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Why Investment In The Water Industry Has Been A Washout

Water is one of the world's most precious commodities, and the world's water networks are some of the oldest networks in the world. For this reason, there have been many water problems caused by leaks and bursts and insufficient monitoring.

I recently interviewed Amir Peleg of TaKaDu, a water networking and monitoring company in Israel, on the Goldstein on Gelt show. TaKaDu has been named as the best Clean-Tech company in Europe and Israel by the Clean-Tech Group and The Guardian and as a technology pioneer by the World Economic Forum. Amir explained what his company does and the effects of underinvestment upon the water industry.

Here is a transcript of this very interesting interview.

Douglas Goldstein: Your company deals in what you refer to as "software as a service" in order to solve the water problems of the world. How do you do that?

Amir Peleg: In a way, I would actually make the definition in the opposite way. "Software is a service" is a tactical theme in order to facilitate a business model and make it easier. The main target of TaKaDu is really to tackle a mega problem, a global problem, and that is lack of efficiency in water distribution networks. A lot of water is being lost through leaks and bursts and a lot of energy is being lost through different faulty equipment and open valves. At the end of the day, when you're pushing such a scarce resource into all those municipalities and urban networks and you're losing about 25-30% of your water, and bearing in mind that the water distribution networks are the biggest consumers of energy in the world, it doesn't make sense to run such a network without visibility into what is going on in the network itself. You need to see where you have inefficiencies, where you have leaks and bursts. TaKaDu spotted this problem about four years ago, when we founded the company. We thought that we could actually bring a solution based on mathematics and computer algorithms that uses existing data. In the network, people are measuring flow, pressure, and other stuff, and by applying the most noble paradigm to the monitoring network just like they do in IT and in telecom, you can actually achieve a great deal of benefits. You can bring a lot of benefits to the network owners in order to detect and classify and to alert about problems in the network.

Douglas Goldstein: Is the problem with the water network simply that it's very old and therefore, it has all of these flaws?

Amir Peleg: There are a few layers. The infrastructures of water networks are very old. Everywhere around the world, those networks are aging and there is never enough investment to catch up with the deteriorating situation or problems in the network. The reason is that those pipes and valves were placed in the ground 80-100 years ago, or even more than that if you look at the historic networks in the UK. Actually, the average age of the networks in the United States is also about 80, while the average lifecycle of pipes is about 50. You cannot really invest the hundreds of billions of dollars that are needed the U.S. alone in order to catch up and bring those networks to an up-to-date situation or status.

The other thing is that even if those networks were completely brand new, you still have a lot of inefficiency problems because leaks and bursts could still happen. Technicians are taking care of the network and they might leave a valve open. You install a meter. You want to make sure that you're measuring the right stuff at the right place in an adequate way, and if that meter is becoming faulty or uncalibrated, you want to know about that as soon as it happens. Even in computer networks that were put there only 10 years ago or a year ago, you have monitoring layers and pieces of software that send alerts when something goes wrong. And that's exactly what we're bringing to the water industry - a layer that is based on the latest in software and mathematics that essentially provides visibility to the network and gives directions about what's going on in the networks. We're bringing light into a dark area.

Douglas Goldstein: Fundamentally, you're looking at how much water goes into the system and then making sure that the amounts on the other end that come out are pretty much the same?

Amir Peleg: Yes, but that's still not exactly the case. It's very difficult to really quantify or measure exactly how much water is going in and how much water is going out. If you measure the output in annual basis or monthly basis, you can do a little bit of math and indeed there are some methods that are doing that. But if you want to do things in real time and to alert when problems happen, you need to look for patterns in the daytime, different correlations between different data points, so that you can actually have a 24/7 watchdog that listens to the networks through the different meters and sensors that are already out there and transmit their information, raw data in real time.

We've created a black box that gets all that data in real time. Through analysis of the different patterns, data structures, and correlation levels, we can spot anomalies comparing it to the normal behavior of the network. So if you take historical datasets, you can actually see when the flow is going up and when the flow is going down and the different behavior of the network over the weekend, over Christmas and over Jewish holidays. Once you figure that out in terms of creating some sort of a baseline of the pattern of behavior of the network, the purpose of the algorithm is to get the data in real time and spot anomalies.

Douglas Goldstein: One of the things that you've spoken about is the problem of a lack of innovation in the whole water sector. What do you mean by that?

