By Yvonne Lee, Region IX Advocate
On March 17, I met 12 fascinating water technology entrepreneurs from around the world. These innovative food and agricultural businesses were the finalists selected to attend the 2014 Imagine H2O (IH2O) Boot Camp in San Francisco, where they had the opportunity to meet with a network of potential investors.
Imagine H2O is a nonprofit organization that seeks to encourage innovators to solve the world’s water problems. It achieves this goal by hosting competitions and providing an accelerator program for innovative startup businesses. The boot camp was organized by IH2O’s Food and Agriculture Program, which supports emerging water businesses whose primary value proposition improves water use, treatment, supply, or discharge in the food and agriculture sector.
With much of the U.S. facing water challenges—California has suffered the driest year in history, thereby forcing many farmers to abandon their fields—these innovative businesses promise to help farmers and ranchers use innovative and clean energy to deliver cost efficient and safe food products to American consumers.
For example, one startup company recycles discarded produce from supermarkets into liquid fertilizers for farmers in less than three hours. Another growth-stage firm developed innovative manure treatment technology to recycle livestock manure into clean water. Its CEO drank the end product and lived to make a lively investment pitch the next day. A couple of other entrepreneurs offered aerial technology to help growers concentrate their water and fertilizer input/output and disease prevention down to a specific plant while maintaining production management and data.
While these entrepreneurs passionately believe their businesses will improve the overall availability, affordability, and safety of sustainable food, they also recognize innovative water technology is more challenging to attract capital compared to other high technology businesses. Although more venture capital firms have begun to pay attention to this industry, the main source of capital continues to come from angel investors, crowdfunding, family businesses, and foundations. Many entrepreneurs expressed interest in the Office of Advocacy’s work involving the new crowdfunding and other capital fund rules. And, since patents are central to innovative water technology development and commercialization, these entrepreneurs are also concerned with intellectual property, patent, and trademark protection.
Several of the finalists chosen to attend the IH2O Boot Camp were non-U.S. firms. I was intrigued to hear that one Australian family-owned water technology business has decided to move its manufacturing factory from China to the United States for their new business building above-ground, non-submerged bioreactors. These products can help U.S. and global agricultural businesses achieve regulated discharge standards at low energy and cost.
The owners of the Australian company told me they were attracted to the U.S. as a manufacturing hub because America produces higher quality work that is recognized around the world. More importantly, trademark and intellectual property are legally enforced, enabling small businesses to focus their resources on research, development, and marketing. As for the labor cost advantage China and much of Asia had once offered, it has gradually been eroded, making the U.S. labor force more competitive.
The owners did relate, however, that they have some concerns regarding regulations in the U.S. They said they would welcome a simpler understanding of regulatory costs, compliance, and procedures related to exporting to Asia, the European Union, and Australia without the need to employ a regulatory consultant that larger firms could afford. Their final decision on where to build their factory would factor in which U.S. region offers a friendly regulatory approval environment, competitive port charges, and time-sensitive export processing. These are significant costs to manufacturing for the global market in the U.S.
I also met with a previous IH2O competition winner who suggested the water technology industry is heavily regulated by at least a half a dozen federal agencies. He said he was concerned that any duplicative or lengthy review and approval process could slow down or detour the concept to marketing track for early-stage firms.
According to IH2O, 80 percent of the world’s water is connected to food and agriculture. These amazing water technology entrepreneurs and others will continue to find innovative ways to increase resources to support agricultural businesses. And Advocacy will continue to amplify their interests and concerns.
Yvonne Lee is Office of Advocacy’s regional advocate for Arizona, California, Nevada, Hawaii, and the territory of Guam. You can reach her at yvonne.lee@sba.gov.