Water treatment technology market investment continues to decline Water development is a marathon
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After a slow initial phase, the year 2016 is still a relatively active year for water companies that are in the initial stages of their establishment and growth, although the amount of absolute capital has declined slightly compared to previous years.
Among them, companies that have customized water services for users through the Internet of Things and cloud space have obtained an amazing number of rounds of successful financing. Under the lure of high profits, the accelerated time course and recurring income streams are more attractive than traditional processing solutions.
As many consumer-oriented applications and companies that uphold the "software as a service" concept enter the water market, the challenge for the future will be to distinguish these companies from the perspective of investors and potential customers.
“This is a big challenge for water companies and customers because we have to figure out 'What are you really doing?', especially when the leading companies in the industry are doing the same business. It's a decisive role," said Shederaz Haji, a corporate management partner at Zipadrang. Zipdragon invested in Dropcountr’s app app last year, which helps consumers track and adjust their water usage in real time.
As more and more multi-industry investment companies are disappointed by the long sales cycle and inherent conservative concepts of the water industry, experienced investors are looking for better ways to create long-term value.
David Henderson, founder of XPV, said: “XPV invested a total of more than US$50 million in five transactions in 2016. In these investments, many transactions are initiated by XPV to establish a long-term relationship with the partner.†A complete corporate directory database has been established and we prefer to achieve the most successful transactions through our own database, he told GWI.
“There are many companies on the market that have both advanced product technology and outstanding managers, but I don’t think that in this industry, you simply want to invest money and you can expect it to be profitable. Investors need to know how to develop strategies. This sector can The return to investors is reflected in the establishment of long-term value, and keeping the capitalization strategy in line with the technology application strategy,†Henderson said.
For capital-saving investment strategies, there is still a lot of controversy. In particular, to increase sales in order to meet the investor’s income expectations, this may put pressure on customers and lead to the loss of customer resources. "When the market is immature, excessive capital tends to have a negative impact," Haji said.
In the water industry, many companies have invested a lot of capital in the early days of their establishment, but they have not received corresponding returns. Therefore, for start-up companies, senior investors will advise them to carefully consider the development strategy before raising capital according to the traditional development route, and then think of ways to break into the market. Reinhard Huebner, SKion's investment manager, said: "For entrepreneurs, my advice is that working with companies with mature customer resources is much smarter than building a start-up company.
Henderson added: “Startup entrepreneurs believe that their technology will change the water industry in some way, but in many cases, their company is difficult to gain because they are just a product similar to a large enterprise. line."
For those companies that rely on technological development, there are also good exit mechanisms. Chinese film maker Scindor, which is supported by venture capital, was acquired by the engineering company Tianyi Environment for US$131.5 million last year. At the same time, AquaVenture Holdings was listed on the stock exchange with a valuation of US$475 million.
However, not all investment transactions have a good exit mechanism. Due to the failure to enter into a deal with Guozhong Water in 2014, Memsys, a membrane distillation specialist with a valuation of 25 million euros before the transaction, was eventually sold to New Concepts Holdings, a Hong Kong investment company, for a low price of 2.8 million euros last year. Similarly, the German ceramic membrane company ItNNanovation received bankruptcy protection due to the acquisition of Shanghai Baan Water; and the American water treatment company MIOX was acquired by Johnson Matthey after spending a large amount of capital raised from the venture capital.
"The water industry has good value and investment opportunities, but the premise is that investors must ensure that they are on the right track - the development of water is a marathon race, not a 100-meter sprint," concludes Henderson.
(Original title: As investment in inflow water treatment technology continues to decline, clever strategic investment in the water sector has become a trend)