Growing 10 Wonder Kids from 5 to 50 Clients with 0 Equity: Xylem’s Weirdest Move?

You may recall how we covered the Xylem Innovation Labs’ inception last year with Sivan Zamir, which led to many questions as to how they actually work! Let’s open the hood and explore how Xylem scouts the best prospects, multiplies their commercial references by 10 and propels them to new heights all of that… without taking any equity. Crazy? Let’s review:

with 🎙️ Max Storto – Lead Innovation Analyst at Xylem Innovation Labs

💧 Xylem is one of the largest water and wastewater technology company globally and follows the simple motto: “Let’s solve water”

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What we covered:

🤝 How the Xylem Innovation Labs explore partnerships with early-stage technology providers to enhance offerings and improve portfolio stacks

🚀 What the main tracks within Xylem Innovation Lab entail, from the commercial accelerator focusing on client growth to the early-stage incubation program and open innovation ecosystem targeting specific water-related issues.

How Max likens his role in scouting potential technology providers to a talent scout in sports, seeking the most promising innovations that align with Xylem’s capabilities and customer challenges.

🌍 What main challenges Xylem’s customers face, such as decarbonizing the water sector, industrial treatment solutions, decentralized treatment, and addressing contaminants of emerging concern like PFAS and microplastics.

🌊 Why Xylem is looking into areas like digital workforce solutions and flooding issues, aiming to find innovative ways to address these significant concerns in the water management industry.

🎙️ How Max Storto’s dynamic and multifaceted role at Xylem brings both planned goals and unexpected chaos into his daily life.

🗳️ Why political work with the Iowa Democratic Party led Max to engage in grassroots conversations, touching on critical water issues in both local and federal contexts.

🚰 How the state of water networks in the U.S., including boiling water notices, reflects challenges in infrastructure investment, public awareness, and income inequality.

📊 How Xylem Innovation Labs aggregates customer-facing team information, interprets data, and involves business units to prioritize decisions, fostering a united approach.

🚀 What makes Xylem’s accelerator program unique: sourcing from grants, accelerators, internal recommendations, VCs, and conferences, and inviting companies to apply, ensuring a focused approach to innovation.

🤝 Why Xylem’s relationship-building with startups is key: no equity taken, a mutual NDA, building trust, and aiming for long-term commercial agreements to foster a truly collaborative partnership.

🚀 What distinguishes Xylem’s process to carefully select from 3 to 400 invitations, leading to 40-50 applications for a handpicked 10-count accelerator cohort, ensuring alignment with innovation priorities.

🧠 How Max’s role as a market analyst at Xylem intertwines with engineering teams, aiding in financial analysis and business case development for revenue projections.

🌍 What the Xylem Innovation Labs’ role in global R&D is, including their part of the R&D package, and how they complement the company’s existing product development efforts.

🌱 How innovation with impact at Xylem is characterized by a focus on sustainability metrics and diversity, and their efforts in alleviating water challenges and reducing carbon footprints.

👔 Oxford Collar, Decentralized Work Environment, fostering long-term growth, mutual trust and partnership, commercialization over investment, selling solutions vs taking equity… and much more!

🔥 … and of course, we concluded with the 𝙧𝙖𝙥𝙞𝙙 𝙛𝙞𝙧𝙚 𝙦𝙪𝙚𝙨𝙩𝙞𝙤𝙣𝙨 🔥 


🔗 Have a look at the Xylem Innovation Labs’ website

🔗 Come say hi to Max on Linkedin

(don't) Waste Water Logo

is on Linkedin ➡️


Full Video:



Table of contents

Full Transcript:

These are computer-generated, so expect some typos 🙂

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Introducing: Max Storto

Antoine Walter: Hi Max, welcome to the show.

Max Storto: Thanks Antoine. I’m really excited to be here.

Antoine Walter: I’m super curious about what you’re doing. Super curious about your job. Super curious about all you do and the way you do it. And you’ll see in a minute that maybe that’s my dream job. Okay.

Max Storto: Well, I mean, I’m, I’m also curious about what I do because every day is different for my job and both in terms of like kind of my.

daily tasks and projects and things are, I have a lot of longterm goals and I’m working towards, but a lot of short term, both fun chaos and also unexpected chaos. And it’s a, it’s a good role. I mean, I really like it.

A postcard from Washington D.C.

Antoine Walter: We gave a good teaser to everyone to go into the deep dive of the episodes, but have a tradition that podcast, which is to start with the postcard.

So what can you tell me about the place you’re usually at when you’re not in a deep burrow, which I would.

Max Storto: The buildings are a little newer in architecture. I live in Washington, D. C., so I’m from Massachusetts, northeastern part of the U. S. for folks who are not as familiar with U. S. geography and Washington, D.

C., just a little bit further south. It’s a good city where Xylem’s headquarters actually are. Although I lived there and worked for Xylem before they moved their headquarters, so I just like to joke that they moved because of me. That’s why they’re there.

Antoine Walter: Do you work in the Xylem office or are you kind of remote and working from home?

Max Storto: It’s, it’s a hybrid. I like to be really intentional when we’re in the office together. So I try to turn off all my zoom meetings and try to just make it so that all of our tech scouting team is based in Washington, DC. So we can meet in person, but Xylem innovation labs team is global and I connect very frequently with my Xylem colleagues and a lot of startups and entrepreneurs, and they’re not all based in Washington, DC.

Actually, very few of them are, unfortunately. So I spent a lot of time, it’s good, good opportunity for remote work there. So me and my dog hang out right next to each other, typically is what it is.

Xylem: a Decentralized workplace?

Antoine Walter: I’m asking because every time I discuss with someone from, from Xylem, I’m always amazed by the level of decentralization of the company.

I had Austin Alexander and Sivan Zamir last year on the podcast. Basically I was like, Oh, it’s their office. We know there’s no office. My office is wherever I’m, my work is taking me. So it’s not common at that level inside a company like Xylem, if it’s not Xylem. So that’s why I’m. I thought it was worth mentioning.

Max Storto: Yeah, I mean, Xylem is an amalgamation of brands in some ways. So it’s a lot of like newer companies all coming together. And there’s a lot of decentralization that comes with that. People stay where they like. For me, it’s really attractive as a workplace because I can be in person when I want to, but I also have the flexibility to not.

And so I can kind of live my life in the way that I enjoy.

Max’s political involvement and views on Water Issues

Antoine Walter: There’s something in your path, which made me very curious. You’ve been working for the Iowa Democratic Party. I have. No intention to dive into U. S. politics because I would be very off with my French knowledge. At that exact same place, I had a conversation with Paul O’Callaghan just minutes ago about the rollout of SDG 6.

And I’m quite extreme with that because I don’t believe anymore in the… Political power of achieving this kind of goals. And I’m wondering, you’ve been working from the insides, maybe for the record so that you, you know, as well, um, I’ve been a candidate for the pirates party at the U S equivalent, maybe Congress.

I made the best score of the, imagine what the best score of the pirate party might be, but I met the best score. Uh, so impressive, impressive. I was a believer believer. Um, After that rant, what do you think is the influence of politics on the state of water?

Max Storto: So I got into working for the Iowa Democratic Party.

I just finished graduate school. Typically what happens when you go work for a campaign. Is you have to uproot your life. You quit, you move to a new place and it’s jarring. And it’s like four or five months typically. Cause it’s just for the stretch run. One thing that’s big, that’s a difference in the U S versus in France is our, our campaigns are very, very long.

I think that what I learned from that experience and what I wanted to do was really talk to voters and talk to people about issues. And I wanted to work in a place where there was the president and Senator and Congress was all hotly contested. And Iowa was one of, I think, three or four states that had like.

