Reverse osmosis has run on essentially the same membrane for more than forty years, and it isn’t because nobody built a better one. Nala Membranes did. It’s a sulfonated polysulfone film that shrugs off chlorine where today’s polyamide membranes come apart, and that one property kills the biofouling that quietly eats about a quarter of a desalination plant’s operating cost. A major membrane manufacturer’s engineers looked at the chemistry, liked it, and their business side said no. So the question I actually wanted to answer isn’t whether the technology works, because it does. It’s whether a company that has raised $15.15 million, roughly a sixth of what ZwitterCo banked, can get a genuinely new material adopted in a market with three or four serious players that hasn’t changed its core material in two generations.

And I’m going somewhere with this, because the honest answer runs through the least glamorous corner of the water business and past at least one fresh grave.

What did Nala Membranes actually invent?

Nala Membranes is a North Carolina startup built on polymer-chemistry work from Virginia Tech and the University of Texas at Austin, co-founded by CEO Sue Mecham and Dr. Judy Riffle, and what it has made is the first new reverse osmosis membrane material in over forty years: a sulfonated polysulfone thin film composite.

Let me unpack that, because “thin film composite” (TFC) is doing a lot of work. Every modern RO membrane is a sandwich, and the slice that actually rejects the salt is a wafer-thin polymer layer laid on top of a support. Since the late 1970s that layer has been a polyamide, and polyamide has two well-known weaknesses: its surface is rough, so gunk sticks to it, and chlorine tears it apart, so you can’t use the cheapest, most obvious tool in water treatment to keep it clean. Before polyamide, the industry ran on cellulose acetate, which was smooth and could tolerate a bit of chlorine, but it lost the flux-and-rejection race and got displaced. Nala’s pitch is that it brought both of those old virtues back, with a new material and a new way of making it.

The smooth surface is the part chemists get excited about, because it comes from the manufacturing process, not from a coating you add on afterward. Nala makes its polymer first and then lays it down, where polyamide is grown in place on the membrane in a reaction that leaves behind a rough finish and a couple of nasty waste streams. Same trick the cellulose acetate people had, brought forward to a modern high-performance film.

The chlorine advantage, and the 24% it targets

Here’s the money question, because a chemistry curiosity only becomes an investable company when it changes a number on an operator’s spreadsheet, and for RO that number is biofouling. Biofouling is just bacteria setting up house on the membrane, and the standard, boring, cheap way to stop bacteria in water is chlorine. Polyamide can’t take it, so operators fight fouling with pre-treatment, downtime, and expensive cleaning cycles instead. Nala can take it, down at drinking-water doses to keep bugs from growing, and all the way up to 10,000 ppm of hypochlorite when a membrane is genuinely filthy.

There’s an old rule of thumb in this industry that if you’re not at least 20% better than the incumbent, you don’t get a seat at the table. Sue’s answer clears that bar, and she is careful to source it rather than round it up:

That’s an operating-cost story, which matters, because in most industrial water deals the argument long ago stopped being about the sticker price of the membrane and became about what it costs you to run the thing over its life. A membrane you can chlorine-clean instead of babysit is worth more every single year, not just on day one.

Why did the membrane giants pass on it?

This is the part that gives the episode its title, and it’s more instructive than the usual founder war story. Around 2010 and 2011, before Nala even existed, the underlying sulfonated polysulfone chemistry landed on the desk of one of the big membrane manufacturers. Their technical people ran tests and liked what they saw.

Now, my instinct when I hear “the giant turned it down” is to reach for the hall of fame of corporate blindness, and the episode does exactly that: Kodak sitting on the digital camera its own engineer built, Blockbuster waving Netflix through, Xerox letting personal computing walk out the door. The trouble is that this is survivor bias dressed up as destiny. Internet Explorer held nearly 96% of the browser market in the early 2000s while being nobody’s favorite browser. Betamax was better than VHS and lost anyway. We still type on QWERTY keyboards that were designed to slow us down. Incumbency is a moat, not an accident, and the academic read is that you need to reach somewhere between 15% and 30% market penetration before adoption becomes self-sustaining. Sue puts the same wall in plainer terms: on the membrane side, she says, people can’t even fathom what you mean by a new membrane, because it’s been so long since they had one. I’ve argued this at length in a newsletter on why your water tech is probably not as disruptive as your pitch deck claims, and if that debate is your kind of fun, my newsletter is where I keep having it.

Has anyone ever actually disrupted water tech?

