The US startup’s chitosan technology has applications in sustainable water treatment, agriculture and materials manufacturing.

Access to clean water is still a major global problem, with SafetyCulture reporting that almost two billion people drink untreated water or use water from contaminated sources. Water cleanliness and safety are not only an issue in developing countries. Problems with water treatment in the UK, for example, have become a matter of national concern.

The water and sustainability sectors are now turning to startups to find new and more effective ways to treat water.

Enter, the humble crab.

Crabs are a common feature of any coastline, but US startup Tidal Vision says crabs are the answer to safer and cleaner water. This crustacean’s thick exoskeleton holds the key.

Tidal Vision claims that its crab shell chemical formula can provide cleaner, safer and more reliable water treatment. The company manufactures chitosan, a non-toxic biodegradable biopolymer that is extracted from crab and shrimp shells, and fungi.

“We are trying to solve some of the greatest chemistry and pollution challenges facing water treatment in agriculture and material science industries,” says Craig Kasberg, chief executive and co-founder of Tidal Vision.

Chitosan has unique properties that bind to pollutants in water, such as contaminants in agricultural waste. The technology enables more efficient and effective delivery of crop protection and plant nutrition products, says Kasberg.

Its proprietary extraction method of chitosan makes its technology unique, says Kasberg. “Chitosan is a very inconvenient product if it is extracted through simple methods,” he says. “It needs to be modified into a watersoluble form so that it is easier to handle. Our platform technology, called Zale Technologies, enables chitosan to be put into easy-to-handle solutions that are five times the concentration previously possible.”

The founder says its product is the first commercialised zero waste extraction process. It enables chitosan to be extracted at about 75% lower costs than conventional processes.

The company’s Tidal Clear product can be added to existing filtration systems. It increases filterability and can reduce wear and tear on equipment, the company claims. The sludge that is produced as a byproduct can be upcycled into fertiliser and animal feed.

The company also aims to use its technology to make fertilsers, bioplastics, membranes and non-toxic flame retardants.

Founded in 2015, Tidal Vision’s team includes chief strategy officer and co-founder Zach Wilkinson; chief technical officer Wendey Hiester; chief scientific officer Ramesh Raliya.

Kasberg also founded sustainable seafood harvesting startup Alaska Seafood Source. Wilkinson spent five years as a branch manager at financial services company Wells Fargo and served another five years as a technology transfer programme officer at Juneau Economic Development Council in Alaska.

Investing in the circular economy

The circular economy has become one of the most soughtafter sectors for investors. Startups like Tidal Vision are attractive to investors because they aim to improve sustainability across sectors.

“Our agriculture technologies are making a large climate impact by decarbonising the food chain through increasing synthetic nitrogen efficiency to reduce greenhouse gas production in the crop supply chain. Our water treatment division is being used to remove pollutants on 26 billion gallons of water,” Kasberg says.

The global water treatment market is a growing industry. The market was valued at $282bn in 2021, according to Statista. European VC firms have invested $300m into water tech startups in 2022, according to Sifted.

Corporate investment

Tidal Vision has raised $45m over five rounds. Investors include Telus Pollinator for Good, the corporate impact fund of Canadian telecommunications company Telus, and venture capital firms E8 Angels and Pangaea Ventures.

Tidal Vision has used its capital to expand its technologies. “We have reached a stage of full-scale production with our technologies, which enables them to not just be greener and better performing but economical as well,” he says.

“We are at an exciting point in time in the company’s history where we can replicate what we have done in more locations around the world. We’re making tens of thousands of metric tons of our green chemistry solutions per month and we are in a position we where we can grow even quicker going forward than it took us to get here,” Kasberg says.

Tidal Vision has received backing from undisclosed corporate investors. Kasberg says that it’s important for corporate backers to share the same vision that Tidal Vision has.

“Some of our investors are CVCs from large chemical and agriculture companies. It has been important to have corporates who share the same interests as ours, which is the mass adoption of greener chemistries in a range of industries,” he says.

Using solvents and enzymes to break down plastic polymers looks the most promising way to increase plastics recycling — if it can overcome energy and scale-up challenges

Like many companies, Beiersdorf, the German cosmetics and self-care company that owns the Nivea skin care brand, has set itself an ambitious goal — making sure that, by 2025, 30% of the plastic it uses is recycled.

