The water sector is not about to crack. It is standing inside an inflection point it has never actually reached before, and that is exactly why it feels so fragile. By my count, 2025 beat every record that matters: the bench of private-equity-owned water platforms grew from 42 companies in 2015 to nearly 600, private equity ran 165 water acquisitions in a single year, and on day one of the Global Water Summit, the sector’s first and only unicorn, Gradiant, doubled its worth to a $2 billion valuation. Every load-bearing part of a self-sustaining capital machine is finally in place, except the last one. There is no IPO pipeline. And a machine that cannot complete a single lap does not break from too much money pouring in. It breaks from money that cannot get back out. So the real question is not whether water tech is overheating. It is whether anyone can finally cut the cord.
So is the water sector actually about to crack?
Here is the honest answer, and it is the one I went to Madrid to test: no, it is not cracking, but it is closer to the edge than it has ever been. Of the five steps a water company climbs from idea to established business – starting up, raising early rounds, fuelling growth, handing over to private equity, and finally exiting – the first four all beat their records in 2025 and early 2026. Only the fifth, the exit, is missing. That is not a sector overheating. That is a sector that has built every part of a machine except the door the money leaves through.
I think about a water company the way I think about a yo-yo. A founder gives it the first flick of the wrist, and with enough money, brains and muscle it spins faster and faster – that is venture capital, then growth capital. But a yo-yo always has a string attached, and the string eventually calls it back. In my metaphor, that is a private equity fund: it sends the company down on a scaling journey, then reels it in to sell to a bigger fund that flicks it harder still. Only when someone finally turns that yo-yo into a water wheel – a full-scale, self-sustaining company – can the cord be cut. That final player is the riddle. And the riddle is what decides whether the whole thing holds.
So I went to find the players themselves. Over three days in Madrid I got to sit down, one to one, with six of the people who actually move this money – the founders, the funds, and the bankers who broker the exits – plus a dozen more conversations off the record. Almost none of what follows was said from a stage. It is the candid version, the kind you only get sitting across a table, and it is the reason I think the picture is both more exciting and more fragile than the press releases let on.
What does the water capital chain actually look like in 2025?
On the private-equity side, the share of all water deals run by PE buyers basically doubled in a decade, from around 14% in 2015 to 37% last year, with 165 PE-led acquisitions in 2025 alone – the most on record. And the shape is telling: 80 of those 165 were sub-$10 million targets. High velocity, low ticket. The loop is spinning faster than ever, but with smaller cheques. The early stages tell the same story of abundance: by my count there were 108 funding rounds along the early steps in 2025, against 33 in 2018, and the specialist funds writing those checks are now raising faster than the companies they back.
It is not just the venture end filling up. XPV, on the later-stage side, closed two new vehicles in 2025 worth $625 million and pushed past a billion dollars under management. Thematic European money is arriving for the first time too – Summa Equity beefed up a whole water team this year. And the biggest strategic in the world, Xylem, is quietly underwriting the early stage through a fund of funds. So the intake valve is wide open from every direction at once. (I dug into how private equity actually plays water in my newsletter on the three PE strategies reshaping water tech, if you want the mechanics – and you can subscribe here while you are at it.) If you want the founder’s-eye view of where all this capital starts, I walked through it in how water-tech venture capital actually fuels growth.
Why are there 600 private water bets but no way out?
Here is the catch I keep coming back to inside my Leviathan database, where I have logged 5,531 completed water deals since the year 2015. The bench of PE-owned water platforms went from 42 companies in 2015 to nearly 600 in 2025 (arguably, by my own definition – I will expand on that another day). But a platform is not an exit. When private equity sells to private equity, the yo-yo just gets flicked again by a bigger hand. The string is still attached. And each of those platforms now swallows about four times as many bolt-on acquisitions as it did a decade ago, which means the loop does not run on building new platforms anymore – it runs on feeding the ones it already has.