Yes, but you can almost count the clean examples on one hand, and every one of them took a decade or three. These are the cases I keep reaching for on the show. Trojan started in 1977 as three people in Canada betting that ultraviolet light could replace chlorine for disinfection, and most of the industry laughed until UV became mainstream municipal practice in the 2000s. The pressure exchanger, the device that recovers up to 60% of the energy in a desalination plant, arrived in 1992 and didn’t become standard until the mid-2010s, by which point something like 70 million people were drinking water that had passed through one. And the canonical case is Andrew Benedek pushing the membrane bioreactor through the 1980s and 1990s while everyone told him membranes had no place in wastewater, right up until GE bought Zenon in 2006 and the idea became obvious.

So the material working is the easy part. The pattern in this sector is that a better mousetrap wins a niche first and the mainstream last, if ever. Even today, polymer membranes hold about 93% of the market against roughly 7% for ceramics, a 2025 Global Water Intelligence split I chewed over in my newsletter, and that gap has barely moved despite ceramics being genuinely excellent. Membranes, it turns out, don’t much like a winner-take-all story.

How does Nala’s $15 million stack up against the field?

This is where I get to plug in my own numbers, because I keep a section of my Leviathan database on exactly this cohort, the startups trying to move the membrane itself, and laid side by side they tell a story the pitch decks don’t.

Look at what most of that money is actually buying. ZwitterCo, which has raised close to six times what Nala has, puts a clever zwitterionic layer on top of a polyamide. Aqua Membranes, whose 3D-printed spacers I covered with Craig Beckman, improves the plumbing around the membrane. Evove, which I looked at through its lithium work, coats and prints. Nearly the whole field is innovating around the polyamide rather than replacing it, which is the rational thing to do, because replacing the material is the hardest possible version of this game. The one team that took a swing as deep as Nala’s, Aquaporin, built biomimetic membranes out of actual water-channel proteins, raised nearly $25 million doing it, and is now dead. That’s the company Nala keeps, and it’s worth sitting with before you get too excited about a founder claiming to have out-chemistried an entire industry on $15 million.

Can a bootstrapped startup out-patient the oligopoly?

I think the interesting answer is that Nala isn’t trying to beat the giants at all, and that’s precisely why it might work. Run it through the framework I use for this: a water tech can be disruptive on four fronts, creating a market, improving performance, cutting costs, or improving the user experience, and the earlier you are, the fewer of those you’re allowed to touch at once. Nala touches exactly two. It improves performance, by handling organics and chlorine that choke polyamide, and it cuts costs, by that 24%. Two, which is the ceiling I’d give a company this young. It is not also trying to invent a new market or reinvent how plants are operated, and that discipline shows up in the fundraising.

The go-to-market matches the money. Nala is starting in industrial wastewater, the semiconductor, textile, and mining streams that are loaded with the organics polyamide hates, where a customer feels the pain sharply enough to try something new, and where you don’t need to dislodge a giant to win the job. Manufacturing is deliberately asset-light: Nala makes its own polymer, coats a sourced substrate, and hands the sheet to a contractor to roll into modules, with, as Sue points out, no waste streams to dispose of at the end. It’s a company built to survive the twenty-year adoption clock rather than to sprint at it. There’s an exit shimmering somewhere out there too, and I’ll admit I floated the idea on the show that a private-equity-owned membrane major might one day want Nala as the premium “sparkle” on a commodity product, though that one is my speculation, not a plan on anyone’s desk.

Frequently asked questions

What is Nala Membranes?

A North Carolina startup, co-founded by CEO Sue Mecham and Dr. Judy Riffle, that has developed the first new reverse osmosis membrane material in over 40 years, a sulfonated polysulfone thin film composite.

What is a sulfonated polysulfone membrane?

A reverse osmosis membrane whose salt-rejecting layer is made from sulfonated polysulfone rather than the industry-standard polyamide. It has a smoother, more chlorine-tolerant surface, which reduces biofouling and allows aggressive chlorine cleaning.

Is Nala’s membrane really chlorine-tolerant?

Yes. Nala reports tolerance from drinking-water-level doses up to 10,000 ppm of sodium hypochlorite for cleaning, where standard polyamide membranes degrade on contact with chlorine.

How much has Nala Membranes raised?

About $15.15 million across five disclosed rounds, according to the Leviathan funding database, with a further roughly $5 million priced round open at the time of the interview.

How is Nala different from ZwitterCo or Aqua Membranes?

ZwitterCo coats a zwitterionic layer onto polyamide and Aqua Membranes prints spacers around existing membranes; both improve the incumbent. Nala replaces the separating material itself.