But, like many companies with such goals, it has a problem. There just isn’t enough recycled material of the right quality available to meet this target.

“There is a technology gap. For certain plastic types, we don’t have truly sustainable technologies at scale yet to achieve the goals that the industries are setting themselves,” says Ascan Voswinckel, head of venture capital at Beiersdorf. “There is a big market for the right technologies – and demand will outstrip supply over the next five to 10 years.”

One of the big hopes for increasing the amount of recycled plastic is moving to chemical recycling. Traditionally, plastics recycling is done through mechanical sorting. But that is not effective in many regions of the world because of the high-level of contaminants in plastics packaging and the lack of adequate waste collection and sorting.

Chemical recycling uses solvents or other processes to break down polymers so that the plastic can be recycled and reused.

“The holy grail for us is [recycling] mixed plastic streams from post-consumer. We do not think this is doable with mechanical recycling. Very likely, a good technology will be in chemical recycling,” says Tony Sun, investment manager of corporate ventures at GC International, the investment arm of Thai chemical maker PTT Global Chemical, one of the biggest plastics manufacturers in Southeast Asia.

Challenges for chemical recycling

The challenge of chemical recycling technology is that it is very early on in its development and fragmented, says Sun. “Most companies claim they have a unique reactor or catalyst, a unique additive to solve these issues. They all have a unique way, but they are so early stage that they are too early to even validate,” he says.

Sun’s venture team decided to work with a fund specialised in chemical recycling rather than investing in a specific technology. It is a limited partner in Dutch growth capital firm Infinity Recycling, which invests in advanced plastics recycling technologies. “We are hoping some of their portfolio can stand out in the longer term,” says Sun.

One of GC International’s investments is in Interface Polymers, a UK-based, University of Warwick spinout, which has developed a polymer additive that changes the properties of commonly used plastics and can help improve the recycling rate.

Chemical recycling has been criticised, however, for being energy intensive and producing toxic byproducts. The challenge for the industry is to find ways to lower the energy needs.

“Today chemical recycling appears to be the more robust option in terms of degrading of material and quality of output, but with the clear challenge of the need to be more energy efficient,” says Voswinckel.

One promising startup that Beiersdorf team has invested in is DePoly, a Swiss startup that has developed a technology that breaks down plastics through a room-temperature chemical reaction, which is an exception in chemical recycling technology because of its energy efficient approach. The company claims the process generates the same quality of chemicals that would have been used for the plastic in the first place.

BASF and Infinity Recycling also committed capital to the startup. “It is a great example of the right group of people coming together on an investor level – contributing expertise and perspectives from venture, the chemical industry as well as brand owners,” says Voswinckel.

DePoly already runs a pilot facility that can process 50 metric tons of polyethylene terephthalate (PET), used in plastic bottles, a year. The next step will be a showcase plant for its technology in Switzerland with a capacity that is 10 times larger.

Regulation pushes the market forward

The need to find better solutions for plastics recycling is being pushed by ever-tightening regulations. In 2023 the European Commission moved forward with regulations to reduce plastic packaging. The proposed rules ban plastic bags, require plastic packaging to contain minimum percentages of recycled content and require all packaging in the EU to be recyclable.

The UN also recently proposed a resolution to develop a legally binding treaty to reduce plastic pollution.

Legal challenges are also putting pressure on corporates. Drinks maker PepsiCo was sued by New York state in November 2023 for plastic pollution along the Buffalo River that is allegedly contaminating water and harming wildlife.

Coca-Cola, Danone and Nestle have also been accused by environmental groups of making misleading claims about their plastic water bottles being 100% recycled.

The scaling challenge

Observers expect a sharp increase in demand for advanced chemical recycling at scale, which will require investment in large plants. “There is a huge gap between the available capacity of recyclable plastics plants and the demand from the vendors of the amount of recycled content they want to see in their packaging,” says Fredric Petit, co-lead of the Sustainable Packaging Innovation Fund at Emerald, a Swiss venture capital firm specialising in sustainable industrial technology.