So who does cut the cord? Mostly the strategics, and they are picky in a very specific way. Two of the people who broker these deals for a living sat down with me to walk through it. As Samrat Karnik, who runs water M&A at Houlihan Lokey, put it, a target has to be ready before a strategic will touch it.
It needs to be de-risked because the way the corporates are structured today globally, the reward for taking risk is very minimal, and penalty for failing is high from an executive’s career.
That is why the dollars flow to established, profitable, growing platforms and not to technology bets. Veralto bought Aquatic Informatics for its scaled software platform; Badger Meter bought s::can and then SmartCover, both proven businesses with a real commercial engine. As David Rose of Thales Water Advisors framed it, acquiring a company can simply be a faster, de-risked proxy for R&D – but only once it is proven. The growth itself comes in a strict order: a product gap first, then a market gap, then a geography.
Will Gradiant IPO?
Then, sitting across the table from me, Anurag Bajpayee said the quiet part out loud. Gradiant – now a two-time unicorn after its Series E landed at a $2 billion valuation – stopped raising money to survive about four years ago. It is a cash generator now, and the biggest use of proceeds from this round is acquisitions, not runway. So why raise at all, and why talk about going public? Because, he told me, you cannot control your own destiny otherwise.
We are indeed getting what you call an IPO readiness, making sure we’re tying up the loose ends as far as our reporting, compliance, et cetera, is concerned. This company is pretty close to being IPO-ready … at some point, in order to control your destiny as far as providing meaningful liquidity to your shareholders is concerned, you need to be IPO-ready. You need to be able to go public.
Notice what he is not saying. There is no date, and the IPO market right now is not exactly throwing a party. What he is saying is that liquidity is already happening privately: Gradiant has a reasonably viable secondary market for its shares, and some of the people who came in at Series A and B have already cashed out at very attractive multiples. That matters, because it is the closest thing water tech has to a working exit – and it is the backstory to how this company became the first and only water-tech unicorn in the first place.
Hasn’t water tech tried to go public before?
This is where the “zero public exits” in my title comes from, and it is the part that should worry anyone betting on the loop. Of those 5,531 deals in my database, the genuine public-market exits are a rounding error – barely a handful even mention a listing, and several of those are companies going the other way, taken private (H2O Innovation, for one). IPOs in the 2020s are a very pale echo of the 2010s. So the cord almost always gets cut somewhere other than a stock exchange.
Look at what Madrid was actually talking about and you see the shapes that work. Evoqua was built by private equity, taken public, then sold to Xylem for $7.5 billion. Ovivo’s electronics arm went to Ecolab for $1.8 billion. Seven Seas Water passed from one infrastructure fund to the next. And Axius Water, a platform private equity bolted together in barely five years, was sold to CRH – a building-materials group, a true wildcard from outside water – just two weeks before the summit opened. The path to a public exit does exist, mind you: NanoH2O sold to LG Chem and then on to Glenwood for $1.2 billion, and De Nora actually rang the bell, a story I told in how De Nora went from zero to IPO in seven years. It is just that, so far, it is the exception that proves how rare the rule is.
What is the “missing middle” trying to route around the drought?
While the exit door stays jammed, capital is busy trying to build its own. Aurelia Carrère, Thematic Chair at Summa Equity, calls her play the “missing middle”: a platform that buys companies in the gap between early-stage venture and the big buy-outs, scales them with utilities, and goes deliberately deep on one theme – emerging pollutants, and PFAS-destruction in particular. Her targets are concrete.
Between €50 million revenue and €150 million revenue. This is the missing middle, I would say.
Summa starts from a platform doing roughly €5 to €10 million of EBITDA and builds up, the same way it already runs a waste-management platform across the Nordics. What I like about Aurelia’s framing is that she ties her private-equity missing middle to a missing middle in water itself – the same empty middle of the company landscape that Guillaume Clairet of H2O Innovation has been describing for years (we compared notes on it off the record in a Madrid corridor – hi Guillaume!), and the gap I went hunting for across 2,587 water companies in my own newsletter. The hole in the cap table and the hole in the company map turn out to be the same hole, seen from two sides. If you want that thesis in full, it runs right through the H2O Innovation acquisition playbook and my 2,587-company investigation.