The one thing I’d watch

If you want to know whether this is the rare water-tech disruption that sticks, don’t watch the chemistry, which already works, and don’t watch the funding headline. Watch for two things: real, paid industrial-wastewater installations that survive a full cleaning season, and a strategic lead investor writing the check that says a serious player wants this material to exist. Get those, and the twenty-year clock starts running in Nala’s favor. As Sue puts it, the whole point is to make reverse osmosis cheaper and simpler so it can do what it’s supposed to do, and that’s a fight worth losing sleep over. The full conversation, chlorine chemistry and all, is the episode.

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What is Water-as-a-Service?

Start with the model, because the whole story lives there. Henry is blunt about it: “the technology is not the problem,” he told me, “the delivery model, the business model is the solution to our biggest infrastructure problems.”

In the normal world, a town buys a plant. It borrows the money, hires a firm to design and build it, and then owns and runs it more or less forever. Water-as-a-Service flips every one of those verbs onto the provider. Seven Seas finds the capital, builds the plant, owns it for good, operates it, and you simply buy the treated water, usually a fixed charge that pays down the plant plus a price per cubic meter you actually use. You are not buying a machine, you are buying water, the way you buy electricity. Seven Seas liked the idea enough to trademark the name, WaaS, which tells you they think the model, not the membrane, is the product.

Where it sits: the water delivery-model zoo

“A private company runs a water plant” hides at least six different deals, and the line that separates them is simple: who puts capital at risk, and who ends up owning the thing. At one end is Design-Bid-Build, where the city pays for everything and owns it forever. In between sit the half-measures: Design-Build-Operate, where the city still finances and owns the plant but hires one team to build and run it; and Build-Operate-Transfer, where a private builder fronts the cash, runs the plant for twenty or thirty years, then hands the keys back. Water-as-a-Service is the far end, where the provider pays, owns, and the keys never change hands at all. You just keep buying the water.

If that picture feels abstract, the table below puts the who-pays, who-owns and who-runs of each model side by side.

The real innovation is the deal, not the desalination

Here is the part I find genuinely clever, and it has nothing to do with membranes. The desalination itself is decades-old, widely available technology. The breakthrough is the deal. As Henry tells it, water has always had two camps that refuse to talk to each other: the engineering builders, who can size a pump but freeze when you ask them for an IRR (the internal rate of return, the yardstick for what a project earns), and the project-finance money, which can write the check but often cannot spell reverse osmosis. Water-as-a-Service forces those two into one company that gets paid only when the water flows, which kills the margin each camp would otherwise stack on the other.

And the model compounds. Henry’s real moat is not a plant, it is having done this so often that he no longer needs a fresh financial close, new engineers, or “a new lawyer that tells us how the water-as-a-service agreements work” for every deal. Do it once and it is hard. Do it 200 times and it is a machine.

Why doesn’t the US just do this everywhere?

If the model is this good, why hasn’t every thirsty American city switched? Because of a wall called Design-Bid-Build, built from two materials. The first is law: almost every US state requires public construction to go to the “lowest responsible bidder,” which needs a finished design to bid against, which legally splits design from construction. That split, mandated by statute, is the US municipal default.

The second material is decisive: cheap money. A city borrows through tax-exempt municipal bonds that run roughly 150 to 210 basis points below what a private company pays, topped up by the federal State Revolving Funds (about $133 billion in loans over 25 years) and WIFIA. So a US utility’s own credit is cheaper than any private owner’s, and it rarely needs a private balance sheet at all. Add that about 80% of Americans get their water from a government-owned system, plus a long memory of privatizations that soured (Atlanta handed its water to a private operator in 1998 and took it back by 2003), and you have ground Water-as-a-Service simply cannot occupy.

So where does Water-as-a-Service actually win?

It wins where that wall is thin, and there are three such places. The first is industrial customers: a factory, a mine, or a refinery signs the water contract directly, with no public tender, moving a water plant off its balance sheet so its capital stays in its core business. Henry says these are still “a handful” of his book, but they are the growth leg, and the cleanest pure-play around, Belgium’s listed Ekopak, is built entirely on industrial reuse.

The second is islands and decentralized systems, Seven Seas’ heartland: across the Caribbean and Latin America, where public capital is thin and the cheap-muni market does not exist, a private build-own-operate provider is simply the practical route. Seven Seas is the primary water supplier to the US Virgin Islands, St. Maarten and the British Virgin Islands. The third is anywhere a small, fast, brackish or reuse plant beats a megaproject. Set California’s Carlsbad plant (conceived 1993, opened 2015, around $1 billion) against Henry’s decentralized model, where his crews commission a working island plant in under two months.

