Driven by an increasing number of growth equity transactions, financing for water technology innovations is bouncing back after last year’s dropoff, as firms seek to tap new opportunities arising from a projected 40 per cent increase in global water use by 2030.
Lux Research studied each sector of water with different timelines for venture funding, growth equity, and exit windows, identifying opportunities for investors and buyers in active regions of the hydrocosm. Among their findings:
- VCs are losing interest in the sector. Venture capital infusions in water technologies have steadily declined from a 2008 peak of $448 million to $133 million in 2011, thanks to the lack of IPO success. In contrast, growth and private deals are on the rise, having replaced venture capital as the major source of funding since 2010.
- Many are riding on the wave of the shale gas boom. Many water technology companies adapted their technologies for shale gas, hoping for lucrative applications in treating frack water. They include Miox, AbTech Industries, BioTeq Environmental, and Latitude Solutions. From only $37 million in 2008, investments into water technologies for oil and gas have grown to $62 million in 2011, and $34.2 million in the first four months of this year.
- Chinese IPO frenzy ends. Between 2009 and 2011, Chinese water companies went on an IPO spree, with 10 exits valued at $1.6 billion. However, poor post-IPO performances have had an adverse impact, shifting the focus to M&A.
The report, titled “Big Cleantech: Investing in Water Innovations,” is part of the Lux Research Water Intelligence service.