Xylem is solving the same problem from the opposite end. Rather than pick early winners itself, it acts as a limited partner – a fund of funds – inside specialists like Burnt Island Ventures, using them as what Sivan Zamir, now Xylem’s Chief Innovation and Product Officer, calls the “top of the funnel.” Two very different firms, both engineering a way to manufacture the exit the public market is not providing. That is what an immature ecosystem looks like when it refuses to sit still.
How mature is the water investment ecosystem, really?
So I asked everyone the same blunt question: on a scale to ten, where is this ecosystem? The answers were a Rorschach test. Job van Schelven of Pureterra Ventures, ten years in, said three, maybe four. Aurelia called the system’s maturity “globally high.” Sivan was “really bullish.” And Anurag, who arguably built the biggest thing in the room, was the harshest of all: a three, maybe a four, against a Silicon Valley he puts at eight or nine. His arithmetic is the one I keep.
A single Gradiant IPO, he reckons, would move water from a three to a six. To get to an eight or a nine, you would need a few of those – not one fairy tale, but a track record. That is the whole thesis in one number. The capital is here, the platforms are here, the talent is here. What is missing is proof, repeated enough times that nobody can call the first one a fluke.
So, is the inflection point in the room?
After three days in Madrid I tried to argue myself out of it, and I could not. We are living through the most active capital chain the water sector has ever had. The growers have dry powder, the rotation operators are running at a record pace, the strategics are paying premium prices for de-risked platforms, a genuine wildcard like CRH just walked in for the first time, and the sector’s only unicorn doubled its valuation while talking IPO out loud. For the first time, I would not laugh that idea off the stage. I am not saying it is a good idea either – the jury is still out – but that is not a sector waiting for an inflection point. That is a sector living inside one.
Let there be boldness, let there be ambition and lack of fear in the water industry. Let’s stay away from compromising ourselves. Sometimes, by being too shy and conservative, we do a disservice to ourselves and to this industry.
But being at an inflection point is not enough. A chasm is something you cross – would make a good title for a book – because if you do not cross it, you die in the middle. All the scaffolding is in place, and it is also still very fragile. The next twelve months will not be decided by how much money flows in; that part is solved. They will be decided by whether one company, probably this one, can finally turn the yo-yo into a water wheel and cut the cord in public. Watch that door. The full conversation is worth your time – and if you want to hear all six investors make their case, the episode is right here.
Watch the full conversation
Frequently asked questions
Will Gradiant IPO?
Gradiant is, in CEO Anurag Bajpayee’s words, “pretty close to being IPO-ready,” completing its reporting and compliance work and watching the market. No date has been set. He frames going public as the way to control the company’s destiny and give shareholders meaningful liquidity, while noting that a viable private secondary market already lets early backers cash out.
Is Gradiant the first water-tech unicorn?
Yes. Gradiant is the water sector’s first and only unicorn, and after its 2026 Series E it became a two-time unicorn at a $2 billion valuation – the raise itself was undisclosed.
Why are there so few water-tech IPOs?
Of the 5,531 completed water deals in my Leviathan database since 2015, genuine public-market exits are a rounding error, and IPOs in the 2020s are a pale echo of the 2010s. The track record is thin, so water companies almost always exit through a strategic sale or a private-equity-to-private-equity handoff rather than the public market.
How big is private equity in water now?
Private equity ran about 37% of all water deals in 2025, up from roughly 14% in 2015, with 165 acquisitions in the year – a record. Most were small: 80 of the 165 targeted companies worth under $10 million. The bench of PE-owned water platforms has grown from 42 in 2015 to nearly 600.
What is the “missing middle” in water private equity?
It is the gap between early-stage venture funding and large buy-outs – companies at roughly €50 to €150 million of revenue that need a platform to scale. Summa Equity is building specifically in that band, starting from platforms doing €5 to €10 million of EBITDA and focusing on emerging pollutants like PFAS.