The catch: it follows the money, not the thirst

Before you remortgage the house to buy water annuities, here is the catch the brochures skip. A 30-year water contract is only ever as good as the customer signing it. Henry uses a mortgage analogy: “the better your credit rating, the lower your mortgage rate,” and a water deal is no different, because “we need to make sure that we get paid.” So the model needs strong, creditworthy off-takers, which in practice means the US and other wealthy economies, and it struggles exactly where water is scarcest and poorest. The development-finance literature says the same thing in colder language: capital flows to creditworthy buyers, not to need. Water-as-a-Service is a credit instrument first and a water technology second.

There is one tidy exception that proves the rule. The largest market on earth for long-term water-purchase contracts is the Gulf, among the most water-scarce regions there is, but also high-income and state-backed. Scarcity did not unlock it. A guaranteed check did.

Why is a Water-as-a-Service company worth a billion dollars?

Now the part a fund actually pays for. Strip away the water and a book of these contracts is recurring, contracted revenue, locked in for decades, from customers obliged to pay. That is an annuity, and it behaves like a toll road: the predictable, inflation-resistant cash flow infrastructure investors are built to buy. The demand behind it is bottomless: the US alone faces a reported $1.26 trillion in water and wastewater needs over 20 years (US EPA, 2023 to 2024).

Now the arithmetic. In March 2020, Morgan Stanley’s infrastructure arm bought Seven Seas for a reported $500 million. In May 2025, the Swedish investment firm EQT agreed to buy it for a reported $1 billion-plus. By my count, in my own Leviathan database, that is the same asset roughly doubling in five years, while never once ringing a stock-market bell.

What changed in between was not the technology. Henry took a “great company” that had gone “stagnant” and rebuilt its strategy, its team, and a sales pipeline “where before there was none.” Four years, he reminds me, is a nanosecond in infrastructure.

So what did the billion-dollar water exit actually look like?

It looked like a company passed between investors its whole life. Private-equity firms owned Seven Seas through the 2000s. In 2016 its parent, AquaVenture, went public on the New York Stock Exchange under the fitting ticker WAAS, raising about $134.6 million (Renaissance Capital, 2016). In 2020, Culligan took AquaVenture private and carved Seven Seas out, selling it to Morgan Stanley Infrastructure Partners for a reported $500 million (BusinessWire, March 2020). Then, in May 2025, EQT agreed to buy it for that reported $1 billion-plus (EQT, 2025). Four owners across two decades, and the strange part: of those four prices, only the 2016 IPO was ever officially confirmed.

And the exit was not luck. It was designed from the day Henry took the job. When he interviewed with Morgan Stanley, he asked the only question that mattered: what is your exit strategy, and is an IPO an option? They told him plainly it was not. So from September 2021, everyone knew exactly what ending they were building toward, which is roughly how you actually buy a water company and turn a profit.

Who is Seven Seas Water, exactly?

Quick context, because, again, you have rightly never heard of them. Seven Seas Water Group has been treating water for about two decades. Today it runs more than 200 desalination and wastewater plants across the US, the Caribbean and Latin America, from islands like the US Virgin Islands all the way to Peru, with headquarters split between Tampa, Florida and Houston, Texas. Its core trick is brackish-water desalination, taking water that is salty but not quite seawater and making it drinkable, plus wastewater treatment through its AUC division. Not a household name, just the quiet plumbing behind a lot of other people’s taps. Which is exactly the kind of unglamorous, mission-critical infrastructure that hides in plain sight until a fund pays a reported billion for it.

Why do these water companies sell to funds instead of going public?

So if the model is this good, why has Seven Seas never simply floated? Henry’s answer is that public markets are “a cyclical animal,” and that water is tiny by stock-market standards, mostly regulated utilities and the firms selling “pumps, pipes, valves.” Private owners can price the contracted future; public markets mostly price last year’s profit. So the annuity keeps trading privately, between infrastructure funds. Morgan Stanley, then EQT, with Ember, KKR and XPV chasing the same playbook, and the price tags to match: KKR paid a reported $2.07 billion for the environmental group Ecorbit in 2024, while a closer cousin, H2O Innovation, went private for C$395 million. This is water privatization in slow motion. I asked the same question of a far bigger name in 600 private water bets and zero public exits, watched another platform turn bolt-ons into a reported $1.8 billion exit, and mapped the patient money behind it in how HG Ventures became a top-5 water investor. I even sorted water’s investors into three tribes once, because I am, as ever, fun at parties. Subscribe to the (don’t) Waste Water newsletter here.