All three candidates really being kind of close and water issues are really a big deal in Iowa. It’s one of the larger agricultural entities or state producers in the U. S. I talked about water quality issues all the time. A lot of the conversations were, are you planning to vote? Do you know where your voting booth is?

Do you know how to get there? Do you have a plan? That sort of thing. But we did get into conversations as well about goals of water. So a lot of it was kind of low level stakeholder engagement, talking to Folks for kind of grassroots style and then in terms of the actual role of politics on water, especially in the U.

S., there’s like multiple levels. There’s the federal level, there’s state levels, and there’s local levels. And I personally think that the most effect happens on the local side. I worked for a, uh, coordinated campaign, which means that I was representing the Democratic candidates from all the way from Joe Biden for president all the way down to kind of like very, very local levels.

And for them, it’s who manages the municipality. It’s who executes on some of the goals. Who makes sure that there are the right rules and regulations in place to measure water. Who deals with it when water meters break and like what happens. A lot of times that’s all local. Municipalities and utilities are all public entities.

And then on the federal level, there’s recently the EPA just announced regulations for PFAS to regulate. So that’s, that’s really exciting. Uh, we’ll see what happens. There’s, it’s open comment period, which means that there’s potentially subject to change. But either way, there’s kind of the push and incentive structure that comes from the federal side.

And then it’s the local folks who really execute and see whether something comes into reality. At least that’s my opinion.

Influence of Politics on Water in the US

Antoine Walter: I don’t want to take you too. Far down the tangents, but still you have to be two to have a conversation. So you mentioned having this grassroots conversation What’s the level of awareness about the water challenges?

Let’s take just one infrastructure Deal in the us, which is the state of the water networks, you have this e p a survey, which comes out every five years. Yeah. And which estimates how much shall be invested in the networks so that it goes back to a good state. Yeah. Yeah. And if I’m not mistaken, the last one was around $580 billion that had to be invested to bring the networks back to good state.

And that number is constantly going up since the, the eighties. Those grassroots levels of conversation. What’s the level of.

Max Storto: I think you’re you’re talking a lot about the American Society for Civil Engineers, which is a body that’s federal that they estimate under investment in infrastructure, what the state of infrastructure is and what needs to happen in order to get it to to modernize and improve.

They look at bridges, they look at waterways, they look at pipelines. And I think at a high level, people don’t talk about it on a daily basis. They don’t experience politics or policy as much unless it really affects them on a local level. So people unfortunately react to crises. So if a bridge falls in their neighborhood, they’re going to, they’re going to know that.

Or if a number of pipelines break and there’s huge leakages and may like water main breaks that flood their neighborhood, people are going to know about that. And oftentimes you have to wait. For the symptoms to get so bad that it’s kind of a literally an explosive challenge. But I think at a very high level, there are people who are open to conversations, and I find it to be most effective in that grassroots level to connect other people.

Who had that experience from their neighborhoods. It’s almost like the idea, like how in the water industry, I do voice of customer and take those customer lenses and try to introduce them to each other to kind of talk about problems because who am I, some innovation employee at Xylem to. Give their thoughts.

Similarly, how, who is I someone who was not from Iowa to kind of tell them how they could vote and what they should worry about. So it did a lot of network building in, it was almost like the way that at least the campaign worked, you start from nothing. And I like created my own team. Of volunteers and that were from around the country.

I have friends from actually other countries who worked with me to help do like lots of phone baking and such. But once you got all these peers together and you got a lot of folks from the hometown to make those phone calls and to knock on doors, that was, it’s much more effective that way.

Water Challenges and Price Considerations in the US

Antoine Walter: I discussed with Josiah Cox from Central States Water Resources.

So one of the biggest, if not the largest, consolidated issues of this. Small sized utilities in the US and we discussed how there is every year some days you’re a boiling water notice Mm hmm, and I’m really surprised how that can be common in the world’s strongest economy.

Max Storto: I don’t know. I don’t have all the answers I’d say one thing, in my opinion, that’s kind of tough about the relationship between utilities or managers or police and, and individuals, like kind of everyone who’s part of a local government is they really just contact you when there’s a problem.

Sometimes the people’s only interaction with their water utility is when they get that water boil notice because they don’t know how to find their water quality reports. And we need to do a better job of kind of educating and looking at, Oh, there’s ways to interact with your utilities or your managers all year round.

You don’t need to just wait for this challenge. That’s one piece that we can do. The second is water price in the U S in particular. And I’m sure globally too is, is a challenge. We want it to be. a human right, and I believe it is a human right. I think there’s a lot of reasons to keep water prices low, but there are challenges when you do that.

There are under investments in infrastructure, and under investment in treatment, and we could do more, and there’s some cities that have, like, water boil notices very, very routinely, and they’re oftentimes less wealthy. The neighborhoods within less wealthy cities, so it’s, it’s certainly an income inequality and wealth inequality issue as well.

Personal Preferences… and Humor!

Antoine Walter: I promise we’ll come to the core of the topic, but I looked up your profile before that conversation and I think that’s your Twitter handle. And I’m curious about that. What do you have against the Oxford Collar?

Max Storto: Oxford Collar, fair, yeah. I’m not a fashionista. I’m not very good. Typically what you see me, you ask me what my backdrop for my postcard would be.

My typical garb, especially if it was internal phone calls, would be I had a v neck t shirt pretty much. I just like very, very casual and I think in Europe you actually do better job people. better with fashion and have different colors and in the U. S. it’s just like stayed. Everyone has their black or brown or blue suits or like, maybe you have stripes if you’re really out there.

But there’s something about the Oxford College, especially when there’s like a different color collar versus your shirt that I just always thought looked kind of tacky. So it’s just, it’s, it’s just personal preference. And I thought it was provocative and funny on Twitter really.

Antoine Walter: Just the fact that you know that the Oxford color exists makes you already more of a fashionista than, than I am.

I had to Google it to understand what it is, you know, .

Max Storto: Yeah. Well, I, I was trying to do Oxford comma, Oxford collar and trying to be clever. And as you have probably sensed in us getting to know each other a little bit this morning, I’m mostly just self-deprecating and trying to make fun of myself as much as I can.

So that’s my pathway. Okay.

Deep Dive into the Xylem Innovation Labs

Antoine Walter: Let me take you to, to the serious part, to that conversation, to the deep dive, which is what you’re doing. You, you hinted a bit what, what you’re doing at the Xylem Innovation Labs. Mm-hmm. , maybe just in a sentence, how would you describe what you’re doing?

The Xylem Innovation Labs in one sentence

Max Storto: so one sentence, Xylem Innovation Labs is the partnership entity within Xylem that explores relationships or partnerships with early stage technology providers.

And within that, I am in charge with scouting and evaluating all the different technology providers that we could partner with so that they could help complement Xylem’s existing offerings and improve our portfolio stack so that we try to help commercialize. So they provide the right, the great technologies.

And we help with pathway to commercialization.

Background on the Xylem Innovation Labs

Antoine Walter: I had a conversation last year about those Xylem innovation labs with Sivan Zamir. Let’s do a bit of housekeeping for the ones that would have missed that conversation. And really they missed something. So there’s a link in the show notes and you probably want to listen to that one as well, but housekeeping.

You have different tracks within Xylem Innovation Lab. So can you just describe us a bit how all of that works?

Max Storto: So first of all, you should listen to Sivan podcast. She’s my manager. So I’d be remiss to say that I’m sure it’s great because she’s great. Um, you secured your bonus. That’s good. Exactly.

Exactly. Yes. Yes. I should have said it closer to decision making point for bonuses. So there’s multiple paths. So I think where Xylem is really effective at supporting technology providers, it’s helping them get from client five to 50. Faster than if they did it on their own. Getting from client zero to five is kind of tough for us as a partner.

