There are good reasons why investors might see the water sector as holding great promise. Not only is there a substantial global market worth some $400-500 billion a year, but the growing pressures on water resources gives cause for confidence that opportunities will increase. Against a backdrop of increasing population, rising demand from agriculture and industry, and climate change, and the consequent water scarcity and increased pollution, water rates have been rising, notes Steve Kloos of True North Venture Partners.

This offers promise for investors and innovators alike. ‘Historically the sector has been very difficult, and maybe today there’s still some difficulty. As you look to the future, you see the societal issues around water are so huge, advanced solutions are going to be needed,’ says Kloos. The overall rise in rates improves the prospects for funding such solutions. ‘It looks like the economics are there,’ he adds.

Policy and regulation are forcing changes in water treatment and management, especially in places like China, he says, and the need for more advanced solutions opens the way for investment opportunities. ‘These are more hi-tech solutions where innovation can be brought to bear, where you can see new concepts being invented, developed, brought to market, and scaled up,’ he says.

Despite these broad reasons for the water sector to appear attractive, it has a reputation of being a frustrating market, especially for those who have not been around the sector for long. ‘People who come to the water sector and see these societal, global issues around water and want immediate change, it can be really frustrating sometimes for them,’ says Kloos.

The key is to be able to appreciate the markets within the market. Utility managers on the water supply side are rightly risk-averse, but Kloos notes the ‘tremendous opportunity’ around the inefficiencies associated with leakage, for example. There is the wastewater side of utilities. ‘Wastewater has been somewhat expensive to treat, and we have seen a lot of innovation there,’ he adds. Meanwhile industry have proven ready to invest when the economics are right. ‘Once you get into the individual sectors, you can understand what the motivations and drivers for the actual end users are,’ says Kloos.

His message is that water has been undervalued, but rising water rates bring opportunities for more advanced solutions. ‘That trend is just going to continue,’ he says. ‘The market for advanced water treatment versus conventional is still relatively modest, but growing,’ says Kloos. They key is to be able to see through the broad picture to the more specific opportunities. ‘I think a lot of people look at water and think there is just a tremendous amount of money to be made. Sure there is opportunity here, but have your eyes wide open,’ he says.

Advice to innovators

Innovators stand to gain through bringing new solutions to the challenges faced by end users across the market segments. But in order to achieve this gain, they need to avoid falling into a number of traps.

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The World Water-Tech North America Summit will take place on 2-3 November in Toronto, Ontario, Canada.

For more information, see www.worldwatertechnorthamerica.com