Clean tech and energy

Climate Tech Is Hot, But VCs Can’t Forget About Water

By: David Lynch

“It is unequivocal that human influence has warmed the atmosphere, oceans, and land.”

These fiery words come from the latest landmark U.N. report detailing intensifying, universal climate change impacts. They cover air, water and land.

There’s a fair amount of VC and tech focus around air and land innovation. But we need to pay more attention to water, a finite resource covering 71 percent of the Earth—of which, only about 0.3 percent is usable by humans and at severe risk of drying or heating up due to human activity.

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Meanwhile, The New York Times’ Kara Swisher predicted that “the world’s first trillionaire will be a greentech entrepreneur.”

With the right investment vehicles and market shifts, water will become a vibrant, VC-backed sector. The world’s first trillionaire might reach that pinnacle thanks to water investments.

Embrace Water-as-a-Service

Legendary VC Marc Andreessen famously said software is eating the world. And I’m here to say that the world is 71 percent water.

In all seriousness, a common misstep is to think of water as a straightforward problem that can be solved with hardware or a quick mechanical fix instead of what it is: A nuanced problem that can be mitigated with the right mix of technology and software. VCs and other investors should approach water as they would other software- and technology-first markets like e-commerce, ridesharing and fintech. They should consider investing in water-focused companies with SaaS business models and/or individual software solutions supported by ironclad go-to-market strategies and ambitious long-term visions.

Klir CEO David Lynch

For startups and ventures in the water market, embracing a software-driven approach will help advance overall innovation—and accelerate responses to direct competition. Companies that do so will also benefit from more flexibility to innovate and iterate for specific use cases and market opportunities. A byproduct of going all in on software: the attractiveness to enterprising VCs looking for the next (and water’s first) unicorn.

Water is a market that can, and should, be disrupted

Water is clearly connected to sectors powering the global economy (supply chain/logistics), people’s homes (energy), and livelihoods (agriculture). It’s stealthily connected to important and, in some cases, life-saving industries like chip manufacturing, oncology, tourism and ecosystem services. Water is also a traditionally regulated and fragmented sector with potential for massive innovation and reinvention.

VCs, in particular, are poised to look at the bigger picture: There are millions of ways to innovate how water is used, transported, cleaned, recycled and redistributed around the globe. Each one has the potential to make early VCs into legends and the world into a better place.

As VCs survey the water market, they should do what they do best: Apply case studies and examples from other disrupted sectors including health care (telehealth and Zocdoc), telecommunications (smartphones, Slack and video conferencing platforms) and payments (Stripe, Plaid and Venmo) to realize water’s full market potential.

Elevate water’s role in the climate tech market

According to VC Andrew Beebe, the “climate decade” is upon us and any VC firm without a climate arm is not only doing it wrong, but missing out on significant ROI opportunities.

Meanwhile, a lot of VC focus is on noisy climate tech startups that either receive celebrity backing, grab big corporate attention or operate within hard-to-topple markets like energy or manufacturing. It’s time to zoom out and think about what drives market demand for alternatives to legacy industries and power sources.

After all, we can live without power. We can live without renewable energy. We can live without gas. But we cannot live without water. There’s no way to manufacture water. But it’s possible to invest in and scale up novel solutions to an age-old issue: water.

Reframe water as the primary multiplier of climate change

Water is the connector between different elements of climate change from wildfires and droughts (lack of water) to floods and tsunamis (abundance of water). It’s the lens through which most humans notice or feel the effects of a changing environment—whether through water scarcity and food insecurity increasing in severity over time, or noticeable shifts in seasonal weather patterns and frequency of disasters.

As both investors and people, VCs must acknowledge that while clean water is readily available for many in the tech world, it’s anything but for a large portion of the world’s population. Investing in companies actively developing technologies that improve water access, cleanliness and use for other sectors from agriculture to transportation has the potential to literally change the world. Investing in the water market can also help VCs achieve social, environmental and financial gains along with notoriety for offsetting human impact on climate change with meaningful innovation.

The current picture: Trillions of dollars are spent on infrastructure upgrades and billions flow from venture capital firms to more splashy aspects of environmental, social and corporate governance that pump up egos and make modest social impact. But there’s potential for trillions to be invested, countless lives to be saved and several careers to be made in water over the next decade.

Look ahead with a clear head

Water remains overlooked as a hotbed for innovation because people—including within the VC community—see water as a permanent fixture of regular life rather than what it is: Vulnerable to human-impacted climate change and ripe for innovation.

For VCs, there will be a multiplier effect in backing the first water unicorn. That act will, in turn, attract billions in investment to every other corner of water. It will also accelerate the innovation of cost-effective water technologies desperately needed for humanity to survive and thrive on a global scale.

With the right combination of VC attention, capital and market opportunity, the forces already funding climate innovation can (and should) be applied to making water a lucrative and sustainable sector.

David Lynch is the CEO of Klir, headquartered in Reno, Nevada. He is a water policy expert with hands-on, global experience architecting IT systems for water utilities.

Photo by Pan Xiaozhen, via Unsplash.

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