Tom’s path to Burnt Island Ventures and the investment thesis behind their work

Tom has been in and around water for over a decade. He was first introduced to the sector in 2010 through his work with Environmental Resources Management and decided to make it his specialty in 2015 when he joined Imagine H2O, an international accelerator purely dedicated to supporting water founders. By the time 2020 came, Tom noticed that the caliber of founders in the water space had become fundamentally different compared to years prior and felt it was time for someone to make the argument for having a dedicated early stage fund that was going to be able to write decent size checks at a good degree of pace. That someone was him.

Welcome, Burnt Island Ventures. Since closing their fund one with $30 million in February 2021, the firm has only grown and Tom believes they have a shot of accomplishing what they set out to do: investing in right size positions with great companies like StormSensor and phenomenally talented founders like Erin to realize returns for investors and respond to climate change. Burnt Island Ventures recognizes water as the fundamental molecule that allows all life on Earth to exist in its current forms. Tom says that when you look at the droughts, floods, contaminant issues and all the rest of it, what we are being asked to do is to adapt to climate change. And our ability to adapt to climate change is predicated on our ability to steward water – to get ourselves out of its way, to deal with the absence of it, and to make sure that it’s the right quality, quantity, price, place and time for us to continue life in any way that we would perceive as normal. It’s foundational work at the foundation of society, and there’s actually a very high willingness and ability to pay for great solutions in water. Tom presents it as a $1 trillion market opportunity.

What is StormSensor and what problems does it aim to solve

Founded in 2015, StormSensor works with cities and agencies across the United States to track how water moves through storm, sewer and coastal systems. The company maps that movement to provide stakeholders with water, weather and climate data that they can then use to prioritize retrofits or response. Responses can be made in advance of or during storm events, particularly looking at flooding and overflows. Decision makers can also use StormSensor’s data to inform adaptation measures by using insights to efficiently and effectively design and build capital improvements to address the changes that we’re seeing as a result of climate change in our water quantity and quality.

Looking at the connection between StormSensor’s work and climate change, Erin points to an excellent example, as far as timing, when she was first raising money. In 2016, she was told that nobody cares about plumbing. Then, a series of pretty significant hurricanes hit in 2017 and stories of flooding got into the news. Erin explains that now we’ve got droughts, increased urbanization, heavier storm events, all of which are impacting our infrastructure, which is also aging. Combine all of that and you start seeing flooding and droughts gaining increasing media coverage. All of a sudden, people care a lot more because we’re not talking about some abstract concept of climate change – we’re watching it happen. StormSensor is demonstrating that what they’re doing legitimately has a positive impact in those communities to help stop and adapt to what we’re dealing with now. 

The exciting range of water innovations that hold promise

Tom shares that one big idea, not to be underestimated, is the power to reuse water over and over again, whether in the home or in industrial processes. He provides the example of Zwitterco. The company is taking a massive step forward in industrial filtration systems to not only treat, but also recycle water out of industrial processes, including everything from dairy to hardcore cutting-edge biotechnology, which isn’t easily treatable at the moment. Tom explains current industry processes require sticking wastewater into a truck and taking it down to treatment facilities, and the whole business model of filtration right now is a system that requires customers to come back and rebuy the active element of that filtration system every four months. Zwitterco, on the other hand, has been able to build filtration systems that not only deal with the challenges associated with the recycling process, but have also developed efficient filters that don’t degrade, which is a massive advantage on the unit economics.

Burnt Island Ventures has also been thinking a lot about the utility sector, highlighting that people who work in utilities are really the backbone of our society, but little attention is being given to them. The overall economics of utilities is really tricky, but he reveals that the number one concern at the moment is the aging population of utility workers. The average age of water treatment plant operators is about 58, so they’re coming up on retirement en masse and COVID triggered a huge wave of retirements in particular. It’s a massive pain point, and Burnt Island is looking at how to keep water utility plants functioning excellently when there aren’t people available to staff them. The question Tom posed was: “How do you support water and people who work in utilities to do more with less?” There are numerous interventions with StormSensor being one of them, and Tom also recognizes Swift Comply and Daupler as other companies to watch. They are taking all of the information that’s coming into a utility from the world to support management and response. To paint an example, he examines the current nightmare of reporting anything to your local utility: you have no idea what’s happening, you have no idea whether or not someone’s going to come and fix the thing, and whether or not someone’s tracking it. Before that even begins, there’s the issue that people dealing with the incoming information might be sitting in front of a 2001 PC, and when a problem comes in they need to put out a call for someone else to respond to the situation; a number of bottlenecks could occur at any moment. Daupler takes on the process from end-to-end, automating it through the active element of it is an AI system to increase productivity. Tom says the depth and breadth of people coming to solve problems in water is definitely the most exciting thing that’s out there. 

What can everyday listeners do for impact

Tom: If you want to talk about leverage and high impact, you need to let decision makers know and contribute and architect your political participation in a way that makes sure that these issues that we’re seeing in the US and across the world are unacceptable. The lion’s share of water currently goes to industrial and agricultural uses as it should since we all need food, but the idea of individual responsibility is actually going to solve this problem. If you want to look for the highest leverage, it happens when the rules change and when centralized flows of capital can also leverage other forms of capital to build the market. Support for the water industry is miles behind the support that the solar industry has received and this should change. The only way it’s going to change is if people are at risk of losing their elected roles if they don’t deal with these issues, so put pressure on.

Erin: The only way that things are going to change is if individual citizens put pressure on their politicians to make those changes. Also on a smaller scale, if you have a house and land, and can make impervious surfaces, you can build rain gardens to capture that rain. It does two things: it reduces flooding because that rain is going straight into the ground and running off into the streets, into the pipes and filling those up and then filling up your neighbor’s basements. It also recharges groundwater in areas that are suffering from droughts and you can capture that rainwater within your system for use because again, it’s the same water, it doesn’t go anywhere, you still have to keep it and use it. You can do that on your properties and you can get your friends and neighbors to do it. Not only are you making a tiny difference, at least in your neighborhood, but you’re also increasing awareness locally and then on a national and global scale as you’re talking to your politicians.

Resources Mentioned

• Burnt Island Ventures
• StormSensor
• ZwitterCo
• Daupler

Connect with Tom Ferguson and Erin Rothman

• Connect with Tom on Twitter and LinkedIn
• Connect with Erin on LinkedIn

Connect With Jason Rissman

• https://InvestedInClimate.com 
• On LinkedIn
• On Twitter

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