In 2024, the water tech sector saw a massive surge in investment, with a jaw-dropping $12 billion flowing into the industry—up a staggering 29% from the previous year's $861 million. For those paying attention, this spike raises a few critical questions: Where's all the cash coming from, why are certain players dominating, and what exactly is shifting in the world of water tech?
Despite being a crucial component of the clean tech movement, water tech has always been a small player in the grand scheme. In 2023, the clean tech market raked in a record $468 billion, but water tech accounted for just a sliver—only 0.2% of that pie. So, while it's still a small portion of the overall market, the growth is undeniable. Compared to the rest of clean tech, which is seeing triple-digit increases in investment, water tech has been cruising along with steady double-digit growth. And the gap is widening. This difference in financial dynamics signals that investors are catching on to something—there's serious potential in water tech, even if it's a tiny slice of the clean tech pie.
Breaking Down the Categories
To get a better sense of where the money's going, let's break down the categories within water tech. Since 2018, the market's investments have been split across six key areas: Treatment Technologies, Digital Solutions, Decentralized Systems, Smart Agriculture, Resource Recovery, and Environmental Services. Among these, Digital Solutions and Treatment Technologies are leading the pack, with Digital Solutions edging out Treatment Technologies by just a hair—261 deals to 257 deals, respectively. But there's also an uptick in funding for Environmental Services, which focuses on cleaning up polluted water bodies. It's a clear sign that the tide is turning when it comes to addressing the environment's most urgent issues.
The deal sizes within these categories show the diversity in investor appetite. Resource Recovery—think extracting valuable minerals and metals from wastewater—attracts the largest rounds, often surpassing $9 million. Digital Solutions, on the other hand, tends to pull in smaller deals, averaging around $4 million. This division highlights which tech solutions are considered "safe bets" for investors and which areas are still seen as risky but promising.
Four specific niches have emerged as the "hidden champions" of 2024—those overlooked areas that have captured outsized interest. Crop Management in Smart Agriculture, Chemical and Biological Treatment in Treatment Technologies, Atmospheric Water Generation in Decentralized Systems, and Metals and Minerals Extraction in Resource Recovery are driving substantial investments. Atmospheric Water Generation, in particular, has gained a cult following among investors, even though it typically pulls in smaller rounds. Still, its potential keeps investors coming back for more.
The Influx of Fresh Blood
One of the most eye-catching trends of 2024 is the massive influx of new investors into the water tech scene. Out of the 383 investors who funded deals last year, 303 were first-timers. This isn't just a fluke. New faces are flooding the market, and this wave is likely signaling that water tech is no longer a niche curiosity—it's becoming a legitimate sector to watch. What's more, about 84% of investors typically make one-off investments, but the uptick in repeat deals indicates that the money is sticking around.
New players aren't just coming from traditional venture capital firms. Silicon Valley big shots are getting in on the action, too. Reed Hastings, the former Netflix CEO, backed Sun Culture's $27.5 million Series B round to scale solar-powered water pumps for farmers in Africa. Eric Schmidt, the former Google CEO, joined in as well. It’s clear that tech moguls see water tech as more than just a charitable cause—it's an investment opportunity.
Who's Running the Show?
When it comes to the big dogs making the most noise in 2024, several players are leading the charge. Pter Ventures, Burnal Ventures, and Emerald Technology Ventures have all made multiple investments this year, but Hal Burton Labs has been the standout, funneling huge amounts of capital into resource recovery and lithium extraction startups. Their backing of companies like SPQ and Xit underscores the growing importance of direct lithium extraction within the resource recovery field.
Corporate investors are also diving in. SQM, a key player in the lithium extraction industry, has been funding water tech projects, particularly those that address the water needs of the mining sector. Hal Burton Labs, again, is leading the charge with a focus on resource recovery and water-intensive industries.
The Global Shift in Investment
The geographic distribution of water tech investments is starting to look different too. Historically, the U.S. dominated the market, but that's shifting. American investors' share of global water tech funding dropped from 55% to 47% in 2024. This decline signals a growing global interest, with startups in Europe, Israel, and other regions drawing significant capital. While the U.S. is still a major player, the game is becoming more diverse. Other countries are positioning themselves as global leaders in innovation and sustainability, reflecting broader trends in clean tech investment.
The Changing Geography of Water Tech Investments
Water tech has long been seen as America's domain. The United States has dominated the global scene, consistently receiving the lion's share of investments in this critical sector. But as the global water crisis escalates and the investment landscape shifts, America’s once-unassailable lead is beginning to erode.
