The recent “Green Gold Rush” has spawned increasingly large sums of money being invested into the clean technology market, including the water sector, by venture capitalists. Until recently, however, none of these firms has had a targeted investment approach directed exclusively to water.
XPV Capital Corp., a Toronto-based venture capital firm, is the first firm to invest solely in emerging companies in the water industry. The unique strength of this company is its management team.
John Coburn, a former ZENON Environmental executive, has expertise in dealing with the unique opportunities and challenges of emerging water companies. ZENON, which was founded in 1980, became a world leader in advanced membrane-based technology for water and wastewater treatment and water reuse, before being acquired by GE in 2006 for $760 million.
Coburn brings 30 years of experience in water, 20 of those spent with ZENON from its inception. Under his leadership as president and chief operating officer, the company grew from a start-up to acquiring more than $146 million in revenue with a market capitalization of $700 million.
XPV’s ZENON team pedigree is complemented with strong investment experience in David Henderson and Khalil Maalouf. Henderson has broad transactional experience including more than 25 transactions as vice president of Kinghaven Capital. Maalouf developed his expertise leading successful investments for Vengrowth Capital, one of Canada’s largest venture investment firms. Both partners have been actively investing in the water sector for the past three years, applying the financial aptitude and creative structuring required to grow emerging water companies at a rapid pace.
Attracted by tremendous investment opportunities in water, many investors, including successful entrepreneurs, current and former CEOs and Global 500 executives, have invested with XPV. Like other successful venture investors, XPV is actively involved in its companies. The XPV team goes well beyond just providing money; its in-house water and investment expertise, experience and contacts are put to work in each portfolio company to help foster its growth.
David Henderson, XPV managing director, said that the value the firm brings extends beyond capital: “When companies work with us, they team up with experienced investment professionals who know and understand the water industry. They also gain direct access to our extensive network of business executives, analysts, investors and industry leaders. By drawing on this powerful network, they find new management talent, forge strategic partnerships, open new markets and build a stronger customer base,” he said.
Coburn believes that there is more opportunity today in the water industry than when he first started. “When we started ZENON more than 25 years ago, there was no market for new water technologies; however, today that has changed. I am more excited by emerging water companies today because the macro drivers are creating urgent scarcity and huge quality challenges, we now have unparalleled access to experienced water talent and there is growing availability of capital,” Coburn said. “This new environment gives entrepreneurs the opportunity to build a real company on the world stage in a third of the time it took ZENON, and this will likely even get shorter as the water issues worsen.”
Meeting Investment Criteria
One of the companies that has met XPV’s criteria for investment is EnviroTower. EnviroTower has developed a sustainable, technically advanced system for cooling tower water treatment. This system significantly reduces operating costs for energy, water and chemicals. The patented system replaces traditional chemical treatment, providing total control of the problems that typically degrade the performance of cooling tower systems (i.e., scaling, fouling, corrosion and contamination from bacteria).
The result is a clean system that maximizes operating efficiency and eliminates toxic water discharge to municipal sewage systems. XPV has been involved from the beginning by helping to hire needed talent, finding additional investors and building a winning strategy for penetrating the commercial and institutional building sector.
Even with successful investments, Henderson sees risk and reward in every deal.
“It’s a complex, challenging process that demands vision and daring. Our goal is to identify and secure key deliverables that will help companies achieve overall business objectives,” Henderson said. “Whether securing additional capital, engaging new key customers, finding top talent, driving growth with an acquisition or seeking a strategic sale, we want to help our investee companies get where they want to go.”
Water promises to become the volatile commodity in the 21st century that petroleum was during the 20th century. The quest for clean water has become one of the world’s leading environmental and health priorities, as has the development of technologies to achieve this goal. XPV’s specialization in the water area is a much-needed and very timely addition. The company may very well be at the right place at the right time, but it will be interesting to see how its investment in water performs in the long term.