offer long-term cost savings over increased capabilities. Investors like True North Venture Partners opt for acquisitions over investments because the development stage for water innovators is long and difficult; therefore, innovators need on-going support, especially when trying to enter the municipal or industrial markets and navigating their significant regulatory barriers.
• True North Venture Partners acquired Nanostone Water, developer of long-lasting ceramic membrane technology in 2012. True North also acquired Solecta, developer of polymeric membranes (organic membranes) in 2014. Kloos described ceramic membrane technology as, “the future for suspended solids and pathogen removal necessary for drinking water treatment and pre-treatment to reverse osmosis.”
Other business models are advancing Nature Based Solutions (NBS) for water purification. Cleantech Group recently spoke to Attila Bodnar, Executive Vice President of Organica Water, the developer of attractive, garden-like nature-based wastewater treatment plants in urban and residential population centers. “NBS utilizing complex ecologies are more stable and resilient in providing water purification,” said Bodnar, adding,” people have greater trust in water treated by nature.” Organica Waters’ systems are particularly well-suited to growing cities as they take up significantly less space than traditional treatment plants and can be made into gardens, benefitting the local population with both well-being and biodiversity.
For urban water, NBS offer multiple benefits including flood and drought protection, as well as the improvement of urban microclimates and air quality. This ‘green’ infrastructure is increasingly emerging towards the forefront, in contrast to conventional ‘grey’ infrastructure solutions. The United Nations World Water Assessment Program, released in March 2018, focused on NBS water purification systems, outlining how they are essential “to improve the management of water resources and achieve water security for all.” This may explain why investment into NBS water purification deals continues to gather momentum.
Some recent NBS deals include:
• April 2020: THE.WAVE.TALK, the South Korean developer of small water-sensors using live bacteria and IOT to test for micro-organisms, raised $2 million is a Series A round.
• March 2020: Cadiz, the US-based natural resources company, received over $27 million in a Series A round as they enter into a partnership with public water agencies to deliver the Cadiz Water Project, which will create a new water supply in the Mojave Desert by preventing groundwater evaporation.
• January 2018: Organica Water, based in Hungary, raised $21 million in a growth equity round with participation from CITIC Capital, Idinvest Partners, Gamma Capital Partners & IFC.
Competition
The biggest challenge for innovators is surviving lengthy product development stages. Incumbents are careful to adopt innovation as they are operating in complex large-scale water solutions where any “down time” can be costly.
“The case for water investment is often difficult, especially in municipal scenarios, as water is an undervalued resource and regulation has stagnated,” says Kloos. “There is little appetite to invest in essential infrastructure upgrades, let alone innovation, unless scarcity or another problems forces change, and when change comes, it often comes slowly,” he adds.
When it comes to water purification, the process to getting technology recognized as safe can be very slow, involving numerous tests and regulations, which vary by jurisdiction. As a result, innovators often face long development stages, ranging anywhere from 5-15 years, just to get new technologies implemented.
Keep an Eye On…
Population growth, urbanization and aging infrastructures continue to stress our water systems. As a result, innovation into more circular models of water purification and filtration will be needed. The water ecosystem is digitizing, and smart water solutions are also gaining traction. Innovators are using sensors, software, and AI to prevent water loss, predict leaks and promote efficiency. Look out for Cleantech Group’s Sector Insight, “Smart and Circular Water,” which will examine these water options in greater detail. Holly’s report will be published in July 2020.
