An Unpopular & Challenging (yet True?) Take on Venture Capital in Water

Venture capital (VC) has been the lifeblood of innovation across many sectors, propelling startups from garage projects to global giants. Yet, in the nuanced and critical sector of water and water technology, VC’s role is both celebrated and scrutinized. We’ve often covered here the VC’s point of view, let’s look at the other side of the coin today:

with 🎙️ Brian Iversen – Founder & Managing Partner @ Cimbria Capital

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🔗 Cimbria Capital

🔗 Cimbria Consulting

🔗 Cimbria Nord

🔗 Why Venture Capital is Failing in Water (the Article)

🔗 Brian Iversen’s LinkedIn

🔗 Tom Ferguson on the DWW Podcast

🔗 Reinhard Hübner on the DWW Podcast

🔗 Paul O’Callaghan on the DWW Podcast

🔗 John Robinson on the DWW Podcast

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is on Linkedin ➡️

Full Video:

Brian’s Reality Check on Venture Capital in Water

Brian Iversen regularly wrote about the challenges and inefficiencies of venture capital in the water sector. His argument is multifaceted, touching upon the intrinsic nature of the industry and the misplaced enthusiasm of investors chasing high returns. Hence, let’s first dive into his main points:

  • Water: A Conservative Battlefield: The water sector is notoriously conservative, marked by a reluctance to adopt new technologies. This conservatism stems from the critical nature of water services and the risks associated with implementing unproven technologies.
  • The Myth of 5–10x Returns: According to Iversen, the expectation of 5–10x returns, common in other venture capital endeavors, is unrealistic in the water sector. The combination of the industry’s conservative nature and the scale of investment needed makes such returns rare and non-repetitive.
  • Misguided Investments: Iversen criticizes the approach of funds “pouring money” into water technology as misguided. He argues that this enthusiasm overlooks the sector’s realities and leads to misplaced investments.
  • A Call for Growth Equity & Private Equity: Advocating for a more measured approach, Iversen suggests that growth equity and private equity, which aim for 2–3x outcomes, are more suited to the water sector’s dynamics. This approach allows for investments across the water value chain, not just in technology.
  • The Risk of Disappointment: Ignoring the conservative nature of the water sector and the realistic outcomes of investments, according to Iversen, sets investors up for disappointment and financial loss.

For many of this, I can’t really claim he’s wrong (you’ll see there are nuances, though 😉)

Doubling Down on VC’s chances to Build the next big thing from scratch in Water Tech

Brian Iversen offers a rigorous examination of the venture capital landscape in the water sector, providing a sobering reality check against the backdrop of high enthusiasm and sometimes misplaced investment strategies that have characterized the industry in recent years. His analysis extends to debunk several myths about the sector, urging a reevaluation of how investments should be approached. Here’s an expanded look at his key arguments.

The Elusive Water Unicorns

Iversen is unequivocal in his assertion: the water sector will not produce unicorns in the traditional sense of startups that rapidly scale to $1 billion valuations on the back of 10x returns for investors. This stems from the very nature of the water industry—its incumbents, including Fortune 500 companies, OEMs, service companies, general contractors, and municipalities, are inherently deliberate and conservative.

This conservatism isn’t due to a lack of innovation or agility but is a byproduct of the sector’s critical role in global sustainability and health. Disrupting established processes that provide clean water is not only sensitive but fraught with risks, making the chase for high-risk, high-return investments misaligned with the sector’s core mission.

One can argue that, Gradiant kind of proved that Water Unicorns do exist. But I would agree with the essence of Brian’s point here (even if things may change in a close future!)

The Adolescence of Water Investing

Iversen points out that water investing, still in its formative years, has been narrowly and incorrectly pigeonholed as primarily “water technology” investment. This narrow focus led the first wave of venture capital firms to pour significant investments into early-stage water tech companies, a large number of which failed to meet their ambitious objectives.

(That’s an assertion I’d like to fact-check, so stay tuned, I’m gathering data)

This rush, motivated by the desire to discover the next big innovation akin to successes in the dotcom era or blockchain technology, overlooked the unique challenges and realities of the water sector. The “returns reality” in water—characterized by the absence of repeatable 5 to 10x investment multiples—contradicts the traditional venture capital model, which relies on a few high-multiple exits to compensate for the majority of portfolio losses.

(Again, unless a different VC model is built in Water, something we discuss in the full episode)

Rethinking Investment Models

Given the pressing need for innovation in water to meet the challenges of population growth, aging infrastructure, and tightening regulatory requirements, Iversen argues that a shift toward growth equity and private equity models is imperative. Unlike venture capital, which often bets on technological innovation with the hope of outsized returns, the private equity model, especially its more “hands-on” version, focuses on investing in business models and commercial value propositions across the entire water value chain. This approach is inherently more conservative, aligning with the sector’s risk-return profile and the reality of exit multiples available within the industry.

Private equity and growth equity models seek to achieve returns that are both realistic and aligned with the water industry’s traditional growth patterns. These models target a 2-4x investment multiple over a 3-6 year horizon, reflecting a more grounded expectation for returns. This strategy is not only more suited to the steady yet undeniable opportunities within the water sector but also represents a more sustainable and responsible investment philosophy in a field as crucial as water.

The Water Industry’s Unique Investment Landscape

Iversen likens the water industry to other commodity-based sectors that encompass upstream, midstream, downstream, and service components. With water prices steadily increasing, there are ample opportunities for investment across this value chain. However, the sector’s traditional cycles are slow and calculated, often at odds with the rapid-growth expectations common in venture capital circles. Successful investment in water requires a deep understanding of the subject matter, the right financial partners and models, and realistic growth prospects. When approached with a level-headed strategy, the water economy presents a “slow-moving tsunami” of investment opportunities that can yield significant returns over the long term.

In sum, Iversen’s critique of venture capital in the water sector is both a caution and a call to action. It urges investors to recalibrate their expectations and approaches, favoring models that respect the unique challenges and rhythms of the water industry. By doing so, investors can contribute to the sector’s critical mission while achieving sustainable and meaningful returns.

