Water is fast becoming top of mind, joining oil as a precious resource, and carbon as something companies ought to pay attention to. A panel of water investors and experts discussed opportunities in water at the Investors’ Circle conference. My takeaway from the conversation is that water is a difficult (read: fragmented, inefficient, and complex) issue, but one that demands our attention and our intelligence. The panel featured David Zetland, a Postdoctoral Fellow in Natural Resource Economics and Political Economy at UC Berkeley, Brian Dunn, CEO of Growth Capital Services, and Dominic Kulik, founding Principal of Dakai Enterprises.
We just scratched the surface of the complexities of water. Panelists generally agreed the term “water market” is a misnomer, as we really don’t have any sort of market for water. Rather, monopolies rule, Zetland explained.
“Water is on a 10 year lag to alternative energy,” Kulik explained. Water is undervalued, and the system is inefficient. The field is begging for clear competitive mapping and analysis, but this does not exist as yet.
Water is difficult for angels to get involved in, Dunn commented. You need to get in early enough, or you’ll be dealing with project level financing.
A recurring theme at the conference was a focus on the local. Zetland stressed that water is a local issue – most decisions are made at the local level. For example, California has 1,200 water districts.
Kulik explained his interest in soft-path, rather than hard-path investment opportunities. Hard path describes infrastructure, which he characterized as conventional, energy and capital intensive. Soft path refers to alternative, appropriate, energy efficient solutions, which can mimic natural systems. When exploring the sustainable water investment opportunity landscape, Kulik is most drawn to the soft path solutions that treat water holistically, considering the full water cycle, such as local rainwater catchment systems for local land application and filtering water using natural elements like sand.
From what we know of the competitive landscape, water is dominated by giants like GE. But panelists encouraged entrepreneurs not to shy away, but rather to get in on the local and regional level, where most business happens, and where fragmentation and inefficiency have kept the giant players out. Dunn explained that water is “cliquish,” and biased towards engineers with the right name brands behind them. But water managers are risk averse because there is no penalty for incompetence in water management, Zetland noted, making the water space prime for breakthrough innovation in my opinion.