How does an investor decide to fund a water technology or a water company? Are they sitting in a Shark Tank environment and following their instinct to make a decision in minutes? That’s very unlikely, right? Yet, you won’t know before you actually ask about the research and due diligence process. That’s what we explore this week:
with 🎙️ Meshal Alduraywish, Vice President at Sciens Capital Management
💧 Sciens is a research-driven investment fund that identifies uncovered, under-researched, or misunderstood water sector opportunities that are undercapitalized.
This episode is part of my Series on the Water Crisis in America
What we covered:
💰 What are the biggest gaps an actual investor sees in the Water Sector, and how can we turn this into an opportunity
💸 How getting a sense of the potential technology adoption goes beyond gut feeling and requires real-world data
3️⃣ How digitization opportunities are still highly under-addressed by the water industry and how we may get inspired to look at the energy sector
🎛️ How having a portfolio of companies is an interesting pool of data to dive in to identify new needs and trends
💊 Water being still undervalued, cybersecurity applied to the sector, building a portfolio… and much more!
🔥 … and of course, we concluded with the 𝙧𝙖𝙥𝙞𝙙 𝙛𝙞𝙧𝙚 𝙦𝙪𝙚𝙨𝙩𝙞𝙤𝙣𝙨 🔥
➡️ Send your warm regards to Meshal on LinkedIn.
➡️ A big THANK YOU to Sciens Water for enabling this episode!
is on Linkedin ➡️
Teaser – How the Water Industry lags by a 7 years factor compared to the Energy Sector
Full Video: My conversation with Meshal Alduraywish
Table of contents
- What we covered:
- Teaser – How the Water Industry lags by a 7 years factor compared to the Energy Sector
- Full Video: My conversation with Meshal Alduraywish
- Full Transcript:
- Researching the Water Market to identify the most interesting trends
- Why is digitization a challenge for the Water Sector?
- How to build up your water impact as an investor
- A cheat sheet to doing research as an investor in the Water Sector
- How do water investors measure their impact?
- Rapid Fire Questions
- Other Episodes:
These are computer-generated, so expect some typos 🙂
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Antoine Walter: Hi Meshal, welcome to the show.
Meshal Alduraywish: Thank you!
Antoine Walter: I’m curious to have yet another discussion with someone from Sciens Water, because I’m still trying to put my finger on what’s special about Sciens. If I’m right. You are working on the research part of the company, so what are you exactly looking into?
Meshal Alduraywish: First, thank you for having me.
Of course we’d love to talk more about like what I do, like anyone else. Well, so basically to your point, I do the kind of the research part, but also more of like an actionable research, not just like a research that ends up in like a drawer.
Researching the Water Market to identify the most interesting trends
Based on my research and the team’s research, we find kind of, emerging trends, challenges within the water, and we address these challenges with investments with finding the right companies or technologies to address these challenges.
For example to make this more concrete, I can talk about our effort in the digitization of water and wastewater utilities. Our portfolio companies work in the water sector at different kind of levels and across the value chain, but one of them is a water and wastewater utilities company where they own water systems across the US.
Looking at that specific segment, which is the water operation and the municipal water cycle from the source until the end user, we saw a huge opportunity in digitizing this value chain.
The energy market is more advanced by 7 years
Maybe as a key stat to give you a sense about the digitization level of the water sector, if you compare it to the energy sector, it lags by seven years.
To paraphrase, this one is basically
it’ll take the water sector today, seven years, assuming the energy utilities, like stop their digitization as they are now. It’ll take seven years to catch up with it.
So imagine kind of like how this gap is widening.
This is kind of just like to give you a sense of how late the water sector in adopting new technologies as simple as smart metering, and this is just like something that you can see and like sense, but also goes into kind of like the operation and processes of the actual plant.
Translating best practices for the Water Sector
My point is that we saw this kind of challenge that how can these utilities become more digital?
And by doing that helps utilities become more efficient, optimize operation, optimize resources, both human and financial, et cetera. And there’s like a lot of opportunities to realize, like the impact obviously cuz now you can quantify it, you can also mitigate some environmental risks, et cetera.
What I was trying to say is that we look for challenges among the companies we own and we kind of developed the capabilities to address them. And the digitization challenge is one thing that we’re working on now.
Why is digitization a challenge for the Water Sector?
