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Venture Investors Take the Plunge

First published in Cleantech magazine, November/December 2009. Copyright Cleantech Investor 2009

Water and wastewater treatment technologies are attracting the attention of venture capital investors. VB Research has tracked a host of deals in the sector over the past 18 months.

Water technology is a key focus for cleantech venture investors around the world. The sector, which was popular in 2008 and has remained in focus throughout 2009, is attracting the attention of some of the major US venture capital funds. Notable investments last year in the US included HaloSource, Inc., MIOX Corp, NanoH2O and Quench Inc. Significant deals in the US this year have included WaterHealth International ($10 million), Water Science Technologies Inc. ($0.26 million) and Oasys Water Inc. ($10 million).

Bothell, Washington-based HaloSource is developing technology for the purification of water at point of use. The business was founded in 1998 and merged with Vanson Inc. in 2002. HaloSource offers four main products. HaloPure kills bacteria and viruses, HaloShield uses chlorine to kill odour-causing bacteria on cloths and towels, SeaKlear helps to keep pools clean, and StormKlear controls sediment from stormwater and wastewater.

In March the US Environmental Protection Agency approved HaloPure, which can be used in a cartridge that fits in the bottom of water jugs and pitchers. The cartridge has tiny polystyrene beads infused with bromine, which kills harmful bugs such as E. coli and cholera.  The EPA approval makes it easier to approach government agencies and non-governmental organisations about using HaloPure in a range of water purification devices.

HaloSource sells its products through distributors or partners, such as Indian water products company Eureka Forbes, which use HaloSource ingredients in their own disinfectant products. Other strategic partners include Unilever and Mars. HaloSource has manufacturing capacity in India and China and is generating revenues.

HaloSource raised $11.5 million last year from investors including AIM listed companies Origo Resource Partners Ltd and Origo Sino-India Plc (which are currently in the process of merging) and Unilever Ventures. AIM-quoted St Peter Port Capital has a stake in HaloSource, which it received in part payment for a loan to wood pellets supplier FibreGen.

MIOX Corp raised $19 million in series C funding from Doll Capital Management, Flywheel Capital and Sierra Ventures Inc. last year. MIOX develops advanced water purification systems that avoid the use of dangerous chemicals whilst providing significant cost and energy savings compared with traditional treatment methods. The technology uses salt electrolysis to generate chlorine disinfectant on demand, a process referred to as on-site generation (OSG). Water treated in this way is virtually odourless and tasteless and does not cause throat irritations that often occur from drinking bleached water. MIOX’s systems meet US Environmental Protection Agency and NSF International standards and are used widely in the US for treating municipal drinking water. They are currently deployed at approximately 1,000 large scale water purification and industrial installations in the US and another 500 in 30 countries worldwide.

NanoH2O raised $15 million in September 2008 in Series B funding from Khosla Ventures LLC and Oak Investment Partners LP. NanoH2O is developing an advanced membrane technology which enhances current polymer-based membranes with nanostructured material that allows additional control of key membrane properties. This results in improved membrane characteristics, including improved permeability or flux, while maintaining requisite salt and contaminant rejection, both passive and active fouling resistance, as well as flexible membrane performance to address specific water chemistries. As it can be retrofitted to existing membrane synthesis solutions, NanoH2O’s advanced Thin-film Nanocomposite membrane technology requires few modifications to existing commercial manufacturing facilities and fits within current desalination pressure vessels without alteration.

Quench Inc., a manufacturer of rentable water purification systems, raised $26 million in September 2008 from Element Partners.

Other deals in the US last year included Environmental Operating Solutions Inc. (EOS), which raised an undisclosed sum from Stuart Mill Venture Partners LP and the Wolverine Venture Fund. EOS is an environmental technology company providing innovative products for the purification of water. Its MicroC™ line of products provide wastewater treatment plants in the United States with a safer, more effective and environmentally sustainable solution compared with other carbon sources such as liquid methanol. In addition, the company offers technical services to help customers optimise the use of its denitrification products.

And Cyber-Rain Inc. attracted early stage funding of $1.5 million from Funk Ventures. Cyber-Rain has developed a smart sprinkler system which works via the internet to wirelessly control the watering of customers’ gardens, automatically adjusting the watering schedule based on weather and seasonal conditions.

This year deals in the US have included $10 million for WaterHealth International Inc. in Series D expansion capital. Investors in WHI, which has developed a novel UV-based water purification and disinfection technology platform, included Dow Venture Capital and SAIL Venture Partners LP. WHI’s modular platform can be scaled to provide high quality drinking water to a broad range of population groups. The company is currently focused on supplying systems to deliver affordable water to urban populations and rural communities that lack access to municipal water supplies.

Water Science Technologies Inc., which raised $0.26 million in seed financing from Matrix Partners, is developing water treatment and process technologies. Water Science has developed speciality polymers and biocides for industrial water treatment, scale and corrosion inhibitors for oil field applications and cationic and anionic emulsion and dry polymers.

February this year saw investment for Oasys Water Inc. in the US, a developer of a water purification technology known as Engineered Osmosis. Oasys raised $10 million in early stage funding. Investors included Advanced Technology Ventures, Draper Fisher Jurvetson and Flagship Ventures. The Engineered Osmosis process is a novel treatment system that can produce clean, potable water at significantly lower cost than current desalination methods. This is accomplished by eliminating the need for the high pressures used in modern reverse osmosis systems, thereby reducing the electricity and fuel demands by more than 90%.

