Report Title: Big Cleantech: Investing in Water Innovations
Report Author: LUX Research
Publish Date: June 5th, 2012
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% increase in global water use by 2030, according to Lux Research.
$3.1 billion in private investment has been allocated toward water treatment and conservation technologies since 2007, reflecting a strong interest in water technology. The average late stage deal size has increased from $4.5 million in 2007 to $12 million in 2011.
Although innovations are relatively small considering the water market is a $600 billion market. However, in absolute numbers, innovation and start up activity is plentiful in the water sector, says Lux lead report author Daniel Choi, a Lux Research analyst.
Key findings in the report include:
- VC’s 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 a lack of IPO success. In contrast, growth of 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 adopted 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 2012.
- 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.