Amir Peleg: I will tell you a story. Two years ago, we won this prestigious award at Davos, at the World Economic Forum. In January two years ago, I was invited to Davos with all the world leaders to sit on a panel in front of a large audience, and I was supposed to represent the water scarcity. There have been other experts there and I was supposed to talk about water scarcity. Now I'm a novice in the water sector. I'm only about four years in this sector after being in other businesses and my own ventures before that. I showed everyone that at the end of the day, the real scarcity we have is not necessarily just in water. There are better experts that can talk about water scarcity. I think the fact that Amir Peleg is only two years into the water sector but is an entrepreneur with a great idea and that TaKaDu is the best thing that probably ever happened in the water sector is really a proof that the water sector has lack of innovation and a lack of more entrepreneurs to come up with great ideas and great business plans. There are a few proof points beyond my personal story and I'll give you one or two examples.

Out of all the Clean-Tech investments, which are venture-capital-backed, only 2% of all of them go to water. If we compare this to the magnitude of the problem and that there is no substitute to water, it's possible that this will not solve the water problems. We will have to face more people that are under water stress, and food prices are going up all the time as an immediate correlation to water problems. We have 70 rivers that have dried up in the last century in the world and so on and so forth.

Douglas Goldstein: What do you attribute this to? There are plenty of entrepreneurs out there looking for an angle and a section of the market to make money, so why not here?

Amir Peleg: That's a good question and I'm trying to campaign the water sector to many of my fellow entrepreneurs. I think that there is a lack of communication between the three angles of innovation and the three dimensions of the problem, utilities, people to represent the market, capital owners, namely Venture Capital Funds or other capital owners and entrepreneurs, technology gurus, or MBA students. I think so far the sector did not create a good enough platform and hub for those three entities to stick together, talk, express opinions, express problems and create a starting point for these innovation cycle to begin. You need money, you need an entrepreneur and you need a big problem.

Douglas Goldstein: What's the model of TaKaDu itself? How is this company going to grow from where it is today to where it will be tomorrow?

Amir Peleg: We need first to define where TaKaDu is going to be tomorrow. One thing is to save the world. The other thing is really to make a lot of money, and the third is really to take the company to the public and really create a name and a sustainable solution that will just grow within the water sector and possibly even beyond it.

Douglas Goldstein: Who are the companies or the people that come to you or that you go to?

Amir Peleg: We are building our customer base to be directional. We are [changing] all market opportunities in different parts of the world. We have customers in Australia, Chile, Europe, the UK, and Israel, and we are growing in different places in Asia and Latin America. We are working through a fabric of channel partners that are distributing our solutions and they are preaching through older market contacts the mobility and advantages of the TaKaDu solution. In many cases, people are approaching us with utilities. We recently had a very big utility from Brazil that made a decision to become really smart. They've been looking for smart solutions and they came to us.

The biggest model of TaKaDu that makes it easy for us to scale is "software as a service" because what we offer is based on existing data at the network level and the fact that we do not force them to buy anything, not even a single server. All they need is an IT connection to our cloud-based service, which is hosted by Amazon. We are in relatively good shape to say that from the fusion until the system or the service is live and running, is only a matter of a couple of weeks. That's no time. It's zero in the terminology of water people, and that makes it very easy for us to scale globally as well because I don't care if the customer is in Asia or in Latin America. It's the same process that can be done remotely. We charge a certain fee per month based on the size of the network. If you are a small city like Cascais in Portugal or Jerusalem, then you're paying a certain amount per month. If you're a larger utility, like customers we have in London or in Melbourne, then you're paying a higher fee because the network is bigger and the value of our solution is much higher.

Douglas Goldstein: How can people follow the work that you're doing and that TaKaDu is doing?

Amir Peleg: They can follow us through our website, which is If you subscribe through our mailing list, you'll get updates from time to time. You can also follow us on Twitter. One more thing to comment is that we are the founders of an international industry forum called SWAN forum and it puts together all the different components of the Smart Water Network. I am the chairman of SWAN, and we are leading SWAN together with many other companies. We have something like 80 members in SWAN pushing forward the whole notion of the Smart grid. I'll tell you that from time to time, we have an interesting press release, and I sometimes get personal emails from different people asking where they can buy TaKaDu shares trading on the stock exchange. I always tell them that they should keep on following us because we'll be there one day but not yet.