The $58T water ecosystem & Water tech innovation

In 2023, for the first time, the economic value of water ecosystems was estimated at $58 trillion, equivalent to 60% of the world’s GDP by the WWF. Their director, Dr Kirsten Schuijt, states: “Healthy rivers, lakes and wetlands are essential for water and food security, adapting to climate change and sustaining biodiversity”.

Since 1970, the world has lost one-third of its remaining wetlands, while freshwater wildlife populations have, on average, dropped by 83%.
In the EU, 90% of river basins studied are projected to still be unhealthy by 2027, despite 20 years since the adoption of the Water Framework Directive.

Furthermore, according to Treehugger, freshwater demand is projected to surpass supply by 40% by 2030.

This is particularly concerning as water is essential for our daily needs, with households accounting for 11% of global water usage, industries for 19%, and agriculture for a substantial 70%. Without water, we would not only lack drinking water and proper sanitation but also struggle to grow and transport food, produce energy, and meet the essential demands of both nature and industry.

Water tech is growing fast in importance. Last year water tech companies received $1.2B in funding, down 30% from 2022's all-time-high but 105% above 2019’s pre-pandemic levels. This is still better than the average market drop (-38%) and wider climate tech sector (-33%).

In Dealroom, we make a distinction between water tech and blue economy. Water tech is concerned with the sustainable and efficient management of water as a resource, specifically freshwater, whereas blue economy's scope is geered towards coastal and marine ecosystems.

The only exception is desalination as it is an economic activity within the ocean but its ultimate goal is to produce drinkable water.

For more information on Blue Economy, explore the Deep Dive.

Water tech still represented less than 3% of the $48B in climate tech funding raised in 2023.

Water tech companies, labeled as "extremely VC backable" by Anouk Kruijff, a partner at PureTerra, a specialized water investment fund, are attracting attention from climate tech VCs, some of whom have become specialists in the field or established dedicated funds.

As of now, the water startups ecosystem is valued at over $25B, with 75% of value stemming from companies started since 2010, showing a relatively young ecosystem with room to grow.

Water treatment companies have attracted the largest share of VC funding, mostly directed to the wastewater treatment segment. Moreover, 2 of the 4 water tech unicorns are in water treatment.

Wastewater treatment

The freshwater infrastructure sector accounts for approximately 5% of global greenhouse gas emissions, with approximately 62% attributed specifically to wastewater, as highlighted in Pale Blue Dot's Wastewater research.

Furthermore, most water is never reused and 80% of wastewater is today discharged without any treatment, impacting biodiversity in freshwater and ocean ecosystems, as well as groundwater reservoirs.

Companies in this segment often develop hardware-heavy technologies aimed at purifying water that has previously been used in an industrial or residential setting. On top of diminishing its emissions, wastewater plants can generate benefits such as safeguarding public health, protecting biodiversity and ecosystems, and at times give a second life to water, reducing the use of this precious resource. Wastewater treatment VC funding made up a third of total water tech investment this year, driven by rounds from companies such as Gradiant, a unicorn, and Allonnia.

Water harvesting and desalination

Unesco reported around 2 billion people across the world (26% of the population) lack access to clean and safe drinking water. Water harvesting and desalination startups are working to address this from two different angles. Water harvesting, also called atmospheric water generation (AWG), refers to off-grid devices capable of collecting water from air humidity, usually exploiting either passive or solar powered designs and water osmosis principles. The segment has seen an outlier success in Source Global which raised last year $130M from Bill Gates-backed Breakthrough Energy Ventures and venture capital investor Drawdown fund.

Desalination on the other hand is capable of generating much larger quantities of freshwater, but is more locally bound.

Explore over 600+ water tech startups innovating in water related solutions across these sectors. 

Get in touch if you want to partner on future water tech content or get access to the water tech data in Dealroom.