And the reason being is that we’re a large company. We have 17, 000 employees. Oftentimes, if you were just going from zero to one, it’s technology validation. It’s customer validation. There’s no case studies necessarily to pull from. And frankly, we would just probably slow you down in that process to connect you.

So really like that’s one pathway is. For our, what we call our commercial accelerator and the commercial accelerator helps with those. Companies that have a proven technology and a robust and growing revenue stream. Uh, and we help kind of catalyze that speed.

Xylem’s support for Technology Providers

Antoine Walter: Do you have numbers? You mentioned the customers from five to 50, but in terms of turnover, would that translate?

Max Storto: Kind of depends on the type of technology. We think more about the number of clients you have and whether you have paid clients. So, uh, for us, the minimum criteria to enter our accelerator is you have at least three deployments and one of them has to be a paying customer. So especially with treatment, that’s.

Oftentimes really difficult to even have one paying customer. If we’re talking something less expensive, like, like sensor technologies, talking most about hardware now, or, or maybe some SAS programs that might be on a subscription model, probably looking for a little bit more. I think our sweet spot is somewhere in the 500 K revenue to.

One million as like a kind of a baseline, but we have worked with entities that are even smaller in that program It’s oftentimes really high potential breakthrough technologies. That’s what that looks like. So that’s one track. That’s one track Yes, and the other track for us they’re working with we call our early stage incubation program last year We went through it and it was working with technologies that were less mature we’re going to focus and grow it to be more thematically based.

So really kind of bringing together a lot of different experts who are. It’s like focusing on contaminants of emerging concern or nutrient recovery or clean energy generation in the water space and helping decarbonize the water space. Things that are really big issues that need a whole host of solutions from in a lot of different applications, that’s going to be our focus.

And I think for that incubator space, that’s going to be a longer Development. So the accelerator is more one year that partnership happens where it culminates in a technology demonstration with a Xylem client that we can then learn from that experience and then showcase that to the rest of our client portfolio to see if it’s something that they would like to try themselves.

It’s almost think of it as like a pilot, not just for. One end client, but a pilot to be part of a distribution network.

An Open Innovation Ecosystem

Antoine Walter: So, so those are two tracks which are internal to the Xylem Innovation Labs. Correct. You also have external partnerships, if I’m right, with Detroit Reservoir, with Burnt Island Ventures.

Max Storto: Correct. Yes. So that’s what we call our open innovation ecosystem. And that’s one of the roles or positions that I oversee is like, how do we maintain relationships with folks outside of Xylem? And cause we don’t want to do everything. I think of things along the company development life cycle. Like I said before, Xylem is a lot better at helping someone get from client 5 to 50, but there’s a lot of great organizations that are helping someone get from 0 to 5.

And so we work with the funders, like the Burnt Island Ventures or Trial Reservoir, which helps with getting a pilot demonstration and, and making the first connection. We work with a number of accelerators, very, very early stage. So accelerators that are kind of like ideas right after university or ones that are more advanced.

We work with a number of universities as well. And there’s just a number of different organizations because we all try to. Coordinate and work together. I think in terms of economics one on one, because I probably wasn’t smart enough to do economics one on two at a high level there, there’s this concept of comparative advantage.

And I think very strategically about that. It’s like basically choose where you are most suited to help and other people focus on where they are suited to help. And as long as you can then collaborate together and work and kind of coordinate and share ideas. Then that’s where you get the best overall outcomes is when people focus on what they can deliver the best.

Defining Open Innovation

Antoine Walter: What’s your definition of open innovation?

Max Storto: Yeah, I think that’s a great question. And it’s, it’s still, it’s a moving target. Open innovation from Xylem are the folks outside of Xylem itself who are building an innovation ecosystem. Those are all groups that build up and work on. supporting technology providers.

Startups are, we kind of think of startups as part of the open innovation ecosystem, but really it’s like the support network for the technology providers is what we think of.

The Core of Xylem’s Scouting Process

Antoine Walter: So let’s come now to the core of what you do. I see you like, you know, this. You would call it soccer. I’m going to call it football because I’m from Europe.

You have a football match. It’s a match from 11 or 12 years old. And you know, that’s, that’s the age at which you, you have to detect them and to decide who’s going to be the next Messi or Ronaldo. Okay. Mbappé. So you’re one of the guys which is sitting next to, to that field and you’re trying to find out who’s.

The most talented, just, it’s not people playing football, it’s what a companies, yeah. How far off am I with this oversimplification?

Max Storto: I think that it’s not just me doing it, first of all, for me, I’d probably be looking at basketball. That’s the analogy I know the most , and from what I understand, like messy was recruited when he was like six or something.

So that’s just can’t believe how football works. But overall, at a high level, The scouting process isn’t just let’s look for the best technology or let’s look for the best talent and then make those rise to grow because at least with sports, the goal is to win games and there’s some idea of like what that athlete can do on a pitch, for example, and what they need to provide.

There’s that target. To think about what fits well with Xylem and what Xylem can do to help support technologies, it needs to be something that Xylem has the ability to support, that we have the expertise to support. Sure. We have that. Sales network to support, and we have the right resources to support.

And I’m sure a host of other things as well. Our process for scouting starts well before just identifying those technologies. The first step for us is identifying what are Xylem’s customers largest challenges and how does Xylem’s current portfolio of solutions really address those challenges.

Xylem Customers’ Biggest Challenges

Antoine Walter: What are Xylem’s customers biggest challenges?

Max Storto: This is something that is sort of new for Xylem’s innovation lab team to focus on. Cause we originally were focusing on like, what are those technologies and let’s push those out. And now it’s, it’s really kind of focused on those challenges first. The first one that we’re focusing on right now is kind of net zero and helping decarbonize the water sector, at least reducing the carbon footprint within the water sector.

Uh, so that could be something along the lines of with wastewater, improving aeration. Optimization or reducing N2O emissions and process emissions.

Antoine Walter: Is that a real challenge they are facing and I tell you they are facing, or is that’s the one that really looks good?

Max Storto: That’s a, that’s a really good question.

And we question that sometimes because we take what our customers say at face value, but we also look at what their intentions are and their reactions are. Not every challenge is global. So I think there are a lot of groups that are focusing on those challenges. So specifically in the U S uh, North America UK.

Like N2O process emissions is a big deal. Another challenge for us, Xylem’s portfolio is more focused on municipal treatment. So we’re trying to work on industrial treatment solutions as well. And there are a number of different technologies that are really innovative there. Because I think the difference is that there’s a lot more standardized waste streams that come out of industrial players.

Whereas municipalities, they have to deal with kind of everything that comes from every single direction. Residentials, industrials, you name it, whatever it is. So there’s a lot of new technologies you can do there. Uh, for us, decentralized treatment. Decentralized treatment can mean so many different things.

Uh, but there’s, there, that’s one focus for us as well. Helping deal with contaminants of emerging concern. That’s a big focus.

Contaminants of Emerging Concern

Antoine Walter: What’s your definition of contaminants of emerging concern?

Max Storto: Yeah, so first of all, we say contaminants of emerging concern, not emerging contaminants of concern because the contaminants have been around for a long time.

Uh, it’s just, maybe we care about it more now. So for us, we look, yeah,

Antoine Walter: we can measure them now. Maybe couldn’t see in the past.

Max Storto: I think that that’s a challenge too. We need to have better sensors and better ways to measure them. But I do agree that there are, there are more effective ways to do it now than there used to be PFAS is a big one.

Everyone’s talking about that. I don’t think that’s surprising. Microplastics is something we talk about as well. And nutrient recovery is something that kind of fits into the industrial treatment piece as well. That’s Island doesn’t have as many solutions F, but. Xylem’s customers certainly have those challenges too.

So it’s something we’re looking at.

