Water: The Opportunity of a Lifetime for Startups

There’s enough freshwater for everyone on earth, according to the United Nations.

Alright. So why do more than 2 billion people still lack access to safely managed drinking water? Why are almost 2 billion people on the planet dependent on healthcare facilities without basic water services? Why do approximately 300,000 children under five years of age die – every year(!) – from diseases due to poor sanitation, poor hygiene or unsafe drinking water? Why?

We’ve heard all the reasons before…

a) Uneven distribution of freshwater globally

b) Waste and poor (unsustainable) water management

c) Pollution

While there may not be water scarcity, it sure sounds like we’re deep in the throes of an escalating water crisis.

One common metric that’s used to gauge the risk/severity of a water crisis within a certain region is called water stress. The European Environment Agency explains that water stress, “...occurs when the demand for water exceeds the available amount during a certain period or when poor quality restricts its use.”

For all the freshwater supposedly available, it’s hard to fathom that 27 countries on the planet are currently facing high water stress, while 17 others are dealing with extremely high water stress. That’s forty-four countries in the world without enough potable water to satisfy local demand. See the rankings below from the World Resources Institute (WRI).

Source: World Resources Institute

Those 44 countries amount to more than a quarter of the world’s population. And that’s not all. WRI forecasts indicate that the problem is due to become even more widespread in the coming years – tipping countries such as the U.S. and Australia into high stress territory by 2040.

Source: Statista

Remember, the crux of the water crisis is threefold: either the freshwater in a certain region is being polluted, or it’s being wasted and/or mismanaged, or the region is located in a dry area with limited access to freshwater. Dealing with the first two issues typically leads to implementing strict(er) government policies aimed at protecting sources of freshwater from contamination and/or abuse. But that alone is never enough…

Innovation is critical. Technology or mechanisms to recover, recycle and reuse contaminated water (or wastewater) can address all three aforementioned issues adequately. 

In their paper on water reuse in arid zones, Manzoor Qadir of United Nations University Institute for Water, Environment and Health, and Toshio Sato of Tottori University, outlined 12 major constraints to water reuse and recycling in dry regions of the world. Eight of those constraints were cost and infrastructure related, whereas the other four ranged from inadequate information to lack of supportive government policies.

By all appearances, the biggest hurdle in tackling a burgeoning water crisis is timid investment in the clean water industry by local governments. Exceptionally, a few governments have established relevant wastewater policy and institutional frameworks to foster investment in water recycling and treatment technology.

Jordan, for example (which I recently visited), received USAID funding to embark on its US$169 million wastewater treatment plant project, sometime in 1997, and in that same year enacted the Jordanian National Wastewater Management Policy declaring,

- “reclaimed water is to be considered a part of the water budget in the country with no consideration of disposal;

- water reuse is to be planned on a basin scale; and

- fees for wastewater treatment may be collected from the water users”

The reality is, in the last two decades, there has been no shortage of innovation in the clean water technology space. Most of the technology has been built to serve arid areas of wealthy Western nations; however, presumably because of their price tag, developing countries in Africa and the Middle East have been severely deprived of this potentially life-saving technology. The blue dots in the map below show parts of the world with active potable water reuse projects.

Source: Water360

Notice how the vast majority (fifteen) of these projects are in the U.S. – Orange county, California is home to the largest potable reuse system in the world. The other active projects amount to about a handful, spread out across the rest of the world (basically one per continent). And these projects aren’t cheap. Construction of just one of the water treatment plants in Singapore had a price tag of roughly US$167 million.

In essence, just as one of the core reasons for the water crisis is an uneven distribution of freshwater globally, one solution has to lie in a corresponding uneven distribution of clean water technology globally, in favor of the dry and impoverished areas of the world.

In my view, access to clean, potable water shouldn’t be a luxury or nice-to-have. Like oxygen, it’s one of the fundamental sources of life for most - if not all - living organisms. If many local governments are stymied by or oblivious to the threat of an increasing water stress in their jurisdictions, maybe it’s time for the capital markets to intervene with a viable (and profitable) solution.

Aaron Hoddinott

Investor and marketer willing to take big swings at bold ideas.

Aaron Hoddinott

Investor and marketer willing to take big swings at bold ideas.