The Other Side of the Coin: A Case for Optimism

I wouldn’t one to one oppose those two opinions, as I think they pretty much coexist right now in the market and are both right to quite an extensive level. But, just in case you missed my conversation with Tom Ferguson a couple of weeks ago, here’s the list of “counter-arguments”

According to Tom, there’s a growing body of evidence and opinion suggesting that venture capital can indeed find fertile ground in water tech:

  • Building the Right Investor Base: The challenge isn’t the sector’s nature but finding the right kind of investors. Those who understand the water industry’s peculiarities and are content with “predictable, solid growth” can find rewarding opportunities. (what we’re discussing as the “unfair advantage” of investors blessed with the right skills)
  • Evidence of Success: Recent activities by specialized investors like XPV Water Partners, Emerald Technology Ventures, and others show a steady, though not explosive, flow of investments into early-stage water companies. This steady approach contradicts the notion that VC is blindly rushing into water tech.
  • A Nuanced View of Returns: While Iversen highlights the improbability of 5–10x returns as a standard, organizations like Imagine H2O have showcased a portfolio of water tech companies achieving significant growth and survival rates, challenging the assertion that high returns are a myth in the water sector.
  • Success Stories and the Potential for Exits: The water sector has witnessed several successful funding rounds for emerging companies (71 deals for $330 Million in 2023 alone), indicating a vibrant ecosystem for venture capital. The potential for mergers and acquisitions by larger incumbents provides a pathway for rewarding exits.
  • Shifting Operating Conditions: The landscape of the water sector is changing, with emerging regulations (PFAS…), increasing demand for innovative solutions (DLE, Membranes…), and a growing appetite among investors for sustainable investments. These factors create a fertile ground for venture capital to thrive.

The Truth is Out There

While Iversen’s criticisms of venture capital in the water sector stem from genuine concerns and experiences, they also serve as a valuable prompt for reflection and adaptation. The water industry, with its critical importance and complex challenges, demands a nuanced approach to investment.

The counterarguments suggest that, contrary to being a domain where VC is bound to fail, the water sector presents unique opportunities for informed and patient investors. The key lies in understanding the sector’s realities, aligning expectations with achievable outcomes, and supporting companies that bring innovative and essential solutions to water challenges.

The discussion between caution and optimism is not about proving one perspective wrong but about finding a balanced approach that recognizes the risks and rewards inherent in venture capital investment in water. As the sector evolves, so too will the strategies of investors, entrepreneurs, and policymakers, paving the way for sustainable growth and innovation in water technology.

In navigating these waters, stakeholders must remain vigilant, adaptable, and informed, leveraging the insights of industry veterans like Brian Iversen while also staying open to the evolving landscape of investment opportunities. The journey of venture capital in the water sector is far from over; it’s just finding its course.

My Full Conversation with Brian Iversen on Why Venture Capital is Failing in Water

These are computer-generated, so expect some typos 🙂

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Antoine Walter: Hi, Brian. Welcome to the show. Thank you. I’m super happy to have you because what you wrote raised controversy amongst my former guests because I’ve been interviewing. Venture capitalists specializing in water and of course I would think they disagree with some of your thoughts but I’m super interested in your thoughts so without too much introduction let me dive straight in I started and discovered you with the two thousand nineteen.

Paper you wrote on on linkedin which is very simply titled why venture capital is fading in water before we dive just into it what’s your background to that paper what leads you to write that

Brian Iversen: all first of all i appreciate you and inviting i said another way i think i almost invited myself because you called me out on linkedin, for that exact piece i still believe a lot of that so we should talk about it because there’s more details to it i’m an investor in the water, Economy as well.

I’m doing the later stage and I’m deliberately staying away from venture capital for the reasons that I wrote in that paper. And what are we going to talk about today? You asked me recently, if I would quote unquote, double down on my view on venture capital investment in water, as I laid it out in 2019.

And I think that’s almost entirely a yes. There’s lots of reasons and you should ask specifically. I just think it’s difficult. I don’t think necessarily, and we’ll get to this as well. That it’s more difficult to invest in water than anywhere else. I just think sometimes when people look at it, it’s a little foggy.

I think people are applying variables. They shouldn’t in theory on a piece of paper. It’s like anything else. You need to look to certain aspects. You need to have a business and investment acumen to get it right. But if you blur your thoughts with, I want to change the world, I want to impact positively ESG the wrong way.

Then sometimes you end up making decisions that doesn’t work. And then we are dealing in an industry that is working in a more conservative way, slower for very valid reasons. That I think it makes it more difficult because I’m not saying, and I never said by the way that there wouldn’t be an opportunity to make one or five returns because of course it can happen.

You can get lucky, you can invest in the pre money that is maybe off market because anything we’re doing still is quite inefficient when it comes to investing in water, but you can’t do it on a continual basis. And that takes out the normal venture capital model. And that’s my point. And I’m staying with it.

Antoine Walter: So it’s about the repeatability. What you’re saying is that you might within your VC portfolio gets by accident, something which is really skyrockets, but you’re deeming that to be an accident.

Brian Iversen: I think it maybe is a little negative to call it an accident because smart people with specific knowledge and.

The unfair advantage that I think we should talk about as well, they may get there, but for this to be a model like a venture capital model, it has to happen frequently enough that it will happen into every single venture capital fund one, two or three times to make up for the downside that is also natural in that spectrum or inside of that way of investing.

That’s what i’m saying can’t be done and i still think it can’t be done and i would challenge people to prove to me and show me a portfolio where it works

Antoine Walter: the unfair advantage you mentioning is my conversation with tom ferguson the founder of burnt and adventures and he’s seeing is unfair advantage in his time with imagine h2o and how he developed.

Looking at all these entrepreneurs, some common traits and a screening methods to reduce that uncertainty.

Tom Ferguson: If you want to be smart first, avoid doing dumb things. At least I felt like I had an unfair advantage in terms of being able to understand what dumb looks like. What is a bad idea? It’s a quote on our website from, from Charlie Munger is that everybody’s trying to be brilliant.

I’m just trying to not be idiotic, but it’s harder than most people think.

Antoine Walter: So you’re not saying that he can’t be successful. You’re saying that if you don’t have that unfair advantage, the VC model in general. Can’t succeed today. I’m just trying to understand what you thought.

Brian Iversen: That’s fair. I’m saying a couple of things and I know Tom, obviously, and I like Tom.

