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🗣️ "VC and Early Stage Water Investing"

The Water Values Podcast

Photo by Markus Winkler / Unsplash

Table of Contents

Host: Dave McGimpsey
Guest: Tom Ferguson | Managing Partner | Burnt Island Ventures
Category: 🗣️ Opinion

Podcast’s Essential Bites:

[8:38] “I'm a big believer that startups in water are much more to do with Berkshire Hathaway than they are to do with Andreessen Horowitz. Now, I say that because the Andreessen Horowitz, Sand Hill Road side of things is really predicated on companies being as big as possible as fast as possible. And that's great, that has driven a huge amount of consumer surplus for the citizens of the US and the world. But I think a far more effective way of thinking about company building in water is to avoid the things that will kill you. That if you stay out of trouble, and you trust in compounding, then good things can happen as long as you have a set of fundamental predicates that are in place as you set off on your journey. And then that's why it's such a privilege to be working with such early stage founders where we can bring that kind of perspective to bear the earliest stages […] of company formation because it really does help them stay out of the woods, in terms of stuff that can become extremely expensive in their future later.”

[10:40] “Everywhere from Sandhill Road VC firms, to individual Angel groups, to individuals to corporates, the best companies always got there in the end. I've never seen a company in water that deserve to raise money, not be able to raise money just because it's in water. That's a fundamental observation […]. But it takes ages. And the more ages it takes, the more distracted these fantastically talented CEOs are from actually building the business. And so being able to short circuit that timeline was something that I thought I was going to be able to contribute to.”

[11:42] “I really thought that there was space for a venture fund that was operating in a thoughtful, fast, value additive, beyond the check manner, that would help companies really build a sustainable basis for the solution to whatever chosen water problem they had going forward. […] This was also a function of I mean, frustration and fear. So frustration in the context that I thought that the overall commercial argument for a seed fund was just getting better and better. […] I think when you look out certainly within our kind of liquidity timeframe, and by liquidity timeframe, I mean that the time where we need to kind of harvest our investments basically get our money back with hopefully a considerable return, when you look seven to 10 years out, I think there's a really, really strong argument that there's actually going to be a fundamentally different liquidity environment than there is now. And we're already starting to see the green shoots of that.”

[12:58] “We don't have really a […] functioning funding environment in water in the same way that we sort of now do in carbon and in various areas of climate more generally and certainly in the broader startup universe. It's really dangerous. Climate change is water change. The way in which we respond to inevitable climate change that we have baked into our future […] is fundamentally predicated on our ability to steward and harness the water molecule and control it, as we've seen with all of the floods in the last couple of weeks. And the fact that we are not yet building in a concerted manner, the companies of the future that are going to be able to help us deal with that in seven to 10 to 15 to 20 years time, at least from the capital side of things, because certainly the talent is there, I just thought that was phenomenally dangerous. And I wanted to go and put my shoulder to the wheel to be hopefully a really important part of that capital stack that the […] best founders have access to kind of a funding product and and support behind that check that can make a meaningful difference to the amazing work that they're doing.”

[34:23] “People who go into water tend to stay. And I think there are specific reasons for that. Firstly, […] once you understand what it's like to work at the bottom of the bottom of Maslow's hierarchy of needs, and you understand how […] basic water is to the ability of people to really accomplish anything in their lives, including staying alive, […] once you start working in it, you realize how fragile that situation is. […] I also really like the people. One of the things that's great about the water sector is that it really doesn't attract too many egos.”

[35:57] “Gretzky had this great quote about, his secret being that you don't skate to where the puck is you skate to where the puck is going to be. And I think that that was a big part of why I joined Imagine H2O in 2015, because I couldn't see any future where water was going to get less important. And I think what we're seeing at the moment, you know, three IPOs in June, increased activity in the private equity side of things, but also just to the ramifications of water from the mega drought in the Southwest to […] floods in Jen Jong to Turkey to Belgium to Germany, obviously, people are just starting to get it. And I think what we're going to see over the next six to nine months is an increase in the salience of water and […] the national and international commercial conversation.”

[36:57] “I think it's telling that two of the biggest communities in […] climate tech, the […] My Climate Journey Community […] and then the Climate Tech VC newsletter […] both of them put out pieces on water this week. […] I think water is going to become front and center. […] When people talk about resilience, they're going to realize that what they're actually talking about is water very quickly. And I think it's going to be mainstream.”

Rating: 💧💧💧

🎙️ Full Episode: Apple | Spotify
🕰️ 52 min | 🗓️ 09/07/2021
✅ Time saved: 50 min