Some recycling startups have managed to raise large amounts of capital to build recycling plants. An example is French company Carbios, which has developed an enzyme that degrades plastic and textile polymers for industrial use. It raised €141m through the issuance of new shares in July 2023. It will use the money to build a PET biorecycling plant in 2025.

French cosmetics maker L’Oreal is an investor in Carbios. It worked with the startup to create the first cosmetics bottle made from enzymatic recycling. L’Oreal partnered with Nestle Waters, PepsiCo and Suntory Beverage & Food Europe to help scale Carbios’s technology.

But there are many other startups which will need large-scale funding, and corporations will have role to play in that. This is part of the reason that Emerald set up a dedicated packaging fund in 2022. Limited partners include Nestle, Beiersdorf, German chemical and consumer goods company Henkel and US waste management company WM. The fund, which plans to have between 15 and 20 portfolio companies, aims set up collaboration projects between corporate partners and portfolio companies.

Petit sees growing corporate interest in recycling technologies. Multinational chemical companies SABIC, Mitsubishi Chemical and LyondellBasell have stepped up corporate investment to support scaling up of new technologies. Packaging producers are also showing interest in acquiring recycled content.

“The brand owners and packaging converters want to know what kind of technologies are being developed; they want to know for what kind of polymers these kinds of technologies apply; and they want to guarantee access, too. It is unlikely that they will invest themselves in large chemical recycling facilities, but they want to secure recycled content that they can use for their products,” says Petit.

The fund’s investment focus is in two areas: new bio and fibre-based materials to replace fossil fuel-based feedstock for plastics manufacturing, and mechanical and chemical recycling. It also looks at how to improve the functionality of alternative packaging materials such as paper as well as improving the design of packaging for end of life or reuse.

“The brand owners and packaging makers take this end of life into account more than any time before, because they know this is a parameter by which their customers will make a purchase decision,” says Petit.

Water has been the Cinderella of sustainability investment, but as supply comes under strain, investors see more value in the sector.

Despite the growing sense of urgency for sustainable technology solutions, water has remained a distant, overlooked concern relative its carbon and energy counterparts. It’s historically been an abundant and cheap resource that people take for granted.

Not for long.

Reservoirs and natural bodies of water are at historic lows across multiple continents. This reduces people’s direct access to clean water as well as for agriculture and industrial processes. Water levels continue to deplete as demand for it intensifies.

“Water is not expensive today. I think it’s going to be expensive in the coming years. I think it’s going to be very expensive,” says Ginger Rothrock, senior director at HG Ventures, the corporate venture capital arm of the Heritage Group, a US company that owns manufacturers of materials and chemicals.

“People don’t understand the food-water nexus and the energy-water nexus. It’s a very interconnected system. These trends exist globally, and so I think scarcity is going to be more pronounced. It’s going to affect much, much more than people understand today.”

For the industrial sector, which – depending on the source – takes up anywhere between 10% and 40% of the world’s water supply, there have been no big changes in wastewater processing over the past century. Contaminated water continues to be hauled off-site to be dumped or treated rather than reused.

The opportunity for disruption is abundant, but incumbents tend to be driven by inertia, and the competition has been against the notion that if the system is not that broken, why spend millions to fix it.

Part of the problem is what society has always been told about water: it is cheap, regulated and abundant. We’ve done a bad job of communicating just how crucial it is, and how vulnerable we are without it.

“Nothing else matters first. Everybody takes care of water first,” says Tom Ferguson, founder and managing partner of Burnt Island Ventures, a water-focused VC firm. Those who don’t have it are compelled to prioritise getting it ahead of everything else, and for those who do have it, it tends to be the first thing they interact with every day.

Burnt Island’s website puts it succinctly, and somewhat terrifyingly: Water is the medium through which we will feel the effects of a warming Earth.

Bringing water into the circle of confidence

Investors tend to default to investing in sectors they can easily assess. The issue is no one tends to understand the water industry.

“If you look at it through the investment lens, people push out their circles of confidence, especially within the venture world, when something comes into vogue. Nobody’s ever had a good reason to bring water into their circle of confidence,” says Ferguson.

