Water Tech Market Overlooked Despite Drought

The water technology market is parched, even though analysts predicted that severe drought would promote free-flowing investment in this sector.

"Silicon Valley investors aren’t opening their pocketbooks for water and wastewater technology startups, despite California’s worsening drought and water restrictions imposed by Gov. Jerry Brown," Environmental Leader reported.

Investment is drying up, according to The New York Times. "New investments declined 39 percent last year to $358 million, and the number of deals fell by 42 percent to the lowest level since 2009, according to the i3 research group of the Cleantech Group based in San Francisco."

One challenge is that the water market does not tend to pique the imagination of Silicon Valley investors. "The Valley’s idealized image is of two partners toiling in a garage, developing a technology with the promise of delivering accelerating returns," the Times report said.

"But that model is a poor fit for the water conservation conundrum in California, where roughly 80 percent of the state’s water is consumed by agriculture. Water is still inexpensive, as well, which serves as another barrier to innovation," it continued.

Joel Makower, the chairman and executive editor of the GreenBiz Group, based in Oakland, CA, explained the conundrum.

“Silicon Valley has been talking about water technology since they started talking about clean tech, but there are no new big ideas,” he said, per the report. “It all comes down to the price of water. When it’s cheap, efficiency doesn't pay."

The most groundbreaking water ideas often come from Israel. "The sensor-based irrigation innovations that might have been expected to come from the Valley have largely come from Israeli entrepreneurs, as well as more traditional businesses like the wine industry and farming equipment, said Michael Kleeman, a sustainability specialist and a senior fellow at the University of California at San Diego," the report said.

In the US, new companies face systemic challenges in the water sector. "Those start-ups focusing on the treatment of water— how to make it drinkable or suitable for disposal — are having a difficult time. The business model there remains more traditional and the field more crowded, forcing start-ups to improvise,"Environmental Leaderreported.

As Reuters put it, "Water is the world's most abundant commodity. But for investors it tends to be a wash out."

Nevertheless, Amir Peleg, who has been dubbed Israel's water ninja, says he sees shifts in the water industry. He is chief of TaKaDu, a water-efficiency tech start-up. "The industry is changing in the weight they put on software," he said, per the report. "There's a limit you can put on devices."