"We are essentially establishing a business ecosystem to solve water challenges at speed"
One of the most water-stressed regions of the world, the Colorado basin has been suffering a severe drought for the past two decades and faces a hotter, drier future driven by climate-change. The region is also of unparalleled economic importance and water is over-allocated, unable to meet the growing demand. The founders of the Colorado River Basin Fund want to invest in companies that will help address the water challenges in the basin. To do it, they will focus primarily on satellite and digital technologies, to help farmers, industries and homes use water more efficiently. In this interview, Will Sarni, Founder and CEO of the fund, talks about their strategy and how they intend to address water scarcity and quality challenges in the Colorado basin by investing in emerging technological solutions, as a testbed that will lead to application in the global water sector.
Launched in March of this year, the Colorado River Basin Fund is a private equity fund which seeks to identify the technologies addressing water scarcity and quality issues in the basin, and help them advance to commercialization and scale
Can you tell us briefly about your career path and your current involvement with the Colorado River Basin Fund?
I started my career as a hydrogeologist working on water supply and contaminant hydrology projects for companies throughout the US. This changed when I was introduced to the topic of sustainability and the role water stewardship, climate change, and renewable energy play in it. I got hooked on the value of sustainability to the private sector and society, and as a result founded DOMANI, a sustainability strategy consulting firm. This led to working for Deloitte Consulting in their sustainability practice. I would go on to launch Water Foundry in 2017.
Through my work with Water Foundry, I’ve worked with U.S. and non-U.S. multinationals on corporate water strategy, with water technology start-ups and global solution providers, development banks, foundations and non-governmental organizations. I have also made angel investments in innovative water technology start-ups.
This led me to the realization that my next step was to raise capital for a focused fund to address water scarcity, water quality and equitable access within a specific watershed. Enter the Colorado River Basin Fund, which leverages my experience working with innovative water technology start-ups and growth stage companies, global water technology hubs and accelerators, global water technology providers, non-governmental organizations (NGOs) and multi-nationals who are looking for innovative water technologies.
What is the rationale behind the creation of the Colorado River Basin Fund?
Water is a local issue and, as a result, focusing on a specific watershed provides the opportunity to mobilize entrepreneurs, investors and other stakeholders around a specific location. The Colorado River Basin Fund looks to bring in entrepreneurs and investors from across the US and beyond to use the watershed as a testbed to scale solutions for broader applications. We are essentially establishing a business ecosystem to solve water challenges at speed.
Why do you focus on the Colorado basin?
The American West, including the cities of Las Vegas, Los Angeles, Phoenix and Denver, falling under the reaches of the greater Colorado River Basin (CRB), is now among the world's water stressed regions. It’s facing pressing environmental, economic, and social challenges from increased water scarcity.
"Focusing on a watershed provides the opportunity to mobilize entrepreneurs, investors and other stakeholders around a specific location"
In addition to its environmental role, the economic importance of the CRB cannot be overstated: the Colorado River supports $1.4 trillion in annual economic activity and 16 million jobs in California, Arizona, Nevada, Utah, Colorado, New Mexico, and Wyoming which is equivalent to about 1/12 of the total gross domestic product in the U.S. It is estimated that if 10 percent of the river's water were unavailable (a decline quite possible under projected climate change scenarios of 10 to 30 percent flow reductions by 2050) there would be a loss of $143 billion in economic activity and 1.6 million jobs, in just one year.
"It has become clear that under current and projected conditions, the Colorado River is no longer able to meet the demands of its users"
The CRB supplies more than 1 in 10 Americans with some, if not all, of their water for municipal use, including drinking water. The Basin provides irrigation to more than 5.5 million acres of land and is essential as a physical, economic and cultural resource to at least 22 federally recognized tribes. In addition, dams across the Colorado River Basin support 4,200 megawatts of electrical generating capacity, providing power to millions of people and some of the U.S.'s largest cities. It has become clear, however, that under current and projected conditions, the Colorado River is no longer able to meet the demands of its many users. Challenges are emerging that will require the acceptance of a new reality among stakeholders in the CRB.
As water infrastructure ages, demand grows, and the various stressors from climate change continue, we believe that the public sector and private industry will increasingly embrace technology and innovative business models to ensure adequate water quality and supplies throughout the basin.
Can you tell us about your intended investment strategy?
We believe digital water technology has the greatest potential for growth based upon water sector research and recent acquisitions. We are beginning deal flow engagement in the areas of remote sensing, IoT, real time quality monitoring, water quality testing and drone and satellite imagery sensing. A complete list of the technologies we’re exploring from an investment perspective can be found in our website.
"We believe digital water technology has the greatest potential for growth based upon water sector research and recent acquisitions"
It’s our belief that these specific areas are more advantageous for the schedule we hope to see for investment exits (approximately three years). We have identified at least three specific investments and are currently in the process of negotiating letters of investment intent with the founders. We believe our commitments will be dependent upon a capital raise of at least $1 million before deployment as stated in the PPM.
We seek to invest in companies that are post-pilot with nascent revenue that we believe have the ability to quickly scale in partnership with our investment, access to our network and guidance. We seek minority stakes but will seek to only partner with founder teams we believe understand our subject matter expertise and relationships to multi-nationals and other potential acquisition partners are just as important as our investment capital.
"The CRB Fund is focused on innovative water technologies and engaging with investors to support the scaling of these solutions"
What is the role of technology and innovation in water resource management in a region where competition for water is so high?
Innovation in technology, business models, public policy, partnerships (business ecosystems) and funding are needed in watersheds where there is increased demand for water, inequity of access, poor water quality, and climate change is impacting water supplies in terms of volume and occurrence (season and types of precipitation). The Colorado River Basin Fund is focused on innovative water technologies and engaging with investors to support the scaling of these solutions. While innovative technologies led by entrepreneurs and funded by investors alone can’t solve water challenges within the watershed, they are an essential part of the landscape of stakeholders who can scale solutions at speed.
"The website references 20 different technologies we believe can play a role in addressing water challenges in the Colorado River Basin"
Can you mention some emerging technologies to address water scarcity and water quality issues? Are any of those already in the market?
The website references 20 different technologies we believe can play a role in addressing water challenges in the Colorado River Basin. Specifically, we are interested in satellite data acquisition and analytics, AI solutions for industrial, utility and public sector applications, real time water quality and quantity monitoring, smart precision agriculture and smart home technologies such as water quality monitoring at the tap.
Is the seven-state Colorado River system viable into the future? How do you see water resource use in the Colorado Basin 20 years from now?
The Colorado River system can, and must, be viable in the future. However, public policy has to change rapidly to adjust to the realities of increasing demand for water, last century water law, underfunded and aging infrastructure and the impacts of climate change. We need to learn from innovative public policies and technology deployments that can support economic development, business growth, social well-being and ecosystem health. We believe, a more sustainable and resilient Colorado River Basin is within our reach.