Antoine Walter: I’m asking because depending on the side of the Atlantic you’re on, the answer is slightly different. Yeah. Contaminants of emerging concern in the U S you’re right. It’s no brainer. It’s PFAS. Yeah. In Europe, it’s micro pollutants. Yep. And I think more than I think, because that’s my Sue as yours, my biggest competitor was Xylem and it was 50 50.

So I guess. You have technologies to solve the micropollutants in the European exception with your other nation lines.

Max Storto: Yes, absolutely. Yeah. There are solutions there. And I think that they don’t necessarily work in every context. I think in some of the emerging markets that we work in there, some of our solutions don’t translate well there.

They need to be localized solutions. They need to have different cost points.

Antoine Walter: Contaminants of emerging concern is one of these areas you’re looking to.

Future Focus Areas

Max Storto: Yeah, absolutely. Yeah. Uh, another is. We call our digital workforce. So it’s as, as a lot of individuals and utilities are. Aging out and there’s fewer new talent coming in.

How can we do more with less? So how can we be more efficient? Are there new tools that employees can be using? That’s one piece. And then another piece that something in the future, our team is interested in and more broadly within Xylem is helping deal with flooding issues. Xylem’s a pump company in a lot of ways, as, as you know, especially in Europe, that’s, that’s our bread and butter.

There’s a lot of dewatering solutions and opportunities to help with addressing some flood challenges. So how are there ways to help, for example, identify where we should be putting those dewatering pumps at the right time, and are there ways that we can help alleviate some of those kind of… really, really intense issues during flooding events.

Xylem’s Process to Solving Challenges

Antoine Walter: So, so that defines your playground, you have to solve for at least one of these challenges. Now, how do you do that?

Collecting Data and Setting Priorities

Voice of Business

Max Storto: Yeah, so, so all those challenges, the way that we collected that data is we did something we call a voice of business, which essentially is all of our teams that are customer facing, aggregate all their information about what they learned, fill out some information for us so that we can select those priorities.

The Innovation Labs Team

They are then endorsed and supported with it by our business units. So far, the innovation labs team hasn’t really made many decisions about what they are. We’ve interpreted the data, we’ve collected the data, but it’s really the business units that are supporting the decisions for what those priorities are.

Scouting and Coordination

So the next step, that’s where I start to get into the scouting. We run a program to help kind of coordinate across Xylem to bring everyone together. So there’s 10 companies coming into a funnel at the same time, as opposed to 10 separate projects that might come in at 10 different times within the year.

It’s just harder to bring all the right actors in.

Antoine Walter: Companies inside Xylem?

Collaborating with Startups – Xylem’s Secrets

Max Storto: 10 startups that we partner with during our accelerator program. Yeah. And we do that all within like the beginning of the year in January. So going back in time, really our scouting effort, we invite companies to apply. And the way that we find those companies is oftentimes through our open innovation ecosystem.

An open innovation ecosystem

So you asked about that. So we form partnerships with all those accelerators and those VC firms and universities, uh, who have technology spinoffs and. More and they help identify who some of those, who some of the great actors are that are coming down the pipeline.

Antoine Walter: So you would open the imagination to alumni portfolio and say, look, we have these challenges.

All those guys would fit. Maybe we should ask them to apply. And then you would watch them listen to their pitch and then decide if they can be part of your 10 positions.

Selecting the right startups

Max Storto: Yeah, that’s, that’s certainly the way that we would consider whether we’d invite them to apply. That’s one piece. And imagine you chose a wonderful organization who we support greatly.

And they also, what we like about them is. They have a U S presence. They also have their Asia team as well. Imagine you to Asia. So it’s a global goal because our accelerator and our efforts are global.

Antoine Walter: And, and they have the broadest alumni portfolio.

Seeking Recommendations

Max Storto: They have, they have very, yeah, exactly. And especially from a pure water perspective, there’s a number of other folks we look at who’s won grants recently, or who’s won Xylem’s.

employees themselves, they know the space very well that they operate in. So we ask them for advice about if there’s any interesting technologies they’ve seen that they would like to partner with, they would want us to look more into

Antoine Walter: on a volunteer basis, or do they have any kind of reward if they bring you a winner?

The Accelerator Program

Max Storto: Oh, good question. Uh, we do have incentive structures. It’s more geared towards. The pilot identification or the technology demonstration on the backend. But typically people love giving their ideas and advice about which technologies we should be partnering with. So that’s not, it has not been a problem yet.

Hopefully you don’t give any ideas that we have to all of a sudden like change our budget for this. Like if there’s any group of people that just have nuggets of wisdom that we can look into, that’s, that’s the group is would be Xylem secret sauce.

Antoine Walter: And you also have like an open call for applications.

Max Storto: So we haven’t done the open call for applications and mostly it’s because. We don’t want to waste startups time. I think with, if it’s a more generalist accelerator. It’s easier to say, like, look, like, it’d be great to have everyone apply, but we don’t want people to all apply and then it’d be, Oh, but we only have one of these few different innovation priorities.

And yes, I’ll tell them to you. Um, but we, we also just cause Xylem’s like trying to be somewhat protective. We don’t just like blast it on the internet and share it everywhere, uh, in the same way. We’re just trying to be a little bit more protective and focused on that.

Antoine Walter: So you watch the grants, you watch the alumni of various accelerators and you’re asking to your internal stakeholders, if they have recommendation, that would be your three sources.

Max Storto: That’d be three of the sources. Yeah, exactly.

Antoine Walter: You have more?

Max Storto: Sure. Yeah. We work with all the venture capital firms that we invest in. That’s part of like one of the main benefits. We don’t just invest in for the financial reward.

We invest because we share ideas and best practices. Come to conferences like Bluetech. Meet people that haven’t met in person or maybe have. Heard of companies before, but it’s very different hearing their pitch and talk to them. Once they apply though, within the funnel, all the applications, we sort them and make sure that they have a lot of the key information that we want.

And then we give the best applications back to the business units. We have an advisory council within Xylem Innovation Labs that’s made from Xylem employees, and they handpick and select the companies.

Antoine Walter: You went too fast for my little brain here. You have these five sources. Yeah. Again, grants, accelerators.

Internal recommendation from employees, VCs and conferences like Bluetech. And before you send them back to the BU, do you do kind of a, an evaluation, a ranking, a sorting of those applications?

Max Storto: So we have a number of questions within an application. It’s not that dissimilar to like imagine H2O’s application to apply.

And so we take that information and we add our own Xylem Innovation Labs perspective on all of those companies as well. Uh, so that the business units who might not have as much familiarity with startups themselves, but know the space and end user better than frankly. Certainly I do better than most of my colleagues on the innovation labs team as well.

They help use our perspective. They use what the startups fill out. There’s a video, the pitch that the startups provide. So there’s a lot of information they have at their disposal to help them select.

At that stage. How many do you have?

At the very beginning of the funnel, like before we kind of even do the filtering, we’re looking through like three to 400 in our invitation to apply.

I think we invited around 50 companies, 50 to 60 companies last year. Most of them do apply. Cause most of them are excited about working with us, especially the second year. The first year we did it, there was a lot of explaining like, what is the accelerator? What are we doing now? There’s, there’s just some more testimonials and experiences with the startup.

So they know a little bit more about what we do. So now there’s within that, let’s call it 40 or 50 from there. Most of those, uh, go to in the end to the business units.

Antoine Walter: So the business units now receive 40 to 50 applications and they have to give you their input so that. You bring it down and you trim it down to 10.

Max Storto: Correct. Yes, exactly. So they provide the input and then they provide, they rank them. They also give them a score. And for the most part, we’re trying to get diversity across the business units. So we’re not just having 10 companies that are all water treatment solutions.

The Role of Xylem’s Business Units

Antoine Walter: Do they commit as well? Like they pledge or they become sponsors or they have to give some mentorship or I don’t know.