How to invest in water if you’re not a billion-dollar fund

So can you, personally, own a slice of this? Mostly, no, and it is worth being honest about that. The Seven Seas kind of deal lives behind billion-dollar infrastructure funds with institutional minimums, not a brokerage app. What is actually open to you is the unglamorous public half Henry described: listed water utilities, the big equipment makers, and a handful of genuine water-focused funds and ETFs (an ETF being a basket of stocks you buy in a single click). The recurring water-as-a-service upside, the annuity that EQT just paid a reported billion for, stays almost entirely private. Henry, for what it is worth, defines a “water company” generously, counting even firms that simply help others use less of it, so if you go looking, look wider than the obvious utilities.

The frontier Henry keeps pointing at is the “third leg,” industrial Water-as-a-Service, factories handing their entire water headache to an operator and keeping their own capital for their own business. And my crystal ball still says the one chapter Seven Seas keeps skipping, an actual IPO, is the most likely next one, the very thing the whole sector keeps not doing. Whichever way EQT eventually rings that bell, the lesson holds. In water, the billion-dollar moments rarely arrive with a gong on an exchange floor. They happen quietly, between people who understood the delivery model long before anyone else was listening. Go listen to the full conversation with Henry on the podcast, it is genuinely worth your time, and it will change how you read the next water headline.

Frequently asked questions

What is Water-as-a-Service (WaaS)?

A model where a company builds, owns and operates a water or wastewater plant and sells the treated water under a long-term contract, instead of selling the plant itself. The customer pays for water, usually a fixed charge that covers the plant plus a price per cubic meter, with no upfront capital; the operator carries the financing and the risk. Seven Seas Water trademarked the term.

How is Water-as-a-Service different from Build-Operate-Transfer or Design-Build-Operate?

Under Design-Build-Operate, the public customer finances and owns the plant the whole time and just hires one team to design, build and run it. Under Build-Operate-Transfer, a private developer finances and runs it for 20 to 30 years, then hands ownership back. Under Water-as-a-Service, the provider owns the plant for good and you never own it, you only ever buy the water.

Why doesn’t US municipal water use Water-as-a-Service?

Two reasons. Low-bid procurement laws push cities into Design-Bid-Build, where the public owner finances and owns the plant. And tax-exempt municipal bonds plus federal loan funds make public capital cheaper than any private owner’s, so a US city rarely needs a private balance sheet. WaaS therefore concentrates on industrial customers, islands and decentralized systems instead.

Who owns Seven Seas Water?

EQT Infrastructure, through its EQT Infrastructure VI fund, since its 2025 acquisition from Morgan Stanley Infrastructure Partners. Before that it belonged to Morgan Stanley (2020 to 2025), and earlier to AquaVenture Holdings and its public shareholders (NYSE: WAAS), with Culligan owning the parent briefly in 2020.

What did EQT pay for Seven Seas Water?

It was never officially disclosed. Sources put the enterprise value above $1 billion including debt, on a deal agreed on 22 May 2025, roughly double the reported $500 million Morgan Stanley paid for the same business in 2020.

How big is the water-as-a-service market?

There is no single reliable figure: independent estimates put growth at roughly 7 to 13% a year through the early 2030s, but the absolute market-size numbers vary about threefold between firms. The hard number is the demand behind it: the US EPA puts 20-year US water and wastewater needs at about $1.26 trillion.

How do you invest in water?

For most people, through listed water utilities, water-equipment makers, and water-focused funds or ETFs. Direct stakes in private water-as-a-service operators like Seven Seas are generally limited to institutional investors and large infrastructure funds. —

Sources

1. Primary source: the (don’t) Waste Water podcast, S13E15, “What Does a Billion-Dollar Company Exit Really Look Like?” with Henry Charrabe, CEO of Seven Seas Water Group. youtube.com/watch?v=sd2tCuwMKfk (retrieved 2026-06-13).
2. EQT to acquire Seven Seas Water Group, EQT, press release, 22 May 2025: enterprise value reported to exceed US$1bn including debt; financial details not officially disclosed. eqtgroup.com (retrieved 2026-06-13).
3. Seven Seas Water acquired by Morgan Stanley Infrastructure Partners (reported ~US$500M), BusinessWire, 30 March 2020; Conyers, “US$500 million acquisition of Seven Seas Water.” businesswire.com (retrieved 2026-06-13).
4. AquaVenture Holdings IPO (NYSE: WAAS, ~US$134.6M gross), October 2016, Renaissance Capital / PRNewswire. renaissancecapital.com (retrieved 2026-06-13).
5. Proprietary analysis and deal records: Leviathan, my water M&A database (EQT 2025, AquaVenture 2007, Aguas de Panama 2020 deal records; the reported ~US$500M to ~US$1bn+ step-up), verified 2026-06-13.

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