He thinks fast and he speaks fast and he knows what he’s doing. His background, by the way, is also very different than mine is. I come from a private equity type background. I was a CEO, I have military background. I think I come from a world where what I do, it fits to my learnings. And I think what he’s doing fits very much with what he’s done in the past.

And I think he is as close as anybody to have done fair advantage that he talks about, but knowing it all upfront in a industry that is changing, that’s on a disruption is very difficult. So I still think even though I like and appreciate what he’s doing, and I think he’s the natural person doing it in a space, I still think it’s extremely hard.

So it doesn’t take away from the fact that I don’t believe the model. It’s a sustainable as an investment model. I think there’s more to it. When Tom is speaking, to be fair to him, he is talking about participating from the beginning and throughout the journey of a water tech company, for example, for not only the seed states and the venture states, but actually beyond that.

And I think that is actually his very future key to success that he needs to go beyond the venture phase. So I’m very respectful to Tom. But again, I don’t believe that you’re going to stumble into enough high level returns that’s going to make up for those that doesn’t work.

Antoine Walter: Actually, that’s makes you agree very much with John Robinson from measuring ventures, who was on that microphone as well, who’s been building fund one, fund two, fund three, where fund one was doing seeds and venture rounds fund two was doing seeds and series a and fund two is aiming at series a series B.

So what you’re saying is that you can’t just run with VC. You need to build an ecosystem. Along the entire value chain, if you wish to succeed,

Brian Iversen: maybe I’m saying that people around me are learning what we have claimed from the beginning that you cannot, unless he matched the exact LP group from the beginning throughout that process, he still has an LP group that’s exposed to the earlier stage.

And I. I would feel for them a little bit that is the learning. I mean, I, I think everybody’s going to get that. It doesn’t mean that you can’t, you shouldn’t look at those companies. And by the way, from the other side of that end, because what does that mean to young, new technology companies and what, where do they get the money?

Let’s say nobody was brave enough to do. What I’m not brave enough to do, then it’s a little more difficult, but we are in the water industry and there is other funding sources that I think this should be considered patient funding sources that can participate upfront and help these technologies and these young, very young, immature companies to get started.

There’s a few other ways, but that’s probably longer. Conversation.

Antoine Walter: So whether grants funds or simply try to be profitable from the get go. But yeah, you’re right. It’s a different conversation. Something else which you explain aside from the repeatability is this 10 X factor. So VC would need 10 X. You say that with your stage at which you embark, you can have much less risk and aim for 3 to 4 X.

If I get you right. Why the 10 X? Why the threshold?

Brian Iversen: 10 X is just to kind of make the statement. I’m now You know, made throughout already. This conversation is that I don’t think it’s reasonable on a continual basis. We believe. And what we are doing is to we approaching the risk return profile of investment in the water and street in such a way that we think very much like private equity.

We want to never not get our money back. That’s the. Goal. And then we wish to get two, three, maybe on a very good day, four times the money back in a three to six year period of time, it could be longer. I realized that you generally need more time in our industry because of the nature of our industry. I am just never aiming or telling my investors that I’ll get a five to 10 X on anything.

I don’t think it’s feasible. And the risk you would have to take would be lopsided. So I think you just end up. Making more mistakes than ever actually making up for those mistakes. And the risk return, we approach in a such way that we involve ourselves. That’s another way that we do things differently.

If you see an investor, you need to be smart up front. As Tom says, we need to know it all and nearly to get as good of an outcome as possible. I, Think he’s right in saying it. I also think it’s extraordinarily difficult to do. We will do the same level of due diligence, but what we also have in actual belt is that we take ownership of a certain size, we will have governance of the companies we participate in.

That means we also have an ability to participate and act when things are not going as planned. As something you can be certain about in our industry, which is an industry under disruption. It’s a slow disruption, but it’s being disrupted and it’s changing. You will not know everything upfront. Whatever happens that you didn’t plan.

To happen, you need a way to react. We believe our investors are better served if we have an ability to be part of that. So our ecosystem, Symbria’s team will be hands on all the time, but especially in a case where the upfront plan is not quite working, we now have an ability to participate and help and hopefully correct it in a such way that we still get to.

The overall goal, both for the company, for my investors, and frankly, for Cymbria.

Antoine Walter: You touched a bit on, on Cimbria. Let’s just present what you’re doing because there’s an ecosystem identified three companies. So there’s Cimbria Capital, which is the investment body, Cimbria Consulting, which is doing a bit of this governance.

You, you, you just. alluded to, and if I’m right, Cimbria Nord, which is a specific arm, which looks at the Nordics and the link between Nordics and North America, which I would deem to be your background.

Brian Iversen: That’s where my accent is wrong as well. So we set up Cimbria as an investment firm for, and the plan was always so independent of the fact that we later set up a consulting firm that is doing certain things, obviously without being invested.

Cimbria Capital was always meant to. Have this hands on approach. That’s the growth equity portion of it. That’s kind of the private equity background. And we set up from day one, what we call our acceleration program. And it’s really just our way of defining how hands on we actually are. It’s not only by being participants on the board, but also having a team that can help with day to day stuff for a portfolio company, because if it’s the one thing you know about, especially, and we’re not only investing in small and new companies.

But small and medium sized companies even will always have things that they don’t have time for, don’t quite know how to do. And we apply to build a team that we can truly add value in those areas that may not be what they have done well, or they’re not doing, they want to do better going forward. And that means not only are we advising about, go do certain things in a different way when we show up as an investor.

We show up and say, Hey, we have a team that can do it for you. That’s part of the value proposition that we provide into our LPs. It’s also how we change the risk return profile of the companies we’re investing into. When we look at a company to invest into, we don’t just look at risk return profile. Of the target company, we look at the risk return profile of the target company and us.

And because if we already can see upfront, there’s one, two, three or more ways for us to add value. Our investors are not just getting whatever was presented to us by the management team of that company. They get the combination of Symbria ecosystem and that management team. That’s the risk return profile that I sell to my LPs.

It’s not just me taking quote unquote bets up front. That’s a long way of answering what you asked. I realized that. So we did that independently from the consulting company. A couple of years after we founded Symbria Capital, we ran into companies that wanted our help without needing capital. And then we didn’t invent this.

