A few weeks ago, a different kind of venture investment conference took place in Davis, California. Rather than focusing upon the full range of renewable energy technologies, GoingGreen addressed the whole system: just about every facet of the new world brought about by climate change and resource limitations.

GoingGreen addressed everything from green automobiles to green buildings, mega-projects to nanotech, renewable energy and water. Surprisingly, including water in the growing green conversation has been an enduring challenge. About a year ago, I finally found a conference editor, Ed Ring, who enthusiastically shared my belief that water absolutely should be included as one of the topics.

Could water technologies stand on their own as true venture investment opportunities? Innovative technology had not dramatically influenced the water industry in decades. Was water scarcity simply part of the energy challenge? Putting together the water investor panel and the water company panels became as much of a contrarian exercise as putting together a new technology company.

But after 20 years of working in early-stage companies, the more people I encountered who doubted that there were enough experienced water investors and innovative water companies to fill a panel -- not to mention prescient investors who see water as an emerging opportunity -- the more confident I felt.

And this past summer, several U.S. states announced formal drought restrictions, including not only the usual suspects of Florida, California and Texas, but also municipalities in Vermont and North Carolina. Water scarcity in China and Australia reached the levels of national crises.

With water in the headlines repeatedly, and with it the possibilities for research and venture investment in water security, when GoingGreen's water investor panel took the stage on the first day of the conference, opportunities in water technology were ripe for discussion.

Among the water investors, most of the discussion focused upon whether innovative solutions to water scarcity and water purification would sell: historically, a small number of enormous corporate giants have dominated the sales to slow-moving bureaucracies. And they were cautious in discussing the opportunities that growing water scarcity, the impact of water pollution and the crumbling water infrastructure offer. There was little mention of the promise that advanced membrane materials and innovative designs such as advanced oxidation offer for water recycling and groundwater remediation.

But the company panel took the opposite tack. Several companies, including NanoH2O and GeoPure, highlighted their innovative technologies to create new sources of water. The Abtech SmartSponge addresses the threat of pollution from stormwater by absorbing pathogens as they flow off parking lots and roofs. And Derceto discussed how optimizing water infrastructure can save an impressive 15 percent in electricity usage.

What's Coming Next Year

I imagine that the agenda of GoingGreen 2007 will look a bit odd in years to come: Only one company panel on water? Where is the on-site wastewater solutions panel? Where is the "smart water grid" panel? Where is the innovative desalination and water purification panel?

In a year, investors may not yet have reaped huge gains from investments in innovative water technologies, but the potential for new giants to grow rapidly and lead new market segments will be clear. Water, as simple as it is to drink, will be an obvious opportunity for investment.

More importantly, you will see new paradigms for water management. Among the most promising technologies are home purification tools to identify and eliminate chemical pollutants like perchlorates and MTBE, as well as bacteria and viruses, from the tap, and can provide a "personalized" taste for each user in a household.

Other ideas include small-scale, comprehensive water management solutions for remote hospitals, schools and resorts that also include wastewater recycling; and real-time sensors to provide a comprehensive and highly accurate measure of the specific chemicals and pathogens in water supplies and monitor water management.

Complete on-site water management "appliances" will be one of the strongest investments for the savvy early-stage investor. For a home, office or commercial establishment, recycling water to toilets and irrigation will save 50 to 90 percent of their water use, while significantly reducing energy and emissions. In places that use significant amounts of energy to distribute water, like Los Angeles and San Diego, on-site wastewater recycling saves up to 80 percent of the energy.

These systems might look like very different boxes, but they will share a range of features:
  • Self-operating, self-healing: comparable to a PC as compared with a mainframe computer. These appliances will automatically transmit key data about water quality directly to the utility
  • Multi-Process: combining some set of biological, ozone-based, ultrafiltration, electrocoagulation, electrolysis or chemical solutions to provide for "gold standard" efficiency and variable levels of purity for different applications.
  • Modular: to accommodate the latest innovations in membranes and other water-purification solutions
  • Highly subsidized: Within the next few years, water scarcity coupled with the cost of maintaining the water distribution network will bring many localities to remove customers from the edges of their delivery grid.
Experts estimate that 70 percent of the costs of running a water utility are in the water transport network. According to the EPA, the U.S. will need up to $1 trillion to upgrade its water and wastewater infrastructure over the next 20 years to maintain regulatory standards.

Water might be free, but it will cost more and more to ensure a pure, ready supply. Right now, you pay your municipality for water infrastructure. In the future, some ground-breaking innovation will be necessary to get that water to your kitchen sink. Can you imagine getting "house calls" from your water company?

Laura Shenkar is an entrepreneur who has been working with leading-edge technologies for over 20 years in the U.S., Europe and Israel. She holds a B.A. from Yale University and an MBA from Harvard Business School. She coordinated the water panels at AlwaysOn's GoingGreen panel in Davis.