WaterHealth International Inc., has a deal for poor rural villages around the world – we'll help you borrow money to buy our water purification systems, and then we'll stick around to make sure they're run properly.
The Irvine, Calif.-based company announced this week it has raised $10 million in a series D round led by previous investors Dow Venture Capital and SAIL Venture Partners.
That brings total investment for WaterHealth to about $26 million, CEO Tralance Addy said Wednesday. The company hopes to raise another $10 million by March.
WaterHealth is among a number of companies, from startups to giants like Bechtel Corp., General Electric and Siemens, that are focusing on the looming worldwide water crisis (see A Guide to the Water World).
An estimated 1.1 billion people worldwide lack access to clean drinking water, and the United Nations has warned that population growth and water depletion could lead to water shortages for 2.7 billion people by 2030.
Founded in 1996 with technology developed by physicist Ashok Gadgil and licensed from Lawrence Berkeley National Laboratory, WaterHealth at first sold its combination water filtration and ultraviolet light purification systems as stand-alone devices, letting the buyers run them.
But that model changed in 2004, when Addy came on as CEO. Now WaterHealth helps rural communities and non-governmental organizations secure loans to build "community systems," which cost about $65,000 and are housed in a garage-sized building, and then sticks around to manage the systems.
"It's a contribution of a whole chain of people looking at what we need to do to be effective," Addy said. "If you rely on other people to supply the other pieces and integrate that, it leads to inefficiencies and higher costs."
WaterHealth has about 600 systems installed around the world in Central and South America, Africa and Asia. Of those, about 300 are the new "community system" model, the majority in India, though a few are installed in Ghana.
Knowing that it is serving communities where people often earn less than $2 a day, WaterHealth helps communities by arranging loans for those that can put together a 30 percent to 40 percent down payment on a system, which run about $60,000 on average. Those loans are backed by $30 million in loan guarantees from Dow Chemical, whose venture capital subsidiary is an investor in WaterHealth.
That focus on community development has also helped WaterHealth land $1.8 million from the International Finance Corporation (IFC), a member of the World Bank, in 2004, and a commitment of about $865,000 from ICICI Bank, India's second largest bank, in 2005.
WaterHealth now serves about 1 million people in India, and with its new funding hopes to expand that to about 1.5 million people in the next three months, Addy said. Given that the average WaterHealth system serves about 5,000 people, that growth would involve about 100 new systems installed.
The company hasn't reached profitability yet, but "we're on our way to it," Addy said.
And to do that, WaterHealth is willing to look at technologies outside its own, he said.
"We are not primarily a technology company – we're a service company," he said. "we will incorporate whatever technologies work, whether they're developed by us or other people."
After all, "If we look at the scale of the problem, I estimate that more than 600 million people could use this kind of service" in India alone, he said. "We've got to ramp up very quickly."
Facts like these have been leading to increased investor interest in companies developing water purification technologies, from filtration and ultraviolet irradiation to novel forms of chemical purification or other methods (see Water World, Part II: Investing in Purification).
Companies using ultraviolet light include Atlantium, an Israeli company that has installed systems in dairies, soda bottlers and fish farms.
Others are developing novel means to use membranes to purify water, including Pionetics which has developed an ion-exchange membrane; Agua Via, which is developing proteins for filtration membranes; and Porifera, which has made a water filter of single-walled carbon nanotubes (see Agua Via: Water, Water Everywhere and Start-Up Cuts Water Purification Costs With Carbon Nanotubes).