Many have done it before us, but we set up a consulting firm next to our investment firm with the purpose of having an ability to add value, help companies that was not looking for capital and what it gives us by having simpler consulting, we have a sourcing platform because we end up meeting, spending time with seeing things in a much broader ecosystem than we, if we were just investors and that allows us.

For proprietary investment in some cases that we otherwise wouldn’t see or get. And Cimbria Nord is really just our parent company, a holding company in the Nordics, originally from Denmark. That’s not really why we’re there. I think that’s one of the reasons we can probably do it well, because we have a team beyond myself that is both from North America and the Nordics.

The Nordics have spent time on sustainable industries, the water industry, specifically, renewable energy as well, for longer than other parts of the world. They have had a government, they have a culture that has pushed it for way longer. And therefore they have management team technologies that are worth considering when the world is expanding in this direction.

One of the few true unique things about Symbria is that we have that linkage into. Northern Europe. Let’s follow that. And from an investment standpoint, we like to find companies there that wants to get into the U. S. market because we speak both sides of the ocean in some sense, from a cultural language perspective, business perspective, so we can be helpful to them.

So that’s part of what we do and part of who we are.

Antoine Walter: Regarding that investment in companies, what’s the type of profiles you’re investing in? And when you said that you’re looking at what you can bring between you and them and that you’re looking at the synergies. In that process, what are the common traits of these companies?

When you invest in them,

Brian Iversen: that may actually brings you back to the unfair advantage. We have different tools in our toolbox. So each company we run into will have different needs. And we try to have a toolbox wide enough so we can cater to those needs. Some of the small companies we’re talking to, there’s always something around.

Business development, branding, messaging, especially if you take a company that is localized to one place and I don’t want to go somewhere else. There will be things that we can add and help with, not because we’re special, but because we see a lot of small companies growing and we’ve seen a lot of things that has worked and a lot of things that hasn’t worked.

So we try to add that. So I think one common theme is, especially if we find a company in Europe wants to get into the U S market, that we will be better than most to direct that company towards investing the right amount of money in the right things and get the best outcome and return on capital on those investments.

That would be one way. The unsolved vanish, by the way, is relevant here because. I don’t believe that we generally as a broad perspective necessarily have an unfair advantage. However, we will only invest if we feel we have an unfair advantage related to that specific investment opportunity. And that comes back to us saying, what does this look like with the skillset, usually deep technology skillset and potentially commercial skillset with the company we look at.

If we are part of it, what does that mean? And if we conclude that we, in that case, As a combination between them and us have an unfair advantage, then we go, but there will be companies where we may not find that. And in that case, we don’t. So the unfair advantage to us is not a broader unfair advantage that we claim to have.

It’s something that will be created uniquely with each investment opportunity.

Antoine Walter: You mentioned the stakes you’re taking those companies. What is your. Typical size you’re taking is it 20 percent 30 percent it

Brian Iversen: has been more in several cases it’s also been less than a couple of cases we are in some sense opportunistic what’s key to us is that the company is commercial in traditional sense a way to explain that and maybe in a more meaningful way is i’m looking for.

Management teams who are commercial who’s thinking commercial because from being commercial as a general thing means you need to have clients more than one. You need to have a product and a value proposition on a business model. You have to have a full value proposition. You definitely will have to have a technology that works and that has been sold to more than one client.

Those are some of the normal check the boxes thing. Your business model may need tweaks. I mean, frankly, business models should always be reviewed, but they have to have all of those things. They have to be commercial. That’s when I get in and have an interest in a company. When it comes to ownership stakes, again, this could be a lot.

And we have a couple of. Situation where we are outright owners of the company or majority. There’s no rule there besides the fact that I’m not a 5 percent owner without an ability to add value, change things. And I’m not saying I always can at all, or we can, but we just want to team up with somebody where we think we can help.

But more importantly, they believe we can help. The management team and the company we partner with, if they’re not happy that we’re involved and, and deeply involved, then it’s probably not for us. We try to find those relationships. We can team up and do something better together

Antoine Walter: if i’m right you’re wording that under a company which is in his adolescence i just want to nail down the criterion because you just explain them but just to be sure understand it so they need to have more than one commercial project so probably.

Two, three in Paul O’Connell’s thesis about the adoption of water technology, he defines the next step at three. So I guess you’re somewhat aligned with that thesis as well. They need to have a product, a value proposition, and the team which aligns with what you’re aiming to bring as a value. Do you have specific verticals or is it really as long as it touches water, everything is fine?

Brian Iversen: We don’t have specific verticals. I think the opportunity set is across the board. We don’t charge water rights. So you can exclude that. It’s a very different asset class. We invest in businesses. Right. We invest in business models and businesses and business people. So we are going across and we don’t have a featured or a specific niche focus where we think the opportunity is much greater than elsewhere, because I don’t think that’s how our industry works.

The opportunity is across a lot of sectors in the water industry. And this is another reason why I keep handling the VC guys because it’s infrastructure. And whatever we touch, it’s infrastructure related. So yes, there’s technologies and new technologies and there’s SaaS models and all those cool, sexy things, but you’re still applying it to a bunch of infrastructure and things take time when you’re dealing with big assets and old assets, and you’re trying to move the needle.

So from the beginning, we just think about this as an infrastructure related play across the board. That’s how you’re forced to think about it. And if you don’t, you’re risking to get hurt from an investment standpoint.

Antoine Walter: That’s where I’d like to challenge you because you doubled down on your 2019 paper with the 2023 paper published in a bigger paper by Amman.

At the time, I think Gradient had not raised its infamous series B and now Gradient is a unicorn. So there is a unicorn in the water market and then we can debate if that changes anything. But my point here is different. It’s Gradient has. designed itself to only go after the industrial market to focus on a sector, which is a water sector, but Dick related from the infrastructure topic Dick related from the big states investment from the big topics about the aging infrastructure, the Biden Harris package in the U S the efforts to revamp a bit of the infrastructure in Europe and so far and so on.

So as much as I agree with you on the entirety of the sector, wouldn’t you think that there’s a possibility to carve a niche within the big water sector cake and to say that behaves

Brian Iversen: No, I do. And I think that’s smart. You know, one of our many bullet points we go through when you think about what’s a good investment or not is follow the money, right?

