Water Investment Picks Up

Ioteq says it's raising $5 million, while Worldwide Water forms a new subsidiary and Vinod Khosla invests in Quos.

After seeing little action for years, water-treatment technologies seem to be picking up some attention.

Ioteq, a company that uses iodine to clean water for applications such as fruit and vegetable sanitation, food processing and wastewater recycling, on Friday said it was raising $5 million in a first round of venture-capital funding.

That's after Worldwide Water also last week announced it formed a new subsidiary, Cascade EcoSolutions, to remove sediment, heavy metals and organic contaminants from dirty water, and venture capitalist Vinod Khosla said he invested in Quos, a startup developing technology to desalinate salt water without a membrane (see this post from CNET's Green Tech blog).

In fact, the last few months have seen a steady trickle of water announcements after a long drought.

In spite of a rapidly growing demand for water, a market in the billions of dollars and venture capitalists calling water-treatment technologies the Next Big Thing, water investments have been scarce for years (see Parched for VC Funding and VCs Say Water Industry Should Take Lessons From Energy).

But in September, for example, water-management company HydroPoint Data Systems raised an undisclosed sum from RockPort Capital Partners and Chrysalix Energy Venture Capital (see HydroPoint Gets Cash). Microvi Biotech, a water-purification startup, also won $50,000 in cash and $50,000 in services from the California Clean Tech Open (see California Clean Tech Open Winners Score Cash, Services).

And in October, two companies that claim to reduce the energy costs associated with purifying and desalinating water, Stonybrook Purification and Altela, raised $4.1 million and $7.1 million, respectively (see Investors High on Water).

Although water investments are still small compared with investments in sectors like solar power and biofuels, these investments seem to mark a change.

Can Iodine Reduce Agricultural Water Use?

Ioteq, an Australian company, says it has developed a system to accurately dose and measure iodine in mass quantities of water, self-adjusting to make sure the water is getting the right amount of iodine.

While iodine has been used to purify water for more than a century -- such as in tablets for drinking water for hikers -- it previously was difficult to control the dosage in large amounts of water, according to CEO Jared Franks.

Ioteq, which presented at the AlwaysOn Venture Summit in Half Moon Bay on Friday, thinks it has solved that problem with a system using sensors, proprietary electrodes and software.

The company claims that using iodine is greener and safer than using chlorine, the dominant solution today, and also -- with its technology -- is cheaper, Franks said.

After dispensing the iodine in the ideal parts-per-million ratio for the application, the system also extracts all the unused iodine and iodide -- the element that's left after iodine is used to purify water -- so the water can be reused up to five times, he said, adding that organics and solids in the water keep it from being used infinitely.

Today, agricultural growers and processors must pay for the water they use and then pay to dump the chlorinated water back out, so being able to reuse the water even twice can save farmers thousands per month, he said.

Recycling the iodine also is cheaper than buying new iodine, Franks said. Ioteq loses only 2 percent of the iodine, from splashing, and extracts the iodine as part of its maintenance service.

So far, the company has 150 pilot systems installed in Australia and New Zealand and has produced revenue of about $1 million per year from those systems, with a gross profit margin of 60 percent, at the height of its testing, Franks said.

But the company sees much larger markets in the California and Florida, as well as in Spain, Japan and China.

Aside from agriculture, Franks said the company hopes to target wastewater and sewage treatment, as well as manufacturing markets, which would total a potential total market in the hundreds of billions of dollars.

Ioteq plans to start with agriculture in the United States, however. Franks said the company plans to begin trials in the United States within a year, to receive approval from the necessary U.S. and state agencies within two years and to turn a profit in three years.

While Australia's fruit and vegetable market is very small and geographically spread out, 75 percent of all fruits and vegetable supplies in North America are grown in Florida and California.

He said the United States has 150,000 farms, and that they spend an average of about $100,000 per year on chlorine systems. In one case study at a farm in Salinas, the grower was spending $150,000 per month on water, $15,000 per month on sewage fees, $5,000 per month on capital expenses for water-treatment equipment and $3,000 per month on chlorine, Franks said.

He expects Ioteq's system would cost around $5,000 per month for both the capital costs and the iodine, and said the system also would cut the farm's water and sewage costs in half.

"Our technology means significant cost reductions to the end user across multiple areas, be it repairs and maintenance, water costs, sewage costs, occupational health and safety costs and chemical costs," he said. "We're excited about the opportunity to serve a sophisticated and concentrated market [like] California."

Coming from Australia, which has just suffered the worst drought in history, Franks said the company also thinks its technology would help the with the world's water crisis. "There's no better country in the world to talk about drought than Australia," he said. "We hope to be right at the forefront of this changing perspective on the use of water in agriculture."

Ioteq expects the $5 million will last through the trailing phase, after which it plans to raise another round for expansion and ramping up.

Of course, the company isn't the only one targeting water purification for fruits and vegetables.

One other example is Purfresh, previously named Novazone, which is using ozone instead of iodine (see Ozone for the Masses). The company raised $7 million in a Series-B round of venture-capital financing last year.