Imagine H2O and Babson College hosted a successful workshop on “The Water Efficiency Startup” on Friday September 2009 at Knight Auditorium at Babson College.  The workshop was attended by over 120 students, faculty, entrepreneurs and members of the business community.  Notes from the two panels at the event are summarized below:

Panel 1 – The Water Startup

Moderated by Tamin Pechet, Catamount Ventures, Imagine H2O

What is the market opportunity?

• Market size (Heather Landis, Lux Research) – $522 B estimated in 2007
  • 74% Services
  • 12% Equipment

• Most attractive opportunities:

• • Heather Landis, Lux Research -
    • Desalination for equipment manufacturers:
      • 9.8 B cubic meters to 18.1 B cubic meters from 2000 to 2008, expected to grow to ~ 50 B cubic meters by 2020
    • Water information technologies – to facilitate recovery of lost water
      • Current market size ~$200 M

• • • Example: Derceto (New Zealand) – develops software to optimize how pumps are run, to save municipalities or companies 30% on their pumping energy costs
  • Erik Schoepke, GE Power & Water
    • Desalination growing on average 10% (17% last year), slowed slightly this year to 10 or 12%
    • Wastewater treatment & reuse
    • Energy recovery technology – example: finite element analysis to figure out how to raise efficiency (energy recovery devices)
    • Specialty chemicals/’green chemicals’/smart membrane technology

• Trends:

• • Increasing private ownership of waste water treatment facilities

What got Una Ryan, Waltham Technologies excited about starting a water business?

• Opportunity to leverage experience in health care to new markets
• Value proposition of turning wastewater into clean water and clean energy

• • Approach is to deal with wastewater sources – beverage industry in particular – treat their wastewater with cyanobacteria and produce enzymes and oils that can be transformed into biodiesel
  • Typical customer is a craft brewer with production from 15K to 2M barrels per year.  Beer industry wastes 5x as much water as they sell as beer.
  • Process reduces water treatment costs, especially fines and surcharges
  • If wastewater treatment costs a company $500K, Waltham Technologies charges them $250K – immediately saving customer 50% and making an 80% margin

Why did Eric Stoermer, Environmental Operating Solutions move into water?

• Didn’t intend to go into water – met a board member in an existing company
• EOS develops and markets green chemicals for the removal of contaminants in waste water
  • 275 customers in 3 segments:
    • Decentralized (small facilities, e.g. Gillette Stadium which has its own sewage treatment plan)
    • Municipal (largest of wastewater business, 25-30 customers including Fairfield CT, Jacksonville)
    • Industrial e.g. GE, Siemens

What is Brad Sanderson (BISCO) excited about in irrigation water conservation?

• Water management systems using smart controllers and water recovery processes

What type of acquisitions interest GE? – Erik Schoepke

• Membrane technology
• Environmentally safe chemicals i.e. chemicals that decompose in nature
• Technologies that increase energy efficiency of existing processes within GE

What problems need to be addressed by entrepreneurs? – Heather Landis, Lux Research

• Increasing efficiency of products, even if incremental – recovering more water and reducing the amount of energy required

What’s the biggest challenge?

• Una Ryan, Waltham Technologies:
  • “Getting the message across” – it makes sense to limit use of fossil fuels for treating water and to use water more efficiently
    • The limited energy requirement of Waltham Technologies’ process is part of the sales pitch
  • Early financing is difficult, particularly compared to health care – the clean energy sector has taken the lion’s share

• Eric Stoermer, Environmental Operating Solutions:

• • Slowness of adoption of technologies by municipal wastewater customers
    • Municipal customers are the largest customer segment – no one wants to adopt something first
    • Takes a while to overcome CATNAP:  Cheapest Available Technology Narrowly Avoiding Prosecution – new technologies have to prove that they are affordable and will satisfy existing regulations

If you were going to be in any water business besides your own, which one would it be?

• Una Ryan, Waltham Technologies: stay in industrial water treatment, but focus on paper and pulp industry
• Eric Stoermer, Environmental Operating Solutions: develop slow release fertilizers or technologies to reduce the water consumption of agriculture
• Heather Landis, Lux Research:  manage assets or develop holistic approaches to reducing wastewater production

Panel 2 – The Water Startup’s Customer

Moderated by Asheen Phansey, Babson College

Why are you excited to be here?

• Pete Zuraw, Wellesley College – Wellesley is essentially a small municipal community.  Need to decrease water use and maintain existing system that might be 150 years old
• Stephen Estes-Smargiassi, Massachusetts Water Resources Authority (MWRA) – MWRA approves consumer products e.g. flush toilets, faucets.  Interested in opportunities to radically change their business in the long term.  Currently in Boston, the average person uses 65 gallons per day with 2 gallons used for drinking water – it’s easy to imagine those numbers being totally different in 10 years.  Are there ways to transport drinking water more efficiently?
• Stefan Abramo, Siemens:  What channels are startups going to use to approach…?  Talking about an industry that been treating water for 1,000’s of years (that work), we’re risk averse, in certain parts of the world we’re not scared about the scarcity of water – our challenge:  how do you market your product and who do you market it to?  Hundreds of thousands of players in the market – how do you get to the right end user?

What are the major categories of water technology you buy, and how much do you spend?