So if you can find a way to participate a place where you know your customer and the customer has plenty of money to spend, and they know they have a pain point they need to fix, you’re in a better spot. So if you can carve out a value proposition that is. Catering to something like that, you starting out with a better foothold, there’s no doubt.

And again, I’m not saying there can’t be good investments or fantastic investments in water. Just to repeat myself, I just don’t think you can do it on a consistent basis. And by the way, just because somebody is raising a bunch of money to get a high valuation in terms of this too,

Tom Ferguson: nothing is set until.

The liquidity event happens, one of the major LPs in the venture business calls it the moolah in the cooler.

Brian Iversen: The play is not over until somebody’s walking home with a bunch of money. And I can’t speak and wouldn’t want to speak to any of that in detail because I’m not an expert on exactly what happened there, but I’m just saying as a general rule, there’s plenty of ways to raise money in our sector.

There was plenty of ways to raise money in renewable energy 15 years ago, but that doesn’t mean that anybody actually made money. This means that there was an excitement and even a hype. Related to a certain asset class. Sometimes it’s right. Sometimes it’s wrong. I think, especially when you’re dealing with something that could be sold as if you’re saving the world, that could be the reason why people showing up doesn’t mean that, for example, a retail investor and IPO have any idea what he or she is doing.

Antoine Walter: The other aspect on which I’d like to challenge you is on the risk, because I was quoting this research by Apollo Callahan, which goes fully in your direction, that it takes. A hell of time to bring a technology to market and that if you’re looking at 6, 8 or 10 years exit, it’s going to be very, very difficult because simply at that stage, your technology is not adopted.

But the other side of that same story is that what he was proving in his research paper is that water companies don’t die.

Paul O’Callaghan: venture capital investment community would typically anticipate that 10 percent of their companies might, might make it, they might succeed. So the success rate is relatively in keeping with that trend.

The surprising thing about the water sector is the number that they don’t disappear or fail. And they don’t really make it. They kind of live in this kind of no man’s land, this gray area, gray zone where they’re, they’re neither very successful. And yet they kind of hang on for a decade or two decades.

So that’s probably what’s most unique, I think, about the water sector compared to other industries.

Antoine Walter: They live in limbo, valhalla, however you want to call it. They don’t make money. They don’t become super big, but they don’t die either. So you don’t lose your investment. It’s illiquid. You can’t do much with it.

But those companies. Oftentimes end up being slightly profitable, not making big bucks, but they make a bit of money. They just can’t grow because the market is set up that way. So doesn’t that change the risk profile?

Brian Iversen: Apologize for not knowing the details behind that study and what he wrote because I don’t.

But I have a question before I can answer that. Your question. And that is, is it the same investors who participated for that long and had the same ownership? Because I’ve been close to companies and known companies that lasted. For longer than maybe even they should have, but they did that because you can always find some new guy to put more money in.

I mean, the company surviving doesn’t mean that a bunch of people didn’t lose money along the way from an investment perspective. So I don’t know the answer. I’m just saying that’s part of that equation. That’s important because there’s plenty of good things about our industry. I’m not bashing our industry.

I’m here for the long haul. There is no doubt. We refer to it as a slow moving tsunami of opportunity, no rocket ships. People can run around believing in rocket ships and they can try to find them. There’s nothing wrong in that. That’s just not our approach. I believe there will be investment opportunity for many of us for the rest of our lives, because it is that important and it is moving and it is changing.

And several things have changed since I wrote that paper in 2019. The appreciation of the water industry, water as a commodity, From our communities have increased. We realize that it’s not what it used to be. That change is required. We have technology that can make that change. And that’s very, very exciting.

But again, when I say no, no rocket ships, and I say that the opportunity across the board, and when I say slow moving tsunami of opportunity, the opportunity is massive and it will be there, but it’s not something where you can expect to show up yesterday and make money tomorrow. That’s just not how our industry works.

It’s not how it should work because it’s sensitive. Yep. And it should be a little conservative because we’re dealing with the foundation of our society. I’m all for it. I’m, you’re going to see, see here for the next, however many years I’m still working. And I hope that you’ll also see that I’m mostly successful along the way.

So I’m not doubting and I’m not bashing the industry. It’s the approach I’m really curious about because we’re still in a first or a second wave of investors in the space. And I’ll still challenge you and anybody who has that venture capital fund That actually did what it was promised to do. I could be missing it because I don’t know people’s returns because they’re not out there.

But I do think you and I would be more aware of more significant wins. In water tech if I was wrong

Antoine Walter: first I never imply that you’re bashing the industry super interesting that I just want to make sure nobody’s yeah and it’s a super interesting conversation I have a last challenge and then I promise you I move on but that one is interesting to me because.

Part of the challenge is close to you. I mentioned the industrial vertical. I mean, it’s a matrix. I don’t know if it’s vertical and horizontal, whatever is it, but let’s take the membrane part of the industry. The value proposition behind the companies which want to disrupt the membranes is that basically a membrane is an espresso system.

Once you’ve established your membrane in a system every seven years, every 10 years, every whatever years, the hardware around the membrane will stay and you will just change the modules. So if you get established and you’re strongly differentiated, then you’re in a good position to have a repeat business.

And as membranes is a number game, if you can reach the big numbers and the big volume, well, chances are you’re quite profitable. Sure. There is. Early stage investments across the board right now, but we can channel it down to some sub niches, which are much more attractive than others. Atmospheric water generation for an entire set of reasons I don’t want to enter today, but which are beyond my understanding and membranes.

And there in membranes, we see companies which go into spacers and there are several examples of them. We see companies which go into the membrane, some others in the module, some in the materials, but there’s really a bunch of those. And if I look at the portfolio of burnt and ventures, for instance, Today, my best bet of the company, which might bring them to the level where you and I will agree that maybe there is an example of a VC who made it, is Zwitterco, which is changing the material in the membranes.

Where I’m heading with all of that is that, you know, pretty well, Matt Boschowski, which is on your board or one of your advisors. He’s an operating partner. Operating partner. And he’s also the CEO of Aquaporin. Which I would deem to be one of the companies in that wave, even though through a different route as they went through IPO, but of that wave of company, which said, come on, if we go a bit more B2C, if we go a bit more under the sink and approach it a bit differently from the traditional conventional infrastructure, we can maybe I Reduce the timelines and bring it to the big size faster.

