June 24, 2009 - Everyone’s talking water, but VC’S & Investors still not ready to take the plunge

H20 Boston’s first meetup event Wednesday evening was both inspirational and sobering. Hosted by Goodwin Procter, LLP, and co-sponsored by H20 Boston and Green Search Partner, the meeting kicked off to a packed conference room on the 2nd floor at 53 Street Street in Boston at 6:30 p.m. The VC community was well represented with Peter Rothstein, Executive-in-Residence, Flagship Partners and Michael Bevan, Managing Director, Element Partners on the panel. Representing the investment banking world, the panel included John Quealy, Managing Director of Equity Research at Canaccord Adams.

The panel also featured the founders of two recent success stories in the water technology segment, Una Ryan, CEO of Waltham Technologies in Waltham, MA, and Alan Cummings, CEO & Co-Founder of Vermont-based Seldon Technologies. Both Ryan and Cummings offered attendees a glimpse into the science behind their technologies, the hurdles to identifying and overcoming operational and regulatory obstacles, and the strategic market approaches for their products. Cummings revealed the value of a strong R&D group whose talent and wide-ranging experience can result in the discovery of products outside the teams’ original focus. Ryan delivered a powerful statement on the concerns VC’s and investors continue to have around water investments, in particular, the tremendous upfront capital expenditure for large-scale projects involving building new facilities and related infrastructure costs. However, as she offered the financial and operational details on water purification costs in the beverage industry there was a perceptive shift in attention from the audience. After all, it is a sobering moment when you learn how much water is used to produce one bottle of wine or one six pack of your favorite malt beverage.

While the VC panelists were not optimistic about the funding of new water technologies today, they all agreed on how water consumption by industries and consumers, if allowed to continue at its current rate, will be a major contributing factor in an imminent water shortage crisis for the United States. They went on to say that the acceptance of new water technologies in countries like China and India could serve as working models for the US and other countries. These models, if successful, can provide a platform for a discussion with the US government on the application of stimulus funds to subsidize the research and development of new water treatment innovations, and with regulatory agencies to begin educating consumers on necessary increases in water rates.

There were many takeaways from the evening, including discussing at what stage entrepreneurs need to engage government and regulatory agencies in conversation about the viability and application of their technologies (it’s never too early!), what are the most likely sources for funding (forget VC’s for now, look to angels, government grants, strategic partnerships with larger companies and licensing technologies), and be prepared to face a lot of skepticism from decision makers within public utilities and corporate heavy weights in the water industry. While there is no such thing as a magic bullet solution to slowing down water consumption by industries or consumers, the small incremental improvements in water technology are better positioned for scale up and commercialization as long as capital costs stay low and ROI is attainable and immediate.

The panel session concluded with presentations from six new water technology companies. Entrepreneurs were enthusiastic, and each offered compelling stories about their products and companies. We look forward to hearing more from them and we’ll be sure to track and highlight their successes here on our website.

Check back with us in September for information on the next H20 Boston event.