DePIN x Water Recycling

Welcome back to DePIN Snacks! Each week, we cover a recent web2 startup fundraise and explore why crypto-based networks will win long-term.

Today’s topic: water sanitation.

Last week, Epic Cleantech raised a $12m Series B for its water recycling system for commercial real estate buildings. It works like this:

• Epic installs one of its OneWater systems inside a commercial building.

• The building’s waste-water - instead of being sent to a centralized municipal water treatment facility - gets routed to the onsite OneWater system.

• Inside the OneWater, water goes through several layers of processing including biological treatments, membrane filtration and UV disinfection.

• After ~10 hours, the water can safely be re-used for non-potable use cases, i.e. everything except cooking / drinking / showering / brushing your teeth.

• Epic collects the organic material filtered out from water, transports it to one of their processing hubs, and turns into organic soil for the local community.

• In some cases, a separate machine uses the (warm) waste-water to heat up the (cold) fresh water, thereby reducing the building’s electricity bill too.

Epic makes some impressive claims, including re-using 95% of a building’s wastewater and reduce a building’s overall energy consumption by as much as 30%. Their solution has found product-market fit with massive properties like Salesforce Tower in SF and the Waldorf Astoria in Beverly Hills. Across the fifteen case studies listed publicly on its website, properties equipped with OneWater recycle over 6 million gallons of water every month and save $1.7m/yr in utility costs in aggregate.

Epic is not the only startup working on water recycling: Hydraloop, a Dutch company, raised €10.5m for water recycling products designed for apartments ($2k per unit), single-family homes ($6k), and small businesses ($10k+); Greyter, a Canadian company with a similar strategy, also raised $10m last year.

It’s telling that none of these companies are backed by traditional VCs: the rounds were led by a family office, an impact investor, and a corporate VC arm, respectively… Apparently, venture capitalists with return-seeking LPs didn’t see the case for investing, despite these companies proving they can reduce water consumption by 20-60%.

Can a decentralized water network even exist? Does it have network effects?

Peer-to-peer water is a much harder problem to solve than wireless or even electricity. Wireless is easiest, because radio signals have zero mass and can be transported over many mediums, such as air, wires or even water. Electricity has negligible mass, but can only be safely transported over a single medium: insulated metal wires. Water, on the other hand, has significant mass - weighing roughly 8 pounds-per-gallon at room temperature - and therefore needs expensive pumps to push it uphill or over distances.

The other key difference is that water is not totally fungible: once greywater and blackwater mix, they can’t be unmixed; a theoretical p2p water network would need to build at least two sets of physical pipes between buildings to keep them separate.

To make things worse, the water market is about half the size of wireless or electricity. The average American households spends $140 on electricity, $150 across home and mobile internet service, but only around $70 on water each month.

What it lacks in market size, decentralized water makes up for with resiliency benefits. I’ll put it this way: humans can survive only 3 days without clean water, but the first 300k years of our species’ existence were spent without electricity or internet.

It’s not hard to find examples of the dangers of government-managed water systems. In 2021, less than 30% of Venezuelans had consistent access to running water. The citizens of Flint, Michigan are still dealing with the consequences of the bureaucratic incompetence that poisoned hundreds of thousands of them, over a decade later. Eventually, people who can afford it will demand resiliency from their water supply.

We can imagine water recycling systems following a similar adoption curve to backup generators, eventually reaching mid-single digit percentages of all households in developed countries. That said, without a technological breakthrough in last-mile water distribution, we’re unlikely to see decentralized water networks take off: until then the crypto opportunity is probably limited to lead-generation, i.e. helping the manufacturers of these systems acquire customers at low-costs and scale faster.

If you’re working on decentralized network for water recycling, please change our minds—reach out to me on twitter @danconia_crypto or telegram @salgala 🌎️