Antoine Walter: So digitization is a challenge because we are late as a sector compared to the energy. Okay.
But beyond that, why is it a challenge? Why do we need digitization? I’m playing the devil’s advocate, sorry. But…
Meshal Alduraywish: That’s a fair point because this is the question we’re asked every time we try to like sell technology or like convince an operator to adopt a new technology. Like why do we need it as long as it’s like working now?
Dealing with the Water Assets outside the Fence
Well, I’ll give you like an another example to simplify it. When you own a water system, you have some assets that are within the fence or inside the fence, but also you have assets that are outside the fence that are like sometimes like tens or like a hundred mile away from the main plant.
And these assets are various, you have lift stations, pump station, manholes fire hydrants, and you need to make sure they’re working.
You need to make sure, like if there’s like an issue, if there’s flooding or anything, you need to keep track of all these assets.
We’re still doing it as we did it 20 years ago
20 years ago, how do you keep track of like these assets, what. Is you have to send someone driving their truck and check if the lift station is actually working or there’s like a light or an alarm.
So they drive by it and they see if the alarm is like on. Then there’s an issue. Nowadays you can do this with just looking at your phone and checking whether the sensors that are attached to this lift station, whether it’s working or not.
For example, like with this simple technology, the technical name is the remote scada or the remote monitoring of these remote assets. You would think every utility has it, but in reality there are some utilities today still using a technology that’s called auto dialers, which is basically when something goes wrong with your lift station, there is like a connected to the towers and the intranet to calls your phone.
In 21st century you would think this technology is outdated, but still people are using it.
Getting early customer feedback on potential evolutions
So for us, this is how we sell it to the customers. We give them an example, we tell them, okay, how do you do this job? Let’s give you a pilot. Let’s try a pilot and like tell us how is your life?
Afterwards, this is how we can attack it from like a need and necessity than kind of just like, oh, because it’s like fancier to have like, this dashboard where you look at all the numbers, so it’s like addressing a certain need.
How to build up your water impact as an investor
Antoine Walter: Once you’ve identified that need and you want to address it, how do you address it?
What, what’s your vehicle for impact?
Meshal Alduraywish: This is where it comes kind of like our portfolio companies now, we have a, a platform, a digital water platform where it’s focused at finding these technologies that the water sector needs them and then introducing these technologies to them from the pain point. And we do this through our extensive network of companies and distribution networks throughout the US and by actually going, talking to the operators, understanding their issues, inviting them over, having them learn more about the technology.
And like slowly have them adopt these technologies. And what we see, we start with some systems that are 30, 50 lift stations, each would require sensoring, et cetera. Usually they start with one, we don’t have a problem. Takes them probably like couple of months, if not a year to adopt one or two.
From pilot to beachhead to becoming mainstream
But then later you see them asking for more and more and it just like, you see the curve upward trending, but it happens with every customer. But then the good thing is like because of how the water sector is structured, it’s very local and people need to see it before they actually adopt it.
Mm-hmm. by having a technology introduced into a certain community, after some time we start seeing other customers coming because they saw their neighbor. Is actually using his phone to check the performance of his assets. So there’s like, kind of like the word of mouth, but also being close to your customers, listening to them and understanding their concerns.
You know, no one is gonna go to Amazon and like buy the latest sensoring technology, even if it’s like way cheaper and it’s like way accessible because it can get to your door. People need to trust you need to see it. There is a, a kind of like natural. to adapting the technology.
A cheat sheet to doing research as an investor in the Water Sector
Antoine Walter: Can you take us a bit behind the scenes to understand how you run your research?
Because what you’re hinting to sounds like something we experienced out there in the field, that digitization is late in the sector, that it covers a lot of needs, that if you want to go distributed, you need something to power it and digitization will be that vehicle to power it. But beyond this kind of good sense, common sense, which are the facts you’re building on to identify a trend?
Meshal Alduraywish: That’s a, a good question, basically this is the first question I asked myself, how can I do it? When I was first assigned this task of building our digital platform and like doing the research, I mean starting with kind of like top down, what are the research out there?
What are the challenges that the water sector is facing? I’m kind of like, this is the macro view. , which basically everyone knows you can find it in Google. It’s just like accessible. Mm-hmm. easy to find, easy to do, but you need structure it, clean it, and then the next kind of like. Step, which many people struggles actually going and like talking to the people, understanding from the people who are on the ground, how do they perceive these things?
