Congratulations to SewerAI
Below is a letter I sent to our LPs yesterday to summarise the SewerAI story for Fund I.
Dear Limited Partners,
As reported last week, we are delighted to share that SewerAI received a significant investment from JMI Equity, resulting in the first cash distribution to Fund I investors and marking an important milestone for BIV.
Why We Invested
SewerAI was one of our four earliest commitments in Fund I, with our first check written in June 2021, 4 months after our first close. The US has 1.3 million miles of sewer pipe, all of which needs to be inspected regularly, typically once every three-to-six years, at a rate of 400 feet per hour. That means a camera moving through a pipe while a qualified (and expensive) engineer watches the footage in real time in a dark box, looking for and labeling cracks, root intrusion, and collapses on the footage. This is not a good or fun job, and given the monotony and difficulty, only done about 70% accurately.
SewerAI's platform dramatically improved both the speed and accuracy of inspection workflows. They were unignorably, transformatively better at a job that inspection engineers hated - and as a result they had a high propensity to try something new. Early deployments demonstrated the ability to increase inspection productivity from approximately 1,000 feet per day to 3,000 feet per day at lower cost, and crucially allowing utilities to be far more accurate in targeting their maintenance spend, as well as receiving the results of inspections in a fraction of the time.
There was also obvious potential for stickiness with their customers. As they went from inspection to inspection, SewerAI built a growing repository of specific, time-series infrastructure data for each customer, hosted in the cloud (vs sent via email or on physical paper). Over time, as SewerAI’s data set grew to be the instantly accessible source of truth for the condition of a sewer network, the incentive for the customer to move away from the platform would move to approximately zero.
They also had the potential to be that darling of the PE world, a vertical SaaS provider for the sewer inspection market, going beyond the initial job-to-be-done of video labelling. All sewer inspection companies were run on outdated software and processes, and SewerAI has done a great job positioning themselves as the platform for the multibillion vertical, serving multiple needs for their inspection clients.
Most importantly, Matt and Billy represented a canonical example of one of our most sought-after traits in early stage companies - radical founder/market fit. They had 24 years of combined experience in sewer inspection and a team with over 150 years of collective time in the field. Matt had been building inspection software for 10 years when he saw the potential for AI to be transformative. Billy owned a sewer inspection company, with first hand experience of literally being knee-deep in shit. When we invested, they already had two nationally-renowned utilities (SFPUC and EBMUD) as customers. Getting major utilities to adopt early-stage technology out of the gate almost never happens. This was a solution to a very real and urgent problem.
What Happened
SewerAI was right in our wheelhouse: a huge, archaic, foundational, overlooked market where the willingness and ability to pay is high for the right solution. It also had a helpful moat in that it begged the question “Why on earth would anyone build that?!” Sewer inspection is about as far from the tourist trail as you can get.
Over the years that followed, SewerAI expanded from early deployments into a trusted partner for utilities and contractors across North America. What began as an AI-enabled inspection tool evolved into an essential workflow platform for managing underground infrastructure, helping customers improve productivity, reduce reporting timelines, and make more informed infrastructure decisions.
From those early deployments, SewerAI scaled to 3.4 million inspections, 578 million feet of infrastructure managed, and more than 2,000 cities. Accuracy went from the industry’s 70% to 99%, while also providing those results six times faster. The product base expanded: AutoCode for automated defect coding, Risk & Rehab for capital planning, Smart Project Builder for turning inspection data into defensible reports, Sewer3D for photogrammetry-powered manhole models. SewerAI evolved from a coding tool into the system of record for underground infrastructure across North America. They built into their market, while growing it - the hallmark of a powerful and attractive investment.
Why This Matters
SewerAI shows the depth of value in the water and wastewater market. This was an idea that could have been (and was) easily dismissed. It was easy to put on the “too hard” pile. We knew they had what they needed - founder/market fit, an end-to-end defined workflow, proprietary tech, crucial proprietary training datasets, a big pile of spend to aim at, and a naturally recurring market. I’ve always described SewerAI as an intrinsically beautiful business that comes out of some of the grossest places in the world.
This matters because large bodies of capital are waking up to the value potential in water. They can see the depth of these (to them) unexpected markets. JMI understands how big a platform this could be, and the power of the platform that will support valuations well into the future if and when they choose to exit. Some people will laugh at them. I am slightly jealous they are now so close to this phenomenal asset.
It matters most for BIV LPs because SewerAI’s strengths are echoed across the BIV portfolio. Not everyone will hit this kind of exit, but the hallmarks of the business that underpin this result were clear early. We chose the company for strengths that others missed, and that translated into significant value for acquirers who know very little about water and wastewater. This was a repeatable investment outcome - and our job is to make sure the repetitions happen as often as possible.
Investment Outcome
Fund I invested our first check in June 2021, shortly after our first close (we were sadly cash-constrained at the time). While there are marginal regrets over not being able to invest more over the lifetime of the investment, we were limited both by available funds at the start of our investment period of Fund I, and then by alternative, cheaper (but equally compelling) destinations for capital in Spring 2023.
In retrospect, we could have participated more at the Series B, but we feel confident the alternative investments we made in late 2024 will mostly prove to be sensible on a multiple basis. Nobody’s perfect.
This is our third exit from Fund I, returning a good slug of it. It lifts us well into the top echelon of fund performance in the 2021 vintage. We still have only posted one zero - which is rather strange for a Seed Fund of any stripe.
Our most hearty Islander congratulations and thanks to Matt, Billy, and the entire SewerAI team. They have built (and will continue to build) something profound in their market, and we feel so grateful to have been allowed to be a supporter from the early days (for me all the way back to my time at Imagine H2O, prior to BIV). They’re an example to founders everywhere, and it has been a privilege to watch them work. We can’t wait to see what’s next, and we’re cheering you on - once an Islander, always an Islander. Well done, gents, and thank you.