Another hurdle lies in the difficulty in ascribing value to water in the first place. Building a business around a resource that is widely regarded as a fundamental human right is no mean feat.

The price of water, and water technology, is dependent on a whole gauntlet of factors: What compounds are in it? How enriched is it? What level of scarcity is there in the region? What do the regulations allow? What are the historical utility rates in the region? What is the water meant for? What is the customer’s ambition around their branding and messaging around sustainability?

“If I’m making electricity from one power source over here, it’s very easy to find the value of that unit of energy in a welldefined marketplace. Not with water,” says Alex Rappaport, CEO of Zwitterco, a startup manufacturing non-fouling membranes for on-site wastewater filtration.

What has been changing the investment landscape is the growing number and quality of entrepreneurs in the water space, which ramped up in the 12 to 18 months leading up to Ferguson launching Burnt Island in 2020.

“Better people build better companies. We’ve always had good founders, but they’ve always been slightly too few and far between. That is now no longer the case. There are really excellent founders all over the place in water,” he says.

New technologies in focus

Much of the capital investment in water has been in technologies such as desalination, particularly in regions like the Middle East where fresh water is hard to come by. Now, a much wider range of water tech solutions are in demand. Companies with the right technology and execution can access long-term commercial contracts.

But real time or automated monitoring of water remains a big problem.

“Tell me what’s in my water in real time. Very, very difficult problem, but a huge holy grail if and when that can be done,” says Ferguson.

Beyond just monitoring, software-led solutions are valuable, not just because they tend to be scalable and disruptive to legacy industries but because they will have a large market among consulting engineers who advise on upgrading water infrastructure.

Wastewater has always been a large byproduct of industry, and new industries are set to increase wastewater streams. The rise in synthetic biology will produce more cellular and organic waste. Renewable gas – and the anaerobic digesters that make it – also produce waste. At the same time, landfills can’t take as much as they have done because of high levels of methane and other gases.

Opportunities for recycling water on-site and for decentralised systems have grown, as have the prospects for harvesting wastewater for resources to be used in other complex supply chains such as for metals like copper or lead for use in batteries.

A focus on PFAS, or “forever chemicals”, has also exploded in recent years as new information, and even Hollywood movies, have shone a spotlight on their presence in water supplies. Shifting regulations and the spectre of legal action have driven up customer demand for technology that can capture and destroy them.

Sticky contracts make water an investable proposition

Having the right team in place – with not just scientists but experts who know how to take something from the lab to the commercial space – is especially crucial in hard tech. For the right technologies, commercial contracts tend to be long.

“You have to get your product right, you have to have your supply chain, you have your regulatory piece. But once you’ve got that, you can get the legal monopoly that comes along with IP. These tend to be very sticky contracts and that competitive moat can widen over time, so it makes it an attractive investment opportunity,” says Rothrock.

For Zwitterco, which has both HG Ventures and Burnt Island on its cap table, proving the viability of its filtration technology – which would, in theory, halve customers’ costs relative to the industry-standard haulage to a multi-acre treatment plant – was the biggest hurdle.

“Developing a new membrane process is a village effort. It takes not just your company and not just the end user, it also takes the engineering company, the solutions provider, who’s going to end up fabricating and putting all the different systems together into a complete offering for the end user,” says Rappaport.

Once the first commercial agreement was made, it went from receiving grant and seed funding to larger VC money in the tens of millions.

Serving municipal customers – and dealing with water for human consumption – is a more complicated proposition for many companies. Their procurement processes are different, and their requirements as a public sector body tend to be more complex. But once those contracts are made, they tend to last for a long time.

“If you get really good at [municipal] RFPs [request for proposals], because nobody wants to do them, you win them all. And once you’re installed, you never get uninstalled,” says Ferguson.

Rising tide

Even if the wider body of investors are slow on the uptake, potential customers need less convincing to see the value in upgrading their water technology. Sustainability and green credential are all people want to talk about, says Rappaport.

“I have never in five years had to walk into a room and try to explain to someone why it’s a good idea to think about advancing their water treatment. Never once. More often than not, it’s people saying: I know this is important, I want to be the hero of my industry,” he says.