The numbers speak for themselves: Between 2018 and 2024, the U.S. was the recipient of 55% of all water investments. A clear frontrunner, right? Yet, in 2024, that figure dropped to 47%. While the U.S. remains the top recipient, the race for the number two spot has grown much more competitive. In fact, France surged ahead of the UK to claim second place, snagging 7.6% of the investments—just a hair more than the UK's 7.5%. Meanwhile, Israel and the Netherlands rounded out the top five, grabbing 5.5% and 5%, respectively. But what's truly notable in this new landscape is Kenya's emergence as a player. This East African nation made its debut in the top 10 in 2024, marking the highest ranking for a non-OECD country. It's a hopeful signal that Africa is beginning to catch the attention of water investors—and with good reason. The potential for innovation and growth in Africa's water market could prove to be a key piece in solving the global water crisis.
Looking at the bigger picture, the last seven years show the U.S. still in control, but with Canada, Israel, the UK, and France making up a substantial portion of the global market. In 2024, the U.S. still commanded the most significant share, but these new players indicate a broader diversification of where capital is flowing.
The Real Price Tags
When it comes to the water tech market, understanding the investment size at different stages is essential—especially if you're trying to get a sense of what the future holds. In general, water tech tends to be a bit more conservative in its fundraising compared to other climate tech sectors, with earlier rounds reflecting more modest sums.
For instance, a pre-seed round typically raises around $1 million, while a seed round jumps up to an average of $3.5 million. Moving into later stages, Series A raises about $9.2 million, Series B $22.6 million, Series C $44.6 million, and by the time you reach Series D, a company is bringing in $105 million. But there's an important caveat here: these figures aren't exactly representative of the full market, especially considering some of the heavy hitters—companies like Lilac Solutions and Gradient—are likely skewing the numbers upward.
And while the numbers suggest that water tech companies may be raising less at the early stages compared to their clean tech counterparts, there's a reason for this: many companies still rely on non-dilutive funding at these stages. By the time they reach Series C and D, they're typically receiving larger investments, signaling that the market’s appetite for water innovation is growing as it scales.
Where Are the Exits?
In 2024, water tech exits were somewhat underwhelming. There were no spectacular IPOs or major acquisitions, though companies like Real Tech, Metrix, and Aqua did find themselves acquired, some under less-than-ideal circumstances (Aqua, for instance, was acquired out of bankruptcy). The big question on everyone's mind is, where are the exits, and how is the market moving?
To answer that, we spoke with two seasoned water tech investors, Tom Ferguson, founder of Burnt Ventures, and Clayton McDougal from Emerald Technology Ventures. The verdict? While exits remain sparse in 2024, it's not necessarily a red flag. According to Ferguson and McDougal, the water tech sector is at a unique stage in its development, and unlike other sectors, it doesn't operate on the same timeline for exits. They believe that 2024 was merely a quiet year, and we're still years away from the true liquidity events. As McDougal explains, water tech is only at the beginning of its "S-curve" in terms of growth, with significant exits likely to materialize around 2026 to 2028.
However, there are signs that the corporate world is becoming more attuned to water's importance. Major companies are starting to realize the impact their water usage has on their business models, particularly in industries like food and beverage and data centers. As a result, there's growing potential for small to medium-sized acquisitions, which may set the stage for more significant transactions down the road.
Survival Timeline & The Long Road to Profitability
For water tech companies, the road to success is often longer than in other tech sectors. Water tech isn't about instant gratification—there are no billion-dollar unicorns being built overnight. Water companies can't simply burn through cash until they hit critical mass; they have to be financially prudent from day one.
Since 2018, 58 water tech companies have raised growth-stage money. Of these, many have only raised a single round, and for those still operating after that first round, it's been an average of 3.5 years of operation before they raised additional capital. The cycle for companies raising multiple rounds is slower, with the average time between rounds sitting at around two years. This slower pace of fundraising reflects the reality of water tech's long-term investment horizon. Companies need to maintain cash flow and plan carefully for sustainability.
As Tom Ferguson puts it, the role of investors in this space is to give companies "room to run." In other words, don't expect these companies to blow up like some high-growth tech startup. But if they manage their burn rate, keep their eyes on the long-term goal, and continue to innovate, the future looks bright.
Looking Ahead to 2025
So what can we expect in 2025? Based on the trends we're seeing now, there's reason for cautious optimism. The water tech investment market is predicted to double in 2025, potentially hitting $2 billion. While that's still a fraction of the overall clean tech market, it's a sign that investors are beginning to recognize water's increasing importance as a critical resource, especially in the face of climate change.
The bottom line? While exits may be slow and growth may not come as fast as in other tech sectors, the water tech market is at the beginning of its long journey. Investors are betting on the future, and that future is looking promising, even if it takes a little longer than expected.
The survival timeline for water tech companies is long, but for those who stick it out, the rewards—both environmental and financial—could be enormous. As 2025 unfolds, we'll see if the investments continue to grow and if exits start to pick up. Water, after all, isn't going anywhere. And as the world wakes up to the critical nature of water innovation, the tide of capital flowing into this sector will only rise.
Sources for this article include in-depth coverage and expert commentary found at https://www.youtube.com/watch?v=EqQwOC-ys4c