Max Storto: Yeah, no, that’s a great question. So that’s within the accelerator themselves. And this is where actually I, I often hand off to some of my colleagues on the innovation labs team. We have innovation managers that are either have regional expertise. and domain expertise. So one, one of my colleagues is expert in pumps.

He’s based in the U S another one is an expert in sensors and kind of water quality measuring. He’s based in Europe. We have a third expert who’s based in India, who knows treatment and water transport. Like all three of them are the ones that engage and they bring in all of the right actors at different times.

We have an innovation champions program, which means that we have folks within Xylem. that want to work with startups that is volunteer based, uh, and they apply to work with the startups themselves. And a lot of the advisory council members who are selecting those companies to get into our accelerator, they do pledge some time and effort, whether it’s their own or some of their colleagues to help work with those companies throughout the accelerator program.

Antoine Walter: The one you mentioned that will be working with the startups, is it on top of their regular duties or? Are they detached by their BU so that they spend some time on that?

Max Storto: Yeah. So the innovation managers who work with them, they’re part of our team. That’s their full time job. The innovation champions, it is additional.

So their managers, okay. Them to do that for, it’s usually like start to like a couple hours a week. Sometimes they don’t meet at all, but oftentimes it’s, it’s like providing some domain expertise because they’re sales experts in. Bangladesh, and there’s a, we’re working with a technology that works in India that wants to move to Bangladesh as well.

So there’s someone else that we can bring in from Xylem who has like an expertise that that startup might’ve not had access to before.

Commercial Agreements and Long-Term Partnerships

Antoine Walter: Does the fact of being selected within Xylem’s Innovation Lab necessarily mean that there’s an investment of Xylem or is it? Totally different topics.

Max Storto: Yeah. So we, we don’t take equity for example, right now with it for the startups that join our accelerator.

We’ve talked about that Xylem’s potential long term play and like the innovation labs team has measured on is how many commercial agreements can we sign and then within five or 10 years, theoretically, we could get to a point where it’s. What are the revenues that are generated from these new technologies that were at one point part of Xylem Innovation Labs programming?

Antoine Walter: So that means that these companies, these 10 companies, now two cohorts, so 20 companies, which you bring from 5 to 50 customers, theoretically speaking, you don’t have in the company, and they might fully walk off and do something else once they’re done the acceleration.

Max Storto: Theoretically, but that’s what that’s what relationship building and trust building is for.

Okay. And I think over the course of our accelerator, we’re trying to show that we are one of Hopefully the but one of the multinationals that you could partner with so it’s coming on us to help show why we could be valuable to them It’s not just us trying to extract value from the startups It’s very much a partnership in that way,

Antoine Walter: but you’re raising their value.

So you’re shooting in your foot

Max Storto: I don’t think necessarily so at least the mindset we have is that there’s only one piece that we saw that has to be part Of the MOU that really is like And that’s we want them to let us know if they are to enter a commercial arrangement that would preclude them from working with Xylem.

That’s literally the only part of the MOU that anyone could have an issue with. We’ve had lawyers from these startups. Who say, this is all you have to sign in order to do this. So they thought it was like, uh, there was some, like we were hoodwinking them or something, but really that’s it.

Antoine Walter: So you want to know, but nothing prevents them.

It’s just that you have to be aware.

Max Storto: Yeah, we have to be aware. Exactly. Wow. Certainly we’re taking a chance on that, but I think in other ways, we’re also getting to know these startups so well over the course of the year, they’re getting to know us really well. There’s a lot more learning about what it would be like to form that partnership in the longterm.

We signed an NDA eventually once like they joined the accelerator as well. And that’s a mutual NDA. So it’s both sides. Uh, it’s oftentimes to protect the startups, uh, even more than protecting Xylem. And from that case, it’s really just kind of building that relationship over time. And the end result, it, it’s oftentimes not, Oh, we go through one year of accelerator.

Now we can take, take over the world and like put our. Transport technology in every single utility around like just in one day. There’s still a scaling ability There’s still growth challenges and we work with them over the course of that commercialization pathway as well

Scouting, Assessment, and Handover of Projects

Antoine Walter: You did the scouting you have this these routes you assess them.

You got the feedback from the bu you decide on the 10 That’s the point where you hand over

Max Storto: you mean me max. Yes. Yes, that is when I pass it off. But however, like The way that we joke on our team is that I’m the least engineering person on our team. I’m more of the market analyst, business analyst. I have a background in investing.

Oftentimes I brought in at certain points to help develop a business case or help with financial analysis to kind of build out revenue projections and other things like that. So I do work very closely with my colleagues there. And I also, by doing that, I learn. What the challenges are of our colleagues again, so it further reinforces the me scouting at the beginning to see what like solutions could help solve.

So it’s good that I’m still involved, but really I’m more of the support network at that point in time. I’m not driving the ship there.

The role of a market and business analyst within the Xylem Innovation Labs

Antoine Walter: You have a background in investing. Isn’t it frustrating

Max Storto: First of all, I like to work for a operator. I’ve done some investing. I worked. I was not necessarily the investor myself, but I worked for an investment firm.

It was an ESG investment firm. And here in, in the UK or in France, you would just call that investment. But in the US we have to have that extra clarifier. And it’s not that it’s frustrating to not invest. It’s more that. We think that the long term goal and benefit for Xylem is the commercialization potential and being able to sell more solutions and be able to bring it more to our customers.

That’s worth more than just the upside of investing. And equity is so valuable to the startups at this stage. That’s not something that we’re trying to take from them necessarily, unless there’s a really, really good reason. And the commercialization pathway is what Xylem has, has much more value for, frankly, from a profit margin perspective.

The Xylem Innovation Labs and Global R&D

Antoine Walter: How do the Xylem Innovation Labs come into the global R& D package of Xylem? You’re spending 187, 204, and 206 million in R& D over the past three years, which is about 4% of the company’s revenue. Are the Xylem Innovation Labs part of that, or does it come on top?

Max Storto: It’s part of that. Yeah, exactly. So the way that we, that we operate.

We’re part of the innovation team within Xylem. There’s an innovation technology and product team. And the way that we think about it is we compliment our R and D. So R and D and all of our engineering teams, they focus on product development. They focus what maybe it’s horizon one, maybe it’s horizon two solutions.

But moreover, if they’re developing great technologies and technologies that we’re scouting for, that we’re partnering with, we want it to compliment what they do. And we’re not necessarily trying to cannibalize. Sometimes we’re trying to challenge them for doing better if it’s maybe an older technology, but for like at a high level, most of what we do is trying to help compliment what we do.

So it’s part of the R and D package.

The long-term goals and commercialization pathways

Antoine Walter: You gave your definition of open innovation. I’m still surprised that the fact that you don’t take equity and that you really rely on your ability to convince the startup that you’re going to be the right partner in the future, looking forward. What’s your definition from innovation with impact?

Max Storto: This actually goes back to some of my thinking with, uh, when I did work for the ESG investment firm, there are kind of two ways to have impact with, let’s just call it, like, I think of it as process or product development. So process to me is like, how do you as a company function? Do you count your carbon emissions?

Do you pay your workers? Well, do you have good practices, things that you should just have as a good company, then there’s the, does your product help solve problems that you’re aiming for? So in Xylem’s case, are you alleviating water challenges? Are you reducing? Carbon footprints of end users, things that I think are fairly to, it’s really difficult to have both and especially in the public markets.

One reason I wanted to come and work at Xylem is because they actually do accomplish both innovation with impact. We look at. sustainability metrics. We look at diversity of our founders that are part of our accelerator program and who we work with. We have, I think, over a third of all the founders that have been in our program since we started two years ago were, have been women and we have About a third probably have been also non US.