• Stefan Abramo, Siemens:  Siemens is both a buyer and seller of water technologies, typically to and from larger players.  On the industrial side, Siemens is primarily a system integrator.  When Siemens creates a technology, they are always challenged by whether to sell the technologies to others or keep it for themselves.

• Stephen Estes-Smargiassi, MWRA: MWRA spends $600 M per year on pumps, pipes, infrastructure and goods and services.  In MA alone there are 361 water utilities.  Technology purchases are driven in part by rules and regulations (as set by EPA, federal, state and local government)
• Pete Zuraw, Wellesley College:  Wellesley buys equipment, chemicals, etc. to treat and move water, as well as all end use items.  Wellesley College is extremely risk averse.  It’s expensive to change things (e.g. toilets) and to change people’s behavior.

Do you see yourself purchasing higher-tech solutions?  Are purchases growing and if so by how much?

• Pete Zuraw, Wellesley College:  As a college, Wellesley is balancing the retrofit needs of an 80 to 100 year old distribution system with limited capital and interest in a sustainable approach.  Wellesley’s water use is down 25% over the last few years by switching a few easy things (but they were expensive changes and many people had to be convinced).  The improved water use was driven by the need to save energy – water is cheap.
• Stephen Estes-Smargiassi, MWRA:
  • If you’re going to sell, figure out what the local market is. Market is not uniform – the market opportunities in the northeast are very different than those in south Florida e.g. Utilities in MA are not buying desalination.
  • Non-water energy technologies are of interest to water utilities. Water is very heavy and the industry’s biggest single expense is energy

• Stefan Abramo, Siemens:  Siemens’ customers are doing everything they can to improve  energy efficiency and recyclability/reusability, and to reduce the use of chemicals.

Is there one critical problem that you think entrepreneurs should address that you would pay for right now?

• Stefan Abramo, Siemens: “Analytics of Water” – monitoring / measurement of water use data, including smart sensors for industrial or municipal applications.  Monitoring technologies would help the end user/customer/municipality understand what they’re dealing with.
• Water use is different everywhere you go; different from other utilities

• Stephen Estes-Smargiassi, MWRA:
  • Technology for finding contaminants fast
    • Utilities used to measure ppM, now ppB
    • Would allow utilities to increase customers’ confidence in water quality
  • Technology to monitor water quality on every street, instead of at the water treatment plant

• Pete Zuraw, Wellesley College:

• • Ability to quickly assess what an issue is and tools to manage that issue (e.g. what is causing the funny tasting water from a water fountain?)
  • Ways to fix/address eroding infrastructure
    • Wellesley has infrastructure that was installed when Lincoln was President

Q&A

What are the infrastructure delivery system issues and how much do solutions cost?

• Infrastructure issues are largely financial – MA spent about $7B to clean and line pipes over the last 20 years.  Upgrades involved tearing up trees, and was limited to ~2 – 3% of streets.  $2B investment still required to clean and line pipes and a complete upgrade would take decades.
• Infrastructure installed during Lincoln’s Presidency is still in pretty good shape
• Technology development opportunity:  Mechanism to rehabilitate pipes and not tear up streets
  • Any technology needs to be endorsed by public advocates and environmental leaders e.g. Public was not comfortable with recent replacement of copper pipes with plastic
  • Technology adoption requires a preliminary process for convincing a wide range of stakeholders

For buyers of new water technologies, what are the main challenges with new technologies?

• Pete Zuraw, Wellesley College: Often technologists know their product better than they know their customers.  A more effective approach would be to “Get to know a niche.” Customers are very different in different parts of the country.

• • Technology should have three main characteristics:
    • Chemical-free
    • Energy efficient
    • Have capacity to reduce or conserve water use
• Stefan Abramo, Siemens:  Technologists should carefully analyze and understand who they’re targeting.  Not many end users are really thinking about what they’re buying, they’re just looking for a solution.  Customer needs are highly fragmented.  One key is to be target a specific audience e.g. if you invent some device that will treat water of any quality coming through the pipes to residential customers, then you’re selling into big-box stores vs. to plumbers.
• Stephen Estes-Smargiassi, MWRA: MWRA buys most things by competitive bid.  They showcase the best product from a slate of at least three competitive products.  If you’re at the leading edge of innovation, where there are no competitors, MWRA will not likely be a customer.  The people who design stuff for MWRA also offer a technologically savvy ear for new technologies that MWRA may adopt (35 firms in region do ~90% of design for MWRA parts, etc.)

What is the Smart Grid for water?

• Stephen Estes-Smargiassi, MWRA: System of technologies e.g. water sensors, and regulatory codes e.g. codes that mandate smart sensor systems to reduce water waste e.g. by overwatering lawns.  Water utilities are less concerned about minute by minute variation like Smart Grid for electricity.
• Pete Zuraw, Wellesley College: Some of Wellesley’s reduction in water use was irrigation innovation, and improved ways to measure water losses in steam production.
  • In new construction, Wellesley is installing gray water collection and reuse systems.  Hard to imagine retrofitting older buildings with gray water systems – Gillette Stadium uses gray water for toilets
  • Rain water harvesting limited by aesthetic concerns – Wellesley’s residents don’t want ugly rain barrels, they want ivy!
  • Notes submitted by Conor Carlin and Patricia O’Keeffe
  • Photos submitted by Diego Rodriguez (www.diego-rodriguez.com)