Element 8 Member & Board Member
What drove your initial interest in Apana?
I first learned about Apana at an Element 8 member meeting and was struck by how much sense their approach to water management made. For a layman like me, I could look at their platform and technology and understand how it worked. When I’m assessing a potential investment in a company, if I understand the basics of their technology I’m willing to take on a larger risk profile if there is a tangible environmental return. Generally speaking, as an angel investor, it’s especially important to have a general understanding of the underlying technology of a company, otherwise you are investing on someone’s word and might be better off investing in a company that is more established and with lower risk.
Getting back to Apana, I truly believe that water is going to be the next oil and the importance of using water efficiently is only going to increase. As I got into the due diligence process with Apana, I was impressed by the way the managers of the company evolved from a waste water management company and pivoted into water management.
The value of Apana’s existing business relationship with Costco can’t be overlooked. Having a customer as large and stable as Costco helps reassure investors like myself that the company has a stable revenue base to support them while they work to penetrate the broader market. While early success can make a company overconfident, Apana’s revenue projections seem feasible and not overly ambitious.
What specifically about the business model provided you the confidence to invest in the company?
In regards to Apana’s business model, within the universe of big box retailers the ecosystem their product operates in is well defined and should be replicable at scale. It’s also reassuring that many of Apana’s potential “big box” retail customers represent low hanging fruit in water efficiency, and as Apana grows they should be able to provide strong revenue growth by focusing on that core group of customers. I also believe that Apana will be able to scale and grow with little need for additional rounds of funding, which is attractive as it reduces the chances of their needing a lot of dilutive financing.
In what ways does Apana’s business align with Element 8’s mission and investment goals?
When you look at the larger Element 8 portfolio, we take a broad approach in defining “clean tech.” Apana’s clean tech story hits the ball out of the park. As I mentioned, water is going to be a very valuable resource in the near future, so any company that provides customers water conservation solutions is clean tech in my mind. But as with any Element 8 investment, we aren’t just looking to invest in companies that have a strong clean tech story, we are also looking for companies that will provide our members a return on their investment. I feel very confident that Apana meets both those requirements.
What has Apana done to build a company well positioned for growth?
The elegance of Apana’s analytics model provides deep insights on water usage with a limited amount of sensor data. Because of this simplicity, there isn’t a high upfront installation cost for customers looking to use their system. While it is far from a low tech solution, their approach is simpler than many of their competitors’ systems. Apana is able to deliver much more actionable intelligence at a fraction of the cost of higher priced options. The technology provides managers and facility engineers actionable recommendations on how to improve efficiency. Often times, the recommendations help managers recognize issues they wouldn’t have necessarily known about without Apana – and that is the real value of their solution. This is the low hanging fruit that can lead to significant savings for customers using the Apana solution at a reasonable price. So in summary, the Apana system is easy to implement, provides actionable data to managers and helps the customer save money.
How do you see the market for clean tech investment evolving in the next 3 years?
The risky nature of investing with companies at this stage isn’t going to change. But the prospect of companies succeeding in the future will only improve as the opportunities for implementing technology to address the very real problems at hand increase. The market is beginning to realize the associated costs of not operating with a double bottom line. More and more these costs are seen by managers as an opportunity to leverage clean technology solutions.
As a general statement, the startup world is rife with risk. When assessing risk, there are three main areas investors look for; management, technology and market. Two of these legs are improving for clean tech investments. The market risk and technology risks associated with clean tech are improving, but recognizing the risk associated with company management is critical to successful investment. This is why it’s important for investors to find good people to run the ship. We need to really understand who the entrepreneurs are who will be implementing the business plan as opposed to just the focusing on the market or the technology
What was the most valuable piece of advice you’ve ever received as an entrepreneur or investor?
Because of the long horizon of angel investing, you have to approach investments as if you aren’t going to get it back – if you can’t lose it, don’t invest in this area. You have to be doing it for a reason, which is why I focus my investment activities in clean tech. If you a dependable return is important to your maintaining your lifestyle than you are better served by lowering your risk profile and invest in more established companies.
Are you reading any good books right now?
I recently read “Boys in the Boat” by Daniel James Brown about the 1936 U.S. Olympic rowing team. The book I’m currently reading on my Kindle is “Cutting for Stone” by Abraham Verghese.