So would you see here a potential exception to the rule that it’s a slow sector

Brian Iversen: with Aquaporin?

Antoine Walter: With the membrane sector and maybe Aquaporin as an example?

Brian Iversen: I don’t necessarily think and I should speak to who is doing what right? I think it’s still tough and I think it’s difficult. And since you’re bringing up Matt and first of all, I don’t speak to Matt about this company and it is a public company, so I have no information.

But Matt and I speak, but we don’t speak in detail. And I definitely don’t have a information. That’s not public information just to make that clear, since this is a podcast. I like Matt. I knew Matt from before he took that job. He was located in France, by the way, at that point I met him and he’s a smart guy.

He’s a commercial guy. I also think he stepped into extremely difficult job, but as a general comment to what you’re asking about, one thing is that you have technologies that work where you can create business models that will be very, very profitable. That’s a hundred percent correct. There’s still a lot of the companies who hasn’t found those business models.

There’s also some of those companies that’s been over financed or wrongly financed along the way. And again, you, you bring it up, I could pour in, I do follow the stock price and it’s not impressive. I think there’s lots and lots of issues with having a huge team and that’s risk associated with having a huge expensive team.

If you’re not moving forward as fast as you hope commercially. So I think you just have to be careful. Because the business model is still key, but we’re business model investors. We’re not technology investors. At least that’s what we tell ourselves. So if you have the wrong business model applied, you may still lose.

There’s a lot of technologies in water that will eventually make it. Most of the delays resort to the people and the business models that were supplied. So, you know, good luck to Matt and good luck to our coupon, but it doesn’t look pretty. It’s not the only company out there that, that went the IPO route.

That has pretty obvious issues let’s put it that way

Antoine Walter: i could even generalize and say that’s none of them has demonstrated the path to work today it’s not the end of the story and we’re in the middle of the story but as of now

Brian Iversen: it’s not and it’s not necessary because i don’t have technology works but you went out and i mean, it’s always a problem whether it’s an ip route or it’s just any other type of round investment round capital race it’s, Very fun for the owners to get a pre money valuation that’s high on day one, but it’s actually more important.

It’s appropriate because if you can’t live up to the expectation set on that day, it’s only sleepless nights and down rounds and management team members leaving and people losing money. So it has to be appropriate along the way. Because otherwise it’s a setback and that has been one of the issues because we have, and this is one of the pieces, it’s of inefficient still, we’re still in the early stages of learning how to invest in water and especially in the early stages, it seems like there’s always some new money that’s hoping for returns that doesn’t exist and that means that, again, let me just double down for the third time, means that the earlier rounds of all of these investments, they’re difficult to participate in, and even if I wanted to be that guy, it seems like there’s always some other guy with money that has hopes and expectations that I don’t Feel that matches reality.

And that means I can’t participate. So it’s so inefficient in the early stages and early in it, when it comes to investment and investing at the right pre money valuation that for now, I’d stay out of it, and that’s also when we sell something, I mean, if you exit and you get your money, you can take your ball and go home.

Great. That’s not how it works in IPO. You’re locked up, right? So you can tell a great story. You can have retail investors who. is investing for reasons they probably shouldn’t because it’s water and it’s meant to save the world or whatever is being sold to them. They’ll participate. Everybody’s locked up and now you have only trouble from then day and forward.

And that’s what you’ve seen. That’s what you just stated.

Antoine Walter: Your mention of exits gives me a very interesting segue. Because I’ve been through several websites of investment firms, and there’s something on your website, which I’ve never seen written anywhere else. And on the same time, it makes just a ton of sense.

So it’s just about transparency. You’re saying that you need to envision the exit before you enter. What’s the back story?

Brian Iversen: I don’t think that’s so insightful actually, but I’m glad to bring it up. You need to know where you’re going. I am a little bit of a controlled person and I would like to have a plan.

And even though we decided to deviate from that plan, it’s still better to have a plan and deviate from it deliberately. Then not knowing where you’re going. I think it’s very important also because of your timing perspective, because you said it before Tom said it when you interviewed him. Things take time.

Tom is talking about, uh, shortening that time, which I think is absolutely possible with the right tool set and value add program and, and ability to do the right things along the way, but. Especially in water, because if you don’t get it right, it could take much longer than anticipated and also longer than your traditional limited partner group of limited partners would appreciate.

So knowing where you’re going and knowing where the company is in that journey, I think is important. It’s not complicated though, because I think most things that I touch and we touch from a. States perspective, the most natural exit for us is always to some version of a strategic player, an engineering company that needs to jewelry created, a large share of participant in the water space.

That’s really our spot. And that’s what growth equity and private equity is meant to do is to fill up the vacuum. Between seed and early states and the bigger players, that’s how it works. One of the reasons why I love what I do, because not only are we obviously trying to make money, we are also participating in making the whole system efficient.

So we always think about a strategic buyer and who would that be? Not only it’s a strategic, but also which direction, and then we’ve tried to create relationships. With those way before we even really starting a sales process, many times it’ll take two or three years to create a relationship or several that will ease the exit when you get there.

Antoine Walter: I think you recently exited the first company of your portfolio. Can you tell me that story?

Brian Iversen: Yeah, not in great detail because we don’t share that, but yes, when we had a first full exit and we got beyond what we normally promise our investors when it comes to internal rate of return, I’m so very happy with it.

It was an operating company in Florida. That we owned minority stake, small stake, but we sat on the board, have known the company for a long, long time. And we sold to an industry player. Let’s call it that rather than a strategic, they wanted to own the company for the longterm. That was not us. We were there to transition.

We made a good return. I’m very proud of it. It’s important for a small firm like ours that we show that we can do those things. Yeah. We’re happy with it.

Antoine Walter: Several seasons ago, I had the conversation on the microphone with Reinhard Hübner from Skion Water, and he was explaining how When Skion entered the water, they snapped OVIVO because they were very, very few middle sized companies and they needed a middle sized company as their vehicle for growth.