The Complementary Role of R&D and Innovation Labs

Uh, we want that to be a little bit higher. Actually. It’s something our goal is for a metric, but a lot of our impact and our goals are how do we help our customers reduce their challenges and. Net zero, this is something that has impact. Improving and reducing contaminants of emerging concern, that has impact.

And I think it’s just like a byproduct of being in this water sector that a lot of the challenges we’re trying to solve. And I think that’s probably why you’re interested in water issues. I’d love to hear what you have to say too.

Antoine Walter: I don’t have a good answer. I’m the one with the questions. That’s my privilege.

I’m not answering mine.

Max Storto: Alright, I’ll ask you offline then.

Innovation, Partnership and Impact

Antoine Walter: In all seriousness, it sounds to me like what you explain about this innovation with impact, It has a lot of personal elements. Does that mean that the biggest impact is investing in people more than a tech, a company or a prospect? Yeah, I think that often.

So investing, not investing because you’re not investing. Sorry. Sure. Yeah. Okay. Yeah. But betting,

Max Storto: but we’re investing our time. So I think that the, there’s a lot of different criteria that we look at to determine what company or what team would be good fit within our accelerator program. So yes, we talked about, does it solve a challenge, but.

But they’re, especially when it’s early stage, it’s really dependent on the quality of the team. I think even more so than a larger established company where there’s established processes you could depend on. What is the traction they’ve already looked, they’ve already accomplished? Do they have clients that are interested already?

Do they have good case studies? Do they have a pipeline going forward? What is their total addressable market? That’s a piece. Uh, and is it a large enough market that within Xylem, if we did. Invest a lot of our time. Is it helpful that we can, we actually scale it. So the fourth is technology. So what, how good is the technology?

How good is the solution? It’s not always tech. Sometimes it’s just a service potentially. And then the fifth is terms. So like, what would a partnership look like? Like how could Xylem help support these, the technology provider or the solution provider? How can the solution provider help? So thinking about all those elements like that’s I think what we’re looking at for a good quality partnership with a technology provider.

Antoine Walter: You now have two full cohorts of companies you’ve been working with. So 20 companies as a scout, who’s your favorite?

Max Storto: They’re all my favorite, depending on, depending on who’s nicest to me that day, probably. No, I think that there’s. I’m really curious how some of the groups within some of the 10 companies within this cohort are going to shape up.

There are a number of technology providers that are kind of developing their pilots now. One piece that’s, that was special about this year that was hard to do last year is we met in person this year. So we had a symposium. We brought all of the innovators together in one room with a number of Xylem executives and other colleagues to come in.

Our advisory council was there. And it was really special to see them all interact. And in some ways, I like walked in, I was like very nervous. I was like, this almost felt like meeting the family. It’s like getting married. It’s like, are they going to all get along? And you realize they’re all adults.

They’re all happy. They’re all pretty good at this. They all just can be water nerds together. So that, I think that for, for me, it was just, that was special seeing that environment. But some of them are competitors.

Antoine Walter: There are some competitive aspects. Absolutely. So how do you deal with that? Because you don’t invest in them.

So that means you have a project, a commercial project, and then you have two technologies within the acceleration, which might be suited. How’d you pick the one which is going to be deployed?

Max Storto: There was one technology provider that was competitive with one of our other partners, actually, that we worked with, a delivery partner.

And what we learned was that. In the process, actually the company in our accelerator wasn’t, was also not the right partner. It led us to be able to ask the right questions in the longterm to make sure that the existing partnership was even stronger and it helped us make a decision to continue going with them in a way that we might not have.

So that was that that’s one when it’s a direct competitor, I think that there’s oftentimes it’s not like it’s a competitor in every single application with every single end client. Oftentimes there’s a technology provider that. Maybe it’s an aeration solution, for example, like I go back to that, like I had that example earlier, it competes with Sanitare and Sanitare solutions work large scale.

Maybe there’s an there’s one that works kind of at smaller scales or for industrial clients, and that might not be Sanitare’s sales channel because Sanitare is mostly focused on larger scale municipalities. So how can they work together to complement our portfolio to extend and expand the number of and the types of Xylem end users?

That’s often the way we, we talk about and think about it.

KPIs, Commercial Agreements, and Long-Term Goals

Antoine Walter: You rapidly touched on your KPI of these numbers of project commercialized down the line. Can you be a bit more specific? How do you measure that? And what’s, what’s the target?

Max Storto: I like to work backwards because that’s how I figure out what the KPIs are.

So our overall goals are to have high revenues in the long, that does not happen overnight with us, but the partnerships we’re working with. So within a year of our programming, at least. The question is how many commercial agreements are we signing? Between you and the companies? Between us and the startups.

Exactly. Most of the relationships. Are some sort of exploration of Xylem is a customer of the startup. So maybe we are a licensed reseller or value added reseller. Maybe we’re, maybe we can license the technology. Maybe we white label the technology. We’ve talked about joint venture, although that’s not something we’ve really expanded on now.

That would, I guess, be the investment. Uh, back to your question, but at a high level, like if that’s our goal to get to that many. And for us, like, it’s not quite the same as like a venture percentage, but for us, like two or three would be a pretty good number for a given year. We actually had the first cohort we had.

We’re still having conversations with some of the startups that we’re working with, but we had a lot more success than we anticipated in the first year. So there, we learned a lot and there was a lot of companies that ended up being longer term potential partners. That’s like our end goal. So for me, at least the way I think of it from the scouting perspective.

There’s kind of two factors that determine the quality of the companies that are going in. One is how many companies are we scouting? So that’s in some ways about fact finding and treasure hunting. And the other is, are there ways to help improve the quality of the companies that are in the ecosystem?

And that’s one, that’s another way that we lean on our Open Innovation Ecosystem partners. And we help support them and we work with them over the course of their programming as well to help. Kind of educate or maybe provide some insights to the startups that are in Imagine H2O’s portfolio. For example.

Antoine Walter: We call it cynicism, but I still like to understand at which point we, you expect to invest in those companies. If it’s not in the accelerator, fine, I get your point. But still somewhere down the line, you want to have thousands in your portfolio, don’t you?

Max Storto: Yeah. So, so I think that there’s kind of three pathways.

So in my mind, the strategy and the overall goal is how can Xylem improve its solution stack. And there’s a number of different pathways to get access to new technology, new solutions. You could acquire a company, go like full out, right? And within that, you could take a percentage of investment. Another is you could have a partnership where it’s just a commercial partnership and you have a contract and like, these are, this is what your goals, this is what your responsibilities are.

Based on that contract, this is what xylems are. And then the third would be internal research and development. That’s another pathway to create new technologies. And there’s different reasons to pull at each of those, but to me, they’re all just tools and partnership is just one of the tools and in terms of like the longer term, when we could invest, I think we’ve been open to the fact that.

If there is a company in our portfolio that they’re actively fundraising and they want xylem on their cap table, then we w we could bring it to our team talks very regularly with our corporate development team, the folks that lead M and a activity that that’s, that could be on the table. We have not done that yet, but for the most part, that’s.

Antoine Walter: Because, because your M& A team is a bit busy.

Max Storto: Well, they have been busy this year, actually, after a few years. They’ve been busy every, every year. Don’t worry, Antoine. Uh, from what I understand, they’ve been very, very strategic. But this year they’ve had some, uh, some big wins, um, for, as you can imagine. But for the most part, those, the, the startups that we’re working with in terms of investing, we, we don’t want to hamper them.

We want them to be good at what they do. We want them to be flexible. We want them to be able to take chances. We want them to be able to go test the market, move fast. Maybe break things sometimes. And for us, we want to just help them commercialize and, and like, help them grow. Like, make intros to clients.

