IF WE BUILD IT…
Eyes On A Mouthwatering
$1 Trillion Market
Jun. 30 2011
Crucial elements of companies with lipsmacking growth prospects: quality product, experienced management team, scalable business model, barriers to entry by competitors—and of course, a huge, hungry market.
Or even a huge, thirsty one: the entire globe, for instance, which in many regions is painfully parched.
Polluted water is the planet’s deadliest foe, killing 14,000 people a day, according to the World Health Organization. Three problems: a booming population (closing in on 7 billon worldwide), increased standards of living (which correlate with freshwater use) and damaged groundwater aquifers (which collect and store much of the world’s fresh water). All are putting a serious strain on the global water supply.
Hence the massive market for watertreatment equipment, which could hit $1 trillion by 2020. (My father always said to be in a business with lots of zeroes–even a sliver will feed you nicely. Sorry about the whole publishing thing, Pop.)
Luke Daly, an ex casino exec turned technology entrepreneur, aims to serve the thirsty masses. Over the last decade, Daly, founder of Ferrate Treatment Technologies, has poured $7 million of his own stash (and another $7 million of investors’ money) into developing a compact-yet-powerful system of tanks and pumps that can disinfect up to 30 million gallons of water a day.
The energy-efficient machine–called the Ferrator–cleans water using a substance called ferrate, a molecule that bonds to and neutralizes heavy metals, phosphates and bacteria. The goal: to make drinking water safe and affordable for even the poorest countries.
Daly’s technology (it works) and potential opportunity (huge) landed him at Number 4 on our 2009 list of America’s Most Promising Companies—privately held firms with the products, business models and management teams to put them on the path to serious growth.
But even promising companies hit potholes. With $20 million in business in the pipeline, Daly watched his funding source evaporate this February when a big lender ran into some “liquidity issues.” Says Daly: “You can point fingers and mope around, or get up earlier every day and march forward.”
Cheers To Tears
Forbes Magazine dated July 18, 2011
Luke Daly spent a decade developing a cheaper way to disinfect drinking water. Then his funding source dried up.
Luke Daly could taste victory. In January 2011, after months of negotiation, the 52-year-old entrepreneur landed a $27.5 million convertible note from a Canadian hedge fund to fortify his Orlando, Fla. startup, Ferrate Treatment Technologies, which makes powerful yet compact water-treatment machines that can purify up to 30 million gallons a day. Daly’s device worked, but he needed that precious capital to ramp up production.
A month later the money hadn’t arrived. The lender apologized and said he’d have it by March. In mid- April Daly got a call: The fund had “liquidity issues,” and the lender couldn’t come through with the financing.
Daly was devastated, but after ten years of development that gobbled $14 million (half from his savings) he wasn’t nearly ready to quit. Nor were his staff and a handful of equity holders, who, along with Daly, put up another $500,000 to keep the dream alive. His attorney, landlords and parts suppliers extended payment terms, too. “They’ve seen us make progress and want to be part of our success,” says Daly, who likens his quest to that of Jonas Salk, the father of penicillin.
He has a point: Polluted water is the planet’s deadliest foe, killing 14,000 people a day, according to the World Health Organization. The pain could get much worse. A booming population, increased standards of living (which correlate with freshwater use) and damaged groundwater aquifers are putting a serious strain on the global water supply. Hence the massive market for water-treatment equipment, which could hit $1 trillion by 2020, predicts Lux Research, a technology research firm. Even a small piece could translate into serious riches.
That juicy opportunity helped land Ferrate Treatment on FORBES’ 2009 list of America’s Most Promising Companies– privately held firms with the products, business models and management teams to put them on the path to serious growth.
Daly hopes his system of tanks and pumps–called the Ferrator–will make drinking water safe and affordable for even the poorest countries. Small enough to fit in the bed of a large pickup truck, the Ferrator strips electrons from iron atoms to make ferrate–an unstable molecule that bonds to and neutralizes heavy metals, phosphates and bacteria. The machine blends iron, bleach and sodium hydroxide to form a dark purple liquid mixture of ferrate, salt and water that gets metered into the water supply. (The color disappears instantly as it reacts with the water.) Common disinfectants ozone and chlorine can turn the water cloudy or, worse, leave behind harmful chemical by-products. Ferrate does neither.
It’s also cheaper to use. Traditional disinfecting methods require multiple steps and lots of equipment, explains Daly; treating with ferrate gets the job done in essentially one step, conserving energy. Ferrate also can be made on-site–say, next to a factory kicking off dirty water–avoiding additional transportation costs. A 50-gallon Ferrator costs $750,000 and can disinfect about 10 million gallons a day. According to an analysis by the Louisiana Department of Environmental Quality, disinfecting with ferrate required onehalf the capital investment of an ultraviolet- light-based system and onethird that of an ozone-based system.
Daly is no chemist, but the tall, energetic Harvard Business School graduate knows how to make calculated gambles. After launching two Native American casinos in Wisconsin for Winamax Corporation he left to build his own riverboat casino company in Kansas City, Mo., which Harrah’s bought in 1994. Two years later Daly designed and developed a 64,000-square-foot floating casino on three decks of a ship in Cape Canaveral, Fla., which he sold two weeks before Sept. 11, 2001. When a high school classmate mentioned the wonders of ferrate, Daly (who turned down a bid to medical school at the University of Minnesota) decided to pour part of his fortune into tackling the clean water problem.
The town of Steinhatchee, Fla. (pop: 1,500), a few miles off the Gulf Coast below the panhandle, has been using a Ferrator since May. When the Department of Environmental Protection noticed hydrogen sulfide in the city’s water supply, Stephen Hollowell, general manager of Steinhatchee’s chlorine-based water-treatment plant, and his board were willing to a take a chance on new technology. After a successful three-month pilot program the city now uses the Ferrator to treat its entire water supply, up to 750,000 gallons a day.
“I’ve been serving the clearest glass of tea I’ve handed out in my 12 years of business,” says Jim Hunt, owner of the Fiddler’s Resort, a local hotel and restaurant. Hollowell adds that the water’s vague odor of rotten eggs has dissipated, too.
One problem with the water-treatment industry: extra-long sales cycles. It takes between six months and three years to book revenue for a new machine because of all the testing required by state-certified labs. Daly’s process must go through months of toxicology testing before pilot programs even begin. Pilots run $30,000, which Daly sometimes splits with customers.
His financing evaporated, Daly has put $20 million worth of projects in Jordan, Hungary, South Africa and Russia on hold. But he did catch a timely break as this story went to press: Green Planet Aid, a land-planning and engineering firm in Mexico City, agreed to pay Ferrate $5 million over two years for the right to be the sole supplier of Ferrators in Mexico. Under the agreement Ferrate will sell its machines to Green Planet, which will collect ongoing fees for operating the equipment.
Says Daly: “You can point fingers and mope around, or get up earlier every day and march forward.”