Investing in Water – BIV on TIM TALKS Private Equity & Venture
Water is the quiet machinery of modern life. Every city, factory, and supply chain depends on it, but the systems behind it are aging, overstretched, and largely invisible. As climate pressure and demand intensify, the gap between what we rely on and what actually exists is widening fast. Tom Ferguson has spent ten years inside this gap, evaluating thousands of startups, tracking what solutions work in practice, and helping founders navigate a sector that is both deeply broken and massively under-innovated.
Thank you to Tim Cunningham of Touchstone Group for hosting Tom Ferguson on the latest episode of the TIM TALKS Private Equity & Venture podcast to talk about his journey investing in water. You can listen in here, or wherever you get your podcasts. The episode charts some interesting, ahem, waters:
Episode Highlights:
[05:30] Tom explains how he became involved in water sustainability and early consulting work.
[06:26] Tom describes becoming a water specialist and entering early-stage water innovation.
[07:21] He outlines his training within a specialist water accelerator and how he evaluated companies.
[08:03] Overview of the wide range of startups he assessed across the water sector.
[09:51] The economic realities farmers face and why long sales cycles create barriers.
[11:06] Why water rarely rises to the top of priorities in ag despite its importance.
[12:17] Tom highlights reuse and recycling as critical areas for long-term water resilience.
[13:06] We discuss the infrastructure needs required for large-scale water reuse systems.
[13:22] Desalination innovation and why subsea desal may be transformative.
[14:40] He explains the need for modern software and hardware to reduce costs and improve systems.
[15:55] Tom outlines market limitations, margins, and why hype outpaces fundamentals.
[17:48] Regulation, timing risk, and the dangers of relying on policy shifts.
[19:56] Tom describes regulatory capture, industry lobbying gaps, and ethical tensions in water rights.
[21:27] He explains why water’s physical properties make innovation hard but essential.
[22:13] Why public awareness grows slowly despite worsening climate impacts.
[23:56] Why water tech can be both profitable and socially beneficial for LPs.
[24:37] Discussion about how overwhelming water issues can feel for the public.
[25:17] Tim asks whether Burnt Island Ventures is more of a “picks and shovels” investment model.
[26:57] He explains the challenges of heavy CapEx businesses and why they avoid first-of-kind risk.
[27:36] Tom details why early startups must be cautious with capital intensity and dilution.
[28:08] Founders and the difficult decisions they face while raising capital.
[29:34] He explains how to evaluate whether more capital will help or simply prolong failure.
[30:16] Discussion on liquidation preferences and how large rounds can wipe out founder equity.
[31:52] Tim shares a real-world example of a founder crossing ethical lines to keep a company alive.
[33:07] We acknowledge how quickly situations can spiral without clear communication.
[34:31] Tom discusses passing on companies when storytelling exceeds substance.
[35:14] He explains the red flags of overly polished narratives without real traction behind them.
[36:26] Tom outlines ethical boundaries around bottled water and water rights investing.
[37:29] Conversation covers political risks and eminent domain around community water resources.
[38:18] Tim asks about buzzwords and pitch patterns that concern Tom.
[39:48] Tom shares how he evaluates slide decks, storytelling, and founder communication.
[40:37] He reflects on seeing beautifully articulated pitches that still describe weak businesses.
[41:02] Discussion turns to common bad advice founders receive, especially around aggressive scaling.
[42:33] Tom explains why “fail fast” thinking often harms long-cycle sectors like water.
[43:26] We discuss expectations for average hold time within the fund.
[43:58] Tom breaks down how fund timelines intersect with portfolio maturity.
[44:31] Final thoughts on today’s venture environment and downstream effects on distributions.
Enjoy, and all feedback welcome.
