After decades of underinvestment, the tide might finally be turning for water innovation in Asia

The water crisis is sparking more interest from private equity and start-ups are dishing out solutions that are less capital-intensive, observe industry watchers. The data, however, points to a picture that is more mixed, with stop-start investment cycles that are largely cyclical.

Indra Water_treatment
Mumbai-based start-up Indra Water's main product is a compact water treatment system for recycling industrial wastewater. This year, the firm raised about US$4 million in funding from technology venture investors. Image: Indra Water

For many fast-urbanising cities across India, a continuous water supply that does not get cut in the middle of the day is a pipe dream.

In some regions, households and offices now have intermittent access to clean water, often for only about four to five hours daily. Entire business parks in Bengaluru and the wider Southern India region sometimes announce temporary shutdowns, asking their employees to work from home because they are unable to keep the premises operational due to water scarcity. 

“Unfortunately this is the reality that many businesses based out of India have to live with,” said Amrit Om Nayak, co-founder and chief executive officer of Indra Water, a clean technology start-up based out of Mumbai. The country is one of the most water-stressed in the world and its dependence on an increasingly erratic monsoon and the impacts of climate change have exacerbated the pressure on water resources. 

Many businesses pretty much operate for only three to four days a week, shared Nayak, which essentially means that they are only utilising about 60 to 70 per cent of their capacity. This hurts their bottom line and has in turn driven the demand for clean water solutions and innovations to solve the urgent problem. 

It has also significantly changed the risk-return calculations for private equity investors who traditionally shun water-related projects, previously known to be more capital-intensive with higher risk exposure. 

For example, Nayak’s Indra Water, which works with businesses and well-known brands like consumer goods multinational Unilever, India’s manufacturer Tata Steel and conglomerate Aditya Birla Group, has a patented electricity-based wastewater treatment process that allows it to build more compact and transportable water treatment systems for the recycling of industrial wastewater. What this means is that its corporate customers are able to recover and recycle the bulk of its wastewater at source in a cost-effective way, said Nayak. 

“Our case studies show that if a portable water treatment system is installed, say for the hospitality sector, the average payback period for the investment is just about 11 months now. This is shorter than that for most renewable energy investments,” he said. “And because the cost of water is so high and the demand to solve the problem so huge, once businesses have access to treated water, it directly impacts their cash flow.” 

‘Inflection point’ for water innovation?

Like many Asia-based start-ups, Indra Water started seeing capital flow more easily for its water solution in the last three to four years or as economies started opening up after the Covid-19 pandemic. When the company started operating in 2017, it obtained a small government grant and was mostly reliant on self-funding, but the “access to capital has increased dramatically” recently, said Nayak. This year, Indra Water secured US$4 million in a Series A funding round or its first institutional round of funding led by cleantech pioneer Emerald Technology Ventures and Bengaluru-based Mela Ventures. 

Indra Water_Thane

Indra Water operates its facility from the outskirts of Mumbai, in the provincial city of Thane. Image: Indra Water

On the co-investment deal, Emerald Technology Ventures’ investment manager Kelven Lam told Eco-Business that its partner Mela Ventures previously only operated in the software space but has moved to make its first investment in water recently. 

“Now they are proactively showing us other water projects and telling us what the good opportunities are. There is a surge in interest and it’s now very hard to still call the water sector a cleantech laggard,” he said, adding that the technological solutions that start-ups are promoting are also now less capital expenditure-intensive, which makes the barriers of entry lower for private capital to flow. 

Lam, speaking at a panel discussion that explored emerging opportunities in water innovation at the Cleantech Asia Forum in Singapore last week, also highlighted a growing “water stewardship” movement that sees corporates making “water positive” commitments that they would have to attempt to meet by actively funding clean technologies, beyond just water recycling or carbon offset efforts. 

Industry watchers also note that public water utilities across Asia have been “quietly innovating” and seeking cost-effective ways to solve the problem of water scarcity. On the same panel, Michael Toh, director of industry and technology collaboration at Singapore’s national water agency PUB, said the water industry could be at an “inflection point” where there is potential for an “explosion of opportunities”. This includes water-related investments that intersect with energy, as well as solutions that look at resource recovery, he shared. 

“By and large, as we have conversations with water authorities across Asia, we have realised that there is an increased emphasis on the water problem. The clear message is that solving this problem can also help us address the climate challenge,” said Toh.  

Cleantech Asia Forum 2024

At Cleantech Asia Forum in Singapore, Emerald Technology Ventures investment director Kelven Lam (second from left) shared that there is a surge in interest in water innovations and it’s now very hard to still call the water sector a cleantech laggard. Image: Cleantech Group

Mixed data trends 

Globally, it has sometimes taken emergency crises to put problems in the water sector in the spotlight. Organisations such as the World Bank have repeatedly called for more coordinated flows of public, concessional and private capital to compensate for decades of underinvestment in the industry; some are trying to create a pipeline of bankable projects to attract more funding.

In an outlook analysis published early this year, research and consulting firm Cleantech Group that tracks the cleantech sector, said that it hopes to see a growing interest in water-related investments in 2024 but “do not expect significant changes” in the number or size of investment deals this year. 

Water and wastewater investment data_Cleantech Group

Water and wastewater investment deal numbers and value in Asia from 2019 to 2024, tracked by research and consulting firm Cleantech Group. [Click to enlarge]. Source: Cleantech Group

Statistics that the group provided paint a mixed picture for cleantech investments in water. In Asia, excluding outlier deals above US$350 million, a total of seven investment deals in water and wastewater start-ups with accumulative value of nearly US$27 million were recorded in 2023, an increase from 2022, which saw four deals at a value that only slightly exceeded US$3 million. Its latest 2024 data as of May shows that total deal value is already at US$24.4 million. Yet these numbers are still significantly lower than that at pre-pandemic levels. 

Peter Kennedy, director of Silverstrand Capital, a Singapore-based family office, said that a water membrane company can still take up to 12 years to “go from lab to commercialisation”, and it might need to wait another seven or eight years to get its patent approved, which typically is a long sales cycle for impact investors. Silverstrand primarily invests in regenerative agriculture and nature-based solutions but has recently backed a United States water tech start-up. 

“We are starting to see the technology adoption that has happened in agritech replicated in the water innovation space, and we do find it promising. But it would still take time,” Kennedy said.


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