Burnt Island Ventures Raises $30 Million For Early-Stage Water Startups

According to industry analyst Tom Ferguson, the global water business is vast and ripe for innovation, but it’s also sprawling, fragmented, and buried beneath layers of government bureaucracy. While some estimates put the total value of water-based businesses, including those aimed at combating climate change, at $500 billion worldwide, the market hasn’t grown at the same rate as other sectors like green energy.

“With the explosion of money going into climate tech, $40 billion [in 2021 alone], only $400 million is going into water, or 1%,” Ferguson says.

Ferguson’s venture firm, Burnt Island Ventures, has launched a new fund aimed at investing in a variety of water-related businesses, ranging from scientific filtration solutions like those developed by Cambridge-based ZwitterCo to wastewater and stormwater assessment software developed by San Francisco-based Sewer AI. Ferguson’s first fund raised $30 million after a little more than a year of fundraising, exceeding his $25 million goal.

Ferguson has worked in the water industry in a variety of roles, including researcher, consultant, and vice president of programming at Imagine H20, an industry-specific accelerator. He founded Burnt Island Ventures in 2020 to focus on early-stage water startups. He’d witnessed a number of exits in the ecosystem, including Anaergia, a water-powered energy firm, as well as an increasing sophistication and quality among entrepreneurs in the field, according to him.

Burnt Island’s fundraise drew exactly 99 limited partners, ranging from corporations to family offices, including Ferguson Enterprises (no related to Tom Ferguson). Burnt Island invested funds throughout the process and helped develop a clear track record to attract more LPs, so the fund was raised in nine separate tranches. It deployed $12.3 million over the fundraising lifecycle, Ferguson says. “The majority of our LPs, this is their first exposure to the sector,” he says. “We can really give them the inside track of doing business within the water sector, and the opportunities and impact here to be had, but we absolutely have to keep the structure as boring as possible.”