Funds Flowing in Clean Water: Oasys Raises $10M

oasyswaterlogoCleantech investors have had trouble finding and funding efficient ways to make and manage clean water over the past few years, despite the fact that the water industry is “a dysfunctional train wreck” in need of some serious disruption, according to the Editor of Global Water Intelligence magazine. While funding for large clean power projects has dropped off as a result of the downturn, clean water investing (which at this point is largely early stage), appears to be staying afloat. Oasys Water, a startup that says it has developed a low-energy, low-cost way to produce clean water from sea and waste water, says this morning it has closed a $10 million Series A round of financing.

The funds come from some of the venture world’s most well-known investors on both coasts: Massachusetts-based Flagship Ventures and Advanced Technology Ventures, and Silicon Valley’s Draper Fisher Jurvetson (the fifth most active cleantech firm in 2008). Oasys says it will use the money to continue to develop its desalination and water treatment process, which it says can produce clean water at significantly lower pressure than traditional reverse osmosis methods. According to the company, that lower pressure means its system uses 90 percent less electricity and fuel to produce clean water compared to most systems.

The technology behind Oasys was developed at Yale University, led by Menachem Elimelech and Rob McGinnis and was seed funded by GreatPoint Ventures. While Oasys doesn’t go into too much detail about its technology, reducing the energy needed (and thus the cost) to separate salt from seawater to make drinkable and usable water is an area that receives a good chunk of the innovation in the water sector. Other startups are working on nano-engineering purification membranes, creating technology to mimic the filter processes of the kidneys and developing chemical substances that separate salt from water.

Because creating and managing clean water is such a nascent industry, it seems like the bulk of the investments have been focusing on early stage companies. As we pointed out last month, early-stage firms and less conventional sectors of cleantech are doing better than most, raising funds and hiring. VCs with already-raised funds are looking to spend on less capital-intensive bets.

Look out for other water startups raising cash in the next few months. Yesterday, we reported that water management HydroPoint Data Systems is looking to raise between $4 million and $8 million, and the company expects the round to close in the second quarter. The company sells an irrigation-control system that uses satellite data and weather-predicting software to help calculate how much water to dispense to different plants, and claims its systems saves water, energy and money, and reduces water runoff.

At this point, water investing is still a small area of cleantech — in 2008 water investments only made up only 1.8 percent, or $148 million, of the year’s cleantech investments. But while the millions for the water sector might not grow too much this year, the percent that innovative young water companies take from cleantech might get a boost as expensive clean power projects have been scaled back.