Don’t fall in love with your desktop research: try it out in the field
Countless times when doing the desktop research, I find these technologies that I think are just mind blowing. Like, wow, this technology can actually tells you, for example, where’s your leak detection? Exactly. Like this technology can do this. This is like a no-brainer. Of course every utility is gonna jump over it and like adopt it.
And then you go and talk actually to the operators and like understand their concerns, understand their challenges, their resource limitation, budget limitation. Then you recalibrate your sense of like these technologies. That’s why you are working as a technology provider, as like someone who’s like introducing or investing in new technologies.
Sometimes I see there’s a mismatch between what’s needed and what’s being offered, and to answer your questions through our portfolio companies because we have. Direct access to them. They are in the first line, we get all kind of insights and firsthand experience of what will work, what’s not gonna work.
And also, especially through CSWR, since they’re the case in point here, they experience all these different challenges
How do water investors measure their impact?
Antoine Walter: to round of that, that conversation. I’d like to have a crystal ball question. You’re looking at the trends. You’re looking at how to action the. Do you have a kpi which tells you that you had actually an impact on a five or 10 years outlook?
Meshal Alduraywish: We’re now in the process of developing our KPIs across their portfolio to Okay, quantify this. But I think one of the tangible impact we see, and like we hear this from our customers is that you go and introduce the technology of like, let’s say remote monitoring into like a certain utility, but then you hear back, it’s like, oh, actually now we’re attracting younger generation because the perception of operating utility and like, not necessarily like tech savvy, but no, we’re actually giving you the opportunity to use technology, utilize technology to make your life easier.
So then we see, because we offer also like customization and different kind of services, we see customers coming to us saying, okay, so can you add, for example, different kind of sensors or can you add, like for example, we have this customer, they monitor tank level, which is like basic.
An example of rolling out KPIs
You find it everywhere. But then they realize the value of like sensoring the value. Like monitoring the value of data. They were like, okay, so we have issues with the tank maintenance and how sometimes there are cracks, there are leaks that we didn’t know about until after it happens. So how can we solve it with this technology?
For example, like working, like technologies that address emerging issues that are not, like if you go on like Google sensor, To help me with the tank cracks, it’s not there. You know, we work with our customers to develop the next gen technologies to help them address their issues. So to your question, how do we know whether the impact is there or not is by them kind of reacting and like even like wanting more to adopt even more.
So this is something, positive and we hope to see at. Some point that the water sector is like caught up with like the other industries. And even further
Antoine Walter: to round off these interviews, I have a couple of rapid fire questions. So it’s short questions, aiming too short answers, but I’m never cutting the microphone.
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Rapid Fire Questions
The first one is, what is the most exciting project you’ve been working on and why?
Meshal Alduraywish: Talked a lot about digitization, but I think helping water and wastewater utilities to become more digital. And to bring more talents into the water sector where they can like, have impact through digitization and working and technology.
And this is, I think is very exciting. And also kind of like good energy.
Antoine Walter: What is the one single thing which you’re doing today in your job, which you will not be doing in 10 years?
Meshal Alduraywish: I think it’s kind of like ex. Explaining to people why water like matter. Hopefully in 10 years, you know, people will get , why water is something essential and not just like the water we drink, but also the water infrastructure and everything around it.
Antoine Walter: I would love that you’re fully right here. I just fear . We might have to still explain it in 10 years, but fingers crossed And last question for me, what is the trend to watch out for in the water sector, which is not digitization?
Meshal Alduraywish: One trend that we see happening in the water sector, which is not digitization, but also has to do with technology, which is cybersecurity and how now the threat of cybersecurity is very understated.
But also very significant in terms of like the threat and the risk it poses to water systems and like, utilities, but also it’s like a national risk. So I think more focus in terms of like from the different stakeholders is something we’re gonna see emerging and it’s an opportunity for small companies, operators, and everyone is like to start.
Ahead of the game.
Antoine Walter: Awesome. Well, thanks a lot for sharing this, insights this behind the scenes, and I’ll let you have a good rest of the conference. Thanks. Thank you
Meshal Alduraywish: so much. Thanks a lot. Thank you.