Reinhard Hübner: The result has been that there’s no mid sized companies anymore. There’s lots of small ones, but the mid sized with a few hundred year million in turnover are gone. And then there’s a big one. The market structure still is quite similar. So when we looked at North America a few years ago, there was hardly any company in the range of say 75 to 200 million, uh, turnover.

It was the same. small ones and then there was a few very big ones. And we were actually lucky with a weevil, uh, uh, that they were in the range of two, 300 million that we could take them from the stock market. Uh, this is still the case. So you really have to do small buy and builds.

Antoine Walter: And if you look at the market now, they are big groups and they are.

Small companies and there’s a plethora of small companies big groups don’t want to acquire the small companies because the cost of integration is bigger than what they would bring in terms of even if they have a cool tech even if they have a cool market access they are too small for it to be worth it in terms of snapping so if i get your rights you are.

Value proposition is to say those are too small. The middle players don’t really exist. So we can grow those small players until they reach a critical size where they get interesting for the big ones.

Brian Iversen: Yeah, that’s accurate. And I couldn’t have said it better. I mean, it is generally what I think growth equity and private equity should do in any industry.

My industry is a little narrower. I think still, you know, I was in an energy investor before the gap is bigger because then you can be a growth equity and private equity investor and invest in something for 50 million and bring it to 250 and now you’re a bite size for the big guys that bite size is small and water, but there’s still a vacuum and that is our place.

So I think you said it perfectly

Antoine Walter: on your website as well. You have a list of profiles for companies that would be interesting. Some are. Pretty obvious like i think the first one is a company which is at the beginning of the infection curve if you wouldn’t want to invest in that company i don’t know why you’re investing in the first place but some others are a bit more unexpected you have unexpected the plateaued.

Parading shift in need of new ways. Unexpected changes undercapitalized as well. One would argue that’s pretty natural, but I could say that differently. You’re looking for struggling companies. Am I right?

Brian Iversen: Um, no. Well, you would say it that way. I’m looking for companies that we can change and increase valuing.

I’m probably not looking to invest in great companies as odd as that sounds. If I invest in a great company and I pay the appropriate price for that company, how do I get the two or three X that I’m promising my investors? My goal is to invest in a good company and making it great or a mediocre company and making it good.

You know what? It could even be, you know, invest in a shitty company and make a mediocre. The key part is that I can take a company and we can help a company become more than they were and we make it sell a whole. So that’s key because a lot of things can be made better. But it’s not necessarily the same as you have a sellable company in the end of the day.

So that’s key. We are in an industry that’s changing forcefully, and that means there will be winners and losers. And therefore there will also be people sitting around with companies, small companies, medium sized companies. But they may need somebody like us. And if they think we are those guys, then we would like to participate and make something out of it.

We’re looking for opportunity and investments. That’s how I would describe it in the way that you just correctly mentioned.

Antoine Walter: Did you do inbound with these companies? Outbound? How do they find you? Or do you find them?

Brian Iversen: I mean, I mentioned our consulting firm earlier and our consulting firm is a great lead creator, simply because we are out there and we have, you know, A team talking to companies.

I mean, we like to be deal creators. We’ve written that to deal creators, meaning we hope to be at the table the moment of time that a company is realizing that it would be interesting to take in five to 10 million on new capital to do something new or different. We don’t want to be there when the ideation or the creation of a new technology, that’s not us, you know, they can call Tom, but I would be happy to be at the table in the moment that.

A company is changing or renewing or improving because then we can be part of that. We have inbounds because we’ve been around long enough. The last part of our name is capital. That means we’ll get calls. It’s more fun. I think it’s better to be out there and find it ourselves because that allows for proprietary deal flow and simpler consulting is very, very helpful with that.

Antoine Walter: I’m. A finance muggle it will show in that questions i just warn you beforehand i’m a water guy i find the full investment thing interesting but i have no competency so here’s my stupid question you qualified yourself as a starter in one of your recently would it be something which is possible that someone wants to acquire.


Brian Iversen: yeah, I mean, I potentially, why not? I mean, it happens all the time to be very open with you. And what you read was my most recent New Year’s letter where I allowed myself to call myself a startup, which is a little bit me just being, um, open because normally I wouldn’t necessarily think I would benefit from calling myself a startup because I’m supposed to obviously, A few hundred percent on top of things, since I’m an investment company.

The fact is we have to start somewhere and we did, and we’ll spend years kind of perfecting a toolkit. And at this point, I’m not any longer really referring to us as a startup, but we have been, but our biggest pain point as a company is frankly, lack of capital. I think we’re much better at finding investment, executing investment, running companies, helpful running companies, then we have found a way to be great at raising capital from a strategic perspective.

We are spending real time this year specifically. That’s why I brought it out up in my newsletter to look for strategic partners. That can help us do that piece. And what we have is a fairly unique, very strong ecosystem and team that can execute investments and have a very specific way of executing investments into the water industry.

So if a much bigger private equity player or strategic had a need to team up with somebody like us, then give me a call.

Antoine Walter: That makes me a smooth transition to my crystal ball question, which is you will keep building, you’re no longer a startup, you’re in the next phase, you are looking for partners, I’m pretty sure you will find them down the line.

Which might be five years, 10 years, 20 years, however you want to define it. What is it that you want to build?

Brian Iversen: Good question. I want to do what we’re doing today. I just want to do it at scale. I want to build a much bigger team. You know, I don’t want a hundred people behind me as is inside of Symbiote Capital, but I do want a substantial team.

We will stick with the plan. It’s North America. And Europe, that’s what we’re good at. That doesn’t mean there’s not opportunity everywhere else in the world. We just not the ones for that. It’s very important to me that I think it’s important to all of us that we do what we’re good at, what is our highest and best use and to us, it’s North America and Europe, so we’ll do exactly what you read on our website.

I would just like to find a way to do it at scale. The worry is there’s always the personable approach that I believe we have today. How do you keep that at scale? So I want to grow, but I want to impact. We’re going to talk about what it means to be an impact investor, but I want to make a difference.

But I also firmly believe that the best way to make a difference is to do something profitable because that’s how you make that impact sustainable. My hope is that I will partake and hopefully lead a team that has a hundred million dollars plus on the management. On an ongoing basis, because that I think allow us to participate in a profitable way, but also an impactful.