In June, California-based AquaGenesis Technologies raised an undisclosed sum in Series A funding from Clean Pacific Ventures. AquaGenesis develops and markets products for residential and commercial water purification and conditioning. The company's solutions are based on the AquaGenesis Continuous Electrodeionization process, which was developed by Siemens Water Technologies Corp. The process is used in industrial applications to make high purity water for pharmaceutical and medical applications. AquaGenesis has adapted it for salt and chemical free residential, commercial, food and beverage water treatment and conditioning applications.

In August, Kleiner Perkins Caufield & Byers invested an undisclosed sum of early stage funding in California-based Applied Process Technology Inc. Applied Process provides sustainable water solutions for the drinking water, environmental remediation, industrial process water, wastewater and homeland security markets. Its proprietary offerings include HiPOx®, a high-performance advanced oxidation process based on ozone and hydrogen peroxide chemistry which eliminates a wide range of organic compounds. HiPOx® may be used for disinfection in a wide range of municipal, industrial and environmental applications. The company’s PulseOx® process is an in-situ chemical oxidation remediation technology. PulseOx® produces hydroxyl radical chemistry directly in the subsurface, thereby offering 35-50% more powerful chemical oxidation, and up to 1-billion times faster reaction kinetics than ozone-only remediation systems, resulting in faster clean-up and lower total remediation costs.

Canadian water investment

Last year saw two notable Canadian deals in the water sector. The Pressure Pipe Inspection Co., which is reported to be the world leader in providing critical water infrastructure management tools, raised an undisclosed sum from Emerald Technology Ventures AG.

And Ostara Nutrient Recovery Technologies Inc. raised $10.5 million from Frog Capital and VantagePoint Venture Partners. Ostara is commercialising proprietary technologies that recover resources from wastewater and recycle them into valuable products. The struvite recovery process, invented at the University of British Columbia and developed by Ostara, recovers pollutants that would otherwise be released into the environment, helps wastewater treatment plants reduce operating costs and meet environmental regulations, and provides municipalities and utilities with revenue from the sale of the recovered pollutants that are recycled into an environmentally safe slow-release fertiliser called Crystal GreenTM.

Israeli focus on water

Water is recognised as a scarce resource in Israel where, unsurprisingly, there have been a number of notable investments in the sector. CheckLight Ltd, a company which has developed early warning solutions for the detection of a wide range of contaminants, raised $3.5 million in June 2008.

The following month Whitewater Inc. raised NIS24 million ($7.1 million) from the Gmul Investment Company Ltd. Gmul (TLV:GMUL) is an Israeli company primarily investing in property that establishes and markets residential neighbourhoods in Israel and abroad. The company also invests in vehicles, hotels, energy and water. Whitewater is based in Israel and deals primarily with cutting-edge Israeli water technologies.

Also in July 2008 The Green Way Ltd raised $15 million in Series B funding from the Shaked Global Group. The Green Way provides a range of consulting and implementation services for landscaping, irrigation, erosion prevention and waste and wastewater treatment.

In September this year, BioPure Technology Ltd, based in Rishon-Lezion, Israel, raised $12 million from Aurum Ventures MKI Ltd, Elron Electronic Industries Ltd, Pitango Venture Capital and US Venture Partners. BioPure is a developer of advanced nanofiltration (NF) membranes and separation technologies for the water, wastewater treatment and chemical processing industries. BPT’s products include the Nano-Pro Membrane, an extremely stable and selective NF membrane designed for treating highly aggressive wastewater streams in which most other NF membranes will not operate.

European water deals

In February this year, Germany’s Triton Format AG, a provider of water solutions for the maritime, industrial and small municipal sectors, raised €10.40 million in expansion capital from Meidlinger Partners LLC and Zouk ventures Ltd. Triton designs, assembles and installs water treatment modules ranging from low-energy desalination to water management and waste water systems.

Greifenberg, Germany-based Inge AG, which develops, produces and markets ultra filtration membranes and modules used in the treatment of drinking water, process water and wastewater, raised €5 million in July 2009 from a group of investors including BayTech Venture Capital, Emerald Technology Ventures AG, the Entrepreneur’s Fund BV, Siemens Venture Capital GmbH, Stonefund NV, Sustainable Performance Group AG and Taprogge Watertech Gmbh. The small pore size of Inge’s low cost modules means that they reliably remove not just particles but also micro-organisms such as bacteria and viruses, thus ensuring clean, germ-free water.

Netherlands-based BiAqua, which describes itself as being in the “water security” business, raised undisclosed funding in September of this year from Icos Capital management BV. BiAqua delivers bio-based solutions and related services for serious water contamination issues to water companies and consumers worldwide.

UK water deals

There were three notable deals in the water sector in the UK in the spring of this year. i2O Water, which raised £4.2 million from Swarraton Partners in April, has developed a system which continuously adjusts and controls the pressure of water going into a DMA so that the average zone pressure is kept to the minimum required under all demand levels.

Eco Solids International raised £0.75 million from undisclosed investors in May. Eco Solids holds exclusive worldwide and patented rights outside of the USA to two leading-edge wastewater and sewage sludge treatment technologies. The Eco-Solids Process treats human sewage, cess and septic sludge and farmyard and industrial wastewater and biosolids, without nuisance odours, with energy and operational efficiency and at a competitive capital and operational cost.

And June saw Xeros Ltd, an early stage company focused on the development of virtually waterless laundry cleaning, secure £920,000 in a funding round led by Enterprise Ventures Ltd together with South Yorkshire Investment Fund, IP Venture Fund and various business angels. We understand that Xeros aims to raise further funding in the Spring of 2010 now that the company has reached key milestones using the cash from the last £1 million round.


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