Test their technology and new applications. Provide some resources, uh, both in kind and, and other, like, hardware resources to help them potentially grow and do what they, they need to do well. And I think, in terms of just the full separation, Of in the partnership, sometimes you can do what you want to do best.

The Dream of Discovering Unexplored Innovations

Antoine Walter: If I go back to the early stage of your involvement with those companies as a scout, don’t you have this, this dream of, yes, you have this five paths, but outside of this five paths, you find out the hidden gem. It wasn’t part of an accelerator, maybe they were in a country which is not mapped as good as the other ones, plus the Xylem folks don’t know it yet, but that’s a treasure, isn’t it something you’re looking for?

Max Storto: Yeah, it’s interesting, a couple of the technologies we’re working with. For example, they’re not VC backed, and I think going into this, I had the mindset, and this is something that’s kind of changed over time, that most of the technology work with should have venture funding.

Venture Funds in the Water Sector

Antoine Walter: Do you know many venture funds in the water sector?

Max Storto: We do know a lot. We, we have open communication with many of them and we share ideas pretty often.

Definitions and Perspectives on Investment

Antoine Walter: Many that have also investment in water, but pure plays in water. There’s Burnt Island Ventures, Mazarine Ventures.

Max Storto: Yeah. Who else? Oh, yeah, there’s, uh, the group that I worked with, Echo River Capital. They’re, they’re pretty new, uh, and, and growing, but that’s one that’s early stage.

There’s SKion Water, which is more of a private equity. Okay, Ski On Water, you can, okay.

Antoine Walter: Yeah, it’s, it’s, it’s, we have a different definition of venture capital company, but I wouldn’t qualify them as venture capital. And when I had Reinhard Hübner on that microphone, he even declined the term of being an investor.

Max Storto: Interesting. Uh, okay. So I think that they’re, they’re certainly in, I would say, I would call them an investor, uh, but they, they should call themselves if they want. I appreciate that. Uh, I agree. They’re not venture. That’s true. They’re not very early stage venture. That’s, that’s, that’s a hundred percent true.

Other examples I was thinking about are later stage investing as well.

Challenges and Opportunities in Water Sector Investment

Antoine Walter: That’s my point is that you, you find growth stage capital, uh, you don’t find so much venture capital just because it’s a difficult field. So that’s why I guess in the water sector compared to other sectors, you will have potentially much more hidden gems outside of the radar, even if Burnt Island and Mazarine are doing.

Investing in Growth vs Early Stage

Amazing jobs. Yeah, not putting that into question at all. I’m really amazed by what they’re doing But I think you have a chance as a scout to to find that company, which I don’t know how to interview with me

Max Storto: And yeah, no, I think that there is a chance the effort and partnerships with startups There’s the idea and then that’s key.

That’s like necessary how good the technology is, but it’s not sufficient It’s oftentimes the execution of the idea and how they grow. And you see that in the partnership, you see that there are technologies with sensational ideas that totally sputtered and failed whether or not they were venture funded.

It doesn’t even matter. And it’s just because the execution wasn’t as successful. So in terms of my dream, finding that awesome technology provider, I think I’m much more excited. About us forming a partnership that grows, that builds momentum, where we can achieve something together than just being like, Oh, I found this great technology and they just succeeded.

It’s not like a sports agent or going back to your analogy earlier. I can take a different analogy.

The Importance of Partnership and Execution

Antoine Walter: You don’t want to find Luke Skywalker. If he’s not trained by the Jedi, he’s not worth it.

Max Storto: Oh, of course. Yeah. Luke never would want to partner with Luke Skywalker. That would be the worst. Um, definitely. Okay.

That was, sorry for the nerdy reference. No, I love it. That’s good. No, don’t worry. I’m nerdy too.

The Evolution of the Xylem Innovation Labs

Antoine Walter: You mentioned how one of your paths of the Xylem Innovation Labs is currently being reworked. Yeah. So you’re also a work in progress object.

Max Storto: Absolutely. Yes. Yeah, that’s true. I think that we really enjoy thinking about how we iterate.

Our whole team, like, we joke about how… After we have something good happen, we start writing down how it can improve the next iteration. Uh, running list of ways that we can improve our 2024 accelerator. And we started it literally on January, I think, 24th, right after we launched our first accelerators are like different ways.

And we know that there there’s always ways to improve and we don’t want to get complacent and we don’t want to stay. And there’s, I think a lot of different types of innovation. There’s technology innovation, there’s solution innovation. There’s also business model innovation. There’s process innovation.

I think it’s our role as a team to make sure that. What we’re doing every single year is better than it used to be.

Collaboration and Competition within the Industry

Antoine Walter: Suez used to have a venture arm, Veolia used to have a venture arm, they no longer have it. I don’t know if other companies even used to have such an arm, but to my knowledge, the only company of that size which has something.

Remotely equivalent to what you’re doing is Evoqua. Uh huh. Is it a surprise that you’re good friends?

Max Storto: It’s potentially become even better friends from what I understand, but have to wait for some regulators to make some decisions.

Collaborating with Competitors and Clients

Antoine Walter: On a serious note, do you think other companies should be doing it, or you’re just happy they don’t do it, because that means you have less competition for the cool kids?

Max Storto: I want all of our competitors to work with us. So, you, folks should go listen to, uh, your interview with Piers Clark from earlier about Trial Reservoir. One of the… Projects that I’m most excited about that we’re going to undergo that we’re really launching now is funding a new trial reservoir focused on industrial treatment and very CapEx intensive industry.

It’s very hard to pick winners. They’re thinking about like, who’s the right horse versus just like, can we fund a whole group? We want to work with all of our partners. So we’d love Veolia. We’d love Suez. We’d love all these other folks to come in. There’s more space to collaborate and yes. We’re still ultimately going to be competitive for getting investors or public equity company.

Yes, but I think there’s a lot more space to, to work together and grow the pie for everybody. Just in the past couple of weeks, we’ve seen a number of different end users launch their own accelerator. Curious how that kind of unveils there’s here at Bluetech. Talk to some folks from the hundred plus accelerator, which is a collaboration.

With some of who are competitors themselves. We’re always interested. So anyone who thinks of Xylem as either a partner or competitor, feel free to call me. I’d love to chat, figure out ways we can work together.

Antoine Walter: I guess you already have. Good relationship to, to those people.

Max Storto: They are some of our biggest clients.

Yeah. Veolia and Suez and because a lot, especially with their water management solutions, Evoqua, one of our bigger clients as well.

Xylem’s Water Action Agenda Pledge

Antoine Walter: I was thinking of your water action agenda pledge, which you introduced together with several of those companies plus Bluetech, I think, which is the second largest pledge in that agenda.

I don’t know if it’s a good or bad news, honestly, but congratulations for being the second largest pledge. And that pledge is an investment in R and D. So that means that you’re seeing this investment in R and D as a way to solve. The challenges we’re facing, including sdg6.

Max Storto: Yeah, exactly. Yeah. So that you’re referring to the pledge that was announced during UN water week.

For us, it’s, it’s just another example of us all like putting a target out there. Some us, what our KPIs were trying to be honest about what our numbers were, because I think once you announce them, it’s a lot harder to back down. So we want to all commit to some value. We all want to come together and work together.

And maybe there are some spaces where we will continue to. Operate in separate sandboxes. Maybe there’s going to be places that we kind of butt heads in the same sandbox, but I think there’s oftentimes a coopetition model that I think is much more possible.

Coopetition: A Neologism for Collaboration and Competition

Antoine Walter: That’s a perfect neologism to you. I never heard it.

It’s the co Coopetition. Coopetition.

Max Storto: Great one. Sometimes I, I rue the fact that I spent time getting an MBA and spent the money to get an MBA, but I did learn a few, a thing or two there. So that was one of the terms actually that from one of my professors, he coined it.