Way in our industry, that’s what I set out to do, and that’s what I have decided a long time ago that that’s what I’m decent that

Antoine Walter: last question that deep dive one important part of your DNA from what I understand from your company structure and your history is that ESG aspect, because that’s where you also did a merger move by integrating a company within.

Chimbria to look at the ESG you also advocate for a differentiated take at ESG compared to the kind of greenwashing it can sometimes be out there in the market what’s the reason behind that focus on the ESG and what’s different with your vision of ESG.

Brian Iversen: First of all you see is misunderstood still a little bit less than if you talk to me two years ago because I don’t see it as often than ESG has released historically.

When it became a used term, it was focused on environmental where people sometimes spoke about it, forgetting the last two letters in ESG. So social governance is a big part of it. ESG to us is a little bit of a way of life. It’s part of the culture. It’s part of the underlying set of value. It’s not an investment thesis.

ESG investing is silly at best because it doesn’t really mean anything. But it does mean something when you create culture, it does mean something when you approach how you deal with people, how you deal with your surroundings, I mean, respect yourself, respect your environment, your community, and take responsibility.

That’s, you know, in one way to explain ESG to you. So it’s part of a culture and it has to be part of the culture of the companies we invest into. But again, it’s not an investment thesis. And I, by the way, I’ve written about that as well. We. Believe that all of those things are main part of how you invest how you live your life but i’m not investing into a company just because of that i’m investing into a company for the exact reasons that people have been investing for hundreds of years it’s the attractiveness from a business standpoint from a profitability standpoint from a commercial standpoint right

Antoine Walter: it’s been a pleasure to have that deep dive with you we have many doors open because you mentioned in culture i know you’ve written about you Culture as well, which I had noted ESG.

I think there’s much more to drill into that. And impact investing is something we discussed on that microphone a while ago. So I’d be interested in making an update on that as well. That means you will have to be back at some point, which is good news to me because it was really a pleasure talking to you.

Thank you. That’s fine with you. I propose you to switch to the rapid fire questions.

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Rapid fire questions:

Antoine Walter: What is the most exciting project you’ve been working on?

Brian Iversen: I was part of an investment team several years ago, we were invested in a company named Seajax. It was an offshore service provider, um, in the renewable energy space. It was a very large investment, at least relative to what I do today.

About a quarter billion dollars, if I remember correctly. And we, in two years, almost tripled that. That’s obviously worth remembering just for that. More importantly, the way we approached that project. I loved because we spent the right time up front learning a specific niche in renewable energy. We were renewable energy investors.

We spend time getting to know every single player in that space. And we found the team that we could work with and we executed both the transaction and the ownership, I think, flawlessly, which means we also got lucky. But the recipe of doing your homework and approaching the space as an expert investor, rather than Reacting to inbounds is very key to what Symbria does today.

So not only was it a fantastic project with some of the best people that I’ve ever known, both from a business and a personal perspective, it was also the recipe that I took with me when I started Symbria.

Antoine Walter: Can you name one thing that’s thrown the hard way?

Brian Iversen: That hope is not a strategy. I’ve definitely been part of, you know, delaying tough decisions because we, we hope that things would be better and we have paid the price for that.

Also inside Symbria. So that’s one of the things that I hope, I hope that I’ll never do again. So react and make the change. If you see a change, otherwise you’ll just pay the price later. So I think that’s, is there something you are doing today in your job that you will not be doing in 10 years?

Financial modeling. Um, I love it. And I am, I’m, I’m not a really a nerd and I appreciate nerds, but I don’t have deep, deep skillsets technically anywhere, but I’m pretty decent. And I like production process. You would still do a lot of financial modeling. And financial analysis. And I bet, you know, five to 10 years from now, younger and smarter people should be doing all that for me.

Antoine Walter: What is the trend to watch out for in the water sector?

Brian Iversen: I don’t think there is any specific trends. I think that’s actually, and it goes back to what I said earlier, that there’s no specific niche where I think the opportunity is greater. I think it’s back to the slow moving tsunami. It’s across the board.

So I think that there is no specific trends because it is kind of what it is. And. And you have to be very careful where you step. I do think that things will get worse before it gets better because I think the infrastructure decay and the ability to deal with it and react to it, that we’re not reacting fast enough.

So I think you will see more abruptness in issues. And I think water utilities. Mid sized utilities, especially small utilities, will have more and more issues on their hands. I don’t think that changes my investment thesis, but I do think we will continue to learn how important this industry is, because we’ll have an abruptness in events that will just, you know, teach us that we have to be very, very careful.

Antoine Walter: If I instantly became your assistant and you can delegate the number one task to me, which I never promised I would do, what would it be?

Brian Iversen: It would be payroll. You’re doomed. We are so small team. We do, uh, obviously, and, and it’s important, so you want to keep an eye on it, but, um, that’s not my happiest task of the month.

Antoine Walter: And finally, would you have someone to recommend me that I should definitely invite on that microphone as soon as possible?

Brian Iversen: You should definitely invite somebody who was successful running and executing a VC fund in water. That’s who you should invite. I’ll be all ears. But, but you’re, you’re, you’re sure I can’t find that person, right?

I’m not sure because how could I be sure, but I think you should look for it. I don’t mind being proven wrong. I’m just trying to read the tea leaves, so I’m not doing anything wrong as an investor. That’s where I’m coming from. I’m sure he or she is out there or will be out there, but let’s keep looking.

Antoine Walter: That’s an interesting quest. I’ll, I’ll, I’ll look it up. I repeat myself. It’s been a pleasure talking with you. If people want to follow up with you, where should I redirect them the best?

Brian Iversen: Our website. We have a pretty decent website. Um, Cimbriacapital. com. We have a separate one for Cimbria Consulting that you will find automatically.

We’re pretty good on LinkedIn. So, um, Noah Sabbath’s, uh, my dear business partner and I, um, make sure that we are eased to find, um, so we can help. So I think, um, go on LinkedIn, go on our website and, uh, give us a call.

Antoine Walter: As always, the links are in the description. So you can just look at the description, click on it. You’ll find it. It’s been a pleasure. I think we have more to discuss. I look for that successful VC. I’ll interview her or him, and then we can have a followup. Thanks a lot.

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