Antoine Walter: Well, I’ll keep it as, as the closing for this deep dive.

Sounds like, like the perfect conclusions. Thanks a lot for the openness and sharing how you, you deal with all that stages of the Xamarin Innovation Labs. To round out these interviews, I have a set of rapid fire questions. So if that’s fine for you.

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Rapid fire questions:

Antoine Walter: My first one is what is the most exciting project you’ve been working on and why?

Max Storto: When I talk about trial reservoir is something I’m really excited about and I think collaboration in the water sector has not happened as frequently as I would have wished and I think this is a chance to bring all these people together.

I had my first phone calls ever with groups like Trojan and Pentares and all the and all the kind of the folks that are theoretically our competitors. We’ve talked to a lot of those folks to try to work together, and hopefully they do come together. But either way, even if they don’t decide to, it’s the effort and the idea of it working together, all coming.

That’s what I’m excited about.

Antoine Walter: Okay, I’ll stop. But Trojan is not going to be your competitor very long. But okay, that’s a different story. Can you name one thing that you learned the hard way?

Max Storto: I think that technology itself. Is, is not good enough. It needs to be, it’s all about the execution. There are a number of the companies that I was most excited about in our first accelerator, for example, that they just have sensational technology.

And I think that it should work. It feels like it solves a huge problem and there’s not enough regulatory push or the sales cycle is too long and it’s just like too hard. It’s about management of a company. That’s, that’s really interesting.

Antoine Walter: Is there something you’re doing today in your job that you will not be doing in 10 years?

Max Storto: I hope so. No, uh, no, I, I think there’s a, there’s always ways to iterate and get better. Certainly. I’m sure there’s room for AI. If you ask that question, everyone kind of says that.

Antoine Walter: First one. You’re the first one ever to give AI here. Seriously.

Max Storto: Seriously. I’m shocked. Okay. Well then I can talk about AI. I didn’t want to be unoriginal.

So at least in my mind, there will be opportunities for scouting and pulling up new names that will make it easier. I’ll spend more and more of my time engaging my colleagues and analyzing whether it’s a fit as opposed to identifying the names in the first place. I think it’ll almost become democratized who everyone is.

Antoine Walter: It’s a very interesting point because I do believe you’re going to be right in the long term, especially now that chatgpt connects to the internet. Oh man. But um, Walid Khoury was with us just before we started recording and Walid made an exercise with ChatGPT, having an interview with ChatGPT about water.

And honestly, the answers were at best, vaguely right. Yes.

Max Storto: At best. I don’t know. I did a search about like, what are the biggest water challenges facing our industry right now? And it wrote it in a way I was like, man, I… Definitely scared me a little bit how, how good it was. And it was like, certainly with the amount of effort, it put it amount of time.

It came out. Something was pretty strong.

Antoine Walter: Yeah, I did that experiment. Uh, I was able to introduce an action in the UN water action agenda fully written by chat, GPT, copy paste, and it got accepted by the UN.

Max Storto: So maybe there you go. Good for you. Smart. Yeah. That’s entrepreneurial.

Antoine Walter: I would have loved for it to be rejected.

It would have avoided me proving a point I didn’t want to prove. But okay, that’s a different topic. That’s a different topic, yeah. What’s trend to watch out for in the water sector?

Max Storto: Hopefully that we’re pushing more and more collaboration. I think there will also be more companies, not traditionally. In the water sector that come in.

So recently you might’ve heard, uh, the Microsoft Fido AI, or like, there’s the collaboration there, I think you’re going to have more and more of that as well.

Antoine Walter: Victoria Edwards has, was my guest on that microphone several months ago, and I tried to, to, to trick her into admitting that what they’re doing with Microsoft and, and Thames water is a kind of.

with extra steps, but, but she had also a very compelling explanation as to why it’s not the case. So I will be fair to her and say that it’s not the case.

Max Storto: It’s interesting. And frankly, I’m, I’m happy that there’s getting more and more like insight and focus on the water sector. Water challenges are everywhere.

It affects every single company. It affects every organization. We want more and more players to do it. And I think you’re going to, you’re going to hear about that happening even more.

Antoine Walter: I mentioned Chad, GPT is an assistant. Let me be. The replacement for chat gpt for a second. Sure. I can be your assistant You can delegate me one task and i’m free to not make it because i’m a really terrible assistant.

But what would it be?

Max Storto: I want you to keep doing what you’re doing. I want you to do more storytelling and hopefully do it about collaboration. I talked about my, my economics one on one comparative advantage. Stick with that. You’re good at this. Keep telling this, keep telling stories, keep interviewing interesting people, diverse perspectives.

That’s what I want you to do. Can you, can you do that? Is that something that you’re going to say no to that?

Antoine Walter: You’re a good boss. I appreciate it. By the way, I discovered that, uh, there’s an SDG, I think 17, which is dedicated to collaboration. And I discussed with some utilities, which have put this one as North.

Everybody’s taking as you do six. We are watching people. So it should be a six. Um, then you have John Robinson from as in venture explaining that all the other ones are very relevant to water. SDG six, maybe not, but all the others are, uh, that’s me extrapolating. It’s not saying the SDG six is not relevant.

And then you have these utilities going after SDG 17. And I think maybe that’s the best route because collaboration as you demonstrated it today is probably the way to go. So thanks a lot for the long form explanation. No, of course. It’s good. Yeah. And, uh, last question. We have someone to recommend me.

They should definitely invite on that microphone as soon as possible.

Max Storto: One of my colleagues, Anna Santino, she started this organization called HER2O, which is awesome. It’s trying to bring diverse perspectives and women into the water space and with STEM backgrounds. That’s wonderful. You definitely talk to her.

Anna Huber from the World Economic Forum. She’s created her own accelerator and brought in a lot of diverse perspectives. If you’ve met her,

Antoine Walter: you’re the second person to recommend her to me today.

Max Storto: Well, so, okay. I can send the intro to. Strong alignment of planets. Certainly like Christine Boyle, former Xylem, former entrepreneur.

She just is going to work at Burntisland Ventures. You could do a collaboration between her and Tom Ferguson. I think that would be an awesome podcast. And then I used to work, I said, uh, for an organization, Echo River Capital. Peter Yellis is really brilliant, has been one of my mentors in the water space.

Uh, he’s really, would be really interesting to have on a podcast.

Antoine Walter: I’ll take you as a producer. You have a, I guess you’re a scout, so you’re scouting.

Max Storto: I, I, I, someone once, I don’t remember who it was, but they said that plagiarism is when you take one person’s idea. Research is when you take a lot of people’s ideas.

So I like to just take and sprinkle in a bunch of different ideas from a lot of people that I’ve learned from.

Antoine Walter: Again, perfect conclusion. If people want to follow up with you. Where should I redirect them the best?

Max Storto: I think I’m, I’m best over, not over email. I’m horrible at email. LinkedIn messaging me. I’m, I’m the only Max Dordo.

Jewish first name, Italian last name, not that common. So easy to find me. The Xylem Innovation Labs has a website on the Xylem. You can find us there. There’s a contact form if you’re interested in connecting with Xylem Innovation Labs as a whole. Those are probably two places that are best to find me, but I like the personal touch.

So just message me on LinkedIn and then we’ll start texting and it’ll be fast.

Antoine Walter: As always, go to the show notes, you’ll see all the details, the link directly to you. In case there’s a second Mark Storitor who just created his account yesterday, you never know. That way we’ll cover it, we’re sure. It was a great pleasure to spend that time with you.

I’m sorry we went far over the limit.

Max Storto: I had a lot of fun Antoine, don’t worry.

Antoine Walter: I could have made it even longer, so thanks a lot for all the insights you shared and I hope to talk to you soon.

Max Storto: Yeah, thanks Antoine, good to talk to you too.

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