Valor Water: From Idea to Exit
Xylem Acquires Valor Water Analytics, winner of Imagine H2O’s 2015 Water Infrastructure Challenge
On February 2, 2018 Xylem completed its acquisition of Valor Water Analytics (IH2O ’15). This exit represents an important milestone for Imagine H2O and is a win for the water innovation sector. I recently sat down with Christine Boyle, Valor’s Founder and CEO, to discuss her journey as an entrepreneur in the water industry.
How did you start Valor? At what point did you decide to turn your idea/solution into a business?
The thinking behind Valor really started during my time as a doctoral student at University of North Carolina at Chapel Hill. My colleagues and I were exploring the challenges utilities face when working with large volumes of data. Ultimately, we were unpacking the relationship between conservation, customer behavior, policy and utility economics. No one had really done this before. In fact, Tamin Pechet from Imagine H2O reached out to me as a student and suggested that we explore turning this work into a business. At that time, Tamin and I both agreed that the financial drivers in the water industry were critical, yet largely ignored by the water innovation market.
I moved to California in 2013 during the drought (partially with encouragement from Imagine H2O) to test my assumptions and begin to build this business. It was obvious to me that utilities were struggling to meet conservation goals while maintaining their financial viability. Utility managers facing a 25% conservation mandate were essentially looking at corresponding decline in revenue. The light bulb went off and I knew that it was time to bring my technology to a wider audience.
What were your initial challenges and what role did reference customers play?
Like most new companies in this business, landing Valor’s first few customers was critical — even if the product was in its earliest stages. I simply had to be 100% confident that our approach could be a tremendous asset to utilities seeking greater financial resiliency. Yet, our product wasn’t exactly market ready and I needed to establish trust with customers who were ultimately collaborators at that stage. We were really fortunate to work with utilities that could see that we were onto something that would ultimately address critical financial management questions.
Both Sonoma County Water Authority and Clayton County Water Authority were Valor’s first reference customers. In Sonoma, we quickly learned that the product wasn’t the right solution for a wholesale agency. Yet, we learned a lot about Valor’s potential and were fortunate to move on from this learning experience. Clayton County, on the other hand, was a different story and there was nearly immediate value added from Valor’s emerging technology platform. Our piloting and collaboration with Clayton County eventually evolved into the beta version of Valor’s Hidden Revenue Locator product.
What happened the day after you won IH2O in 2015?
Actually, it was the within the first few minutes when I met my first two investors. They became some of our earliest and most enduring supporters. In fact, one joined our board and played an important role in the process with Xylem. At the time, we were still 3–4 months away from a product launch, so it was incredibly powerful to secure investment and what was essentially a third-party validation in the form of Imagine H2O’s recognition.
The Imagine H2O process gave us a lot of feedback on the business model and market approach. An Imagine H2O judge, Peter Williams at IBM, eventually joined our team as an advisor. At the time, I was also participating in Y Combinator and being exposed to thinking and strategy from incredible entrepreneurs and investors in Silicon Valley. Yet, we really built out a network of industry-specific investors and advisors with Imagine H2O.
You’ve spoken with us previously about creating a “culture of yes” in the water industry. What does this mean and how can others contribute?
This is more about getting away from the dominant culture of “no” that exists in the water industry. An end-user or utility can easily pile on a list of risks for any project or new technology. Yet, risk must be put into context if anyone is going to move forward. With Valor, helping customers create a management strategy around risk became more of a personal mission. Before a customer could say “no,” I had to get to the point at which they would acknowledge the potential benefit from accessing our technology.
Moving to a “culture of yes” begins with acknowledging that risk can be managed. Once strategy is in place, someone can say “yes” to a pilot or simply begin to evaluate something that hasn’t been done before. In Valor’s case, we had to get customers to the point at which they could see that the benefits outweighed the potential risks.
You were fortunate to be in a position to sell your business relatively early (in terms of the water industry). In the end, what drove this decision?
I saw cultural alignment between Xylem, our buyer, and Valor. Everyone we met at Xylem was energetic and visionary in terms of their outlook for the industry and Valor. It was clear that Xylem was ready to leverage Valor’s mission and technology to create a new category for revenue loss detection. After working on this for so long, I saw a clear opportunity to deliver Valor’s product on as many meters as possible — as fast as possible.
For the past several months, I could see that we could either do that alone on our own join forces with a larger platform. Xylem made a very compelling case for the possibilities within its ecosystem. The financial aspects were obviously important to Valor and our investors, but I ultimately saw that the we could carry out our mission faster with less risk and more resources.
Our customers are also enthusiastic as they know Valor will have more resources to support and expand its technology platform. For the early reference customers, there’s also a sense of validation knowing that they picked a winning partner at a very early stage.
What would be your advice for data entrepreneurs entering the water sector?
Adding water industry people to your team is critical for any entrepreneur entering the sector. The industry’s peculiarities are complex — you need to stand shoulder to shoulder with people who know the sector and can inform your market strategy.
Entrepreneurs must also develop a clear understanding of their product’s financial aspects. Not just from their own perspective, but from that of the customer, sales partner or other industry provider. It’s an uphill battle if you’re not addressing your customer’s financial constraints and priorities. This is especially critical in the conservation side of the business where Valor operates. So many water efficiency and conservation technologies make a lot of sense from resource management perspective. Yet, many of these solutions struggle to scale as successful businesses because they’ve been unable present fundamental economics that benefit the customer.
Can you address the process of getting the right team together and retaining technical people when they can easily be pulled elsewhere (especially data scientists in the Bay Area)?
Building a team in the Bay Area is challenging and expensive. Yet, I’ve been fortunate to hire great talent along the way. Initially, the majority of our early hires were inbound — they were dedicated to water and Valor’s mission. I also was fortunate to encounter “techies” who wanted something more meaningful as far as their career path. With limited financial resources, I also had to be patient with the timing of recruiting some of our senior hires such as our CTO and Chief of Product and Delivery. I scheduled a lot of coffee meetings to keep talent close while I built the business to the point at which I was ready to make new hires.
Lack of data scientists in the water industry is a considerable challenge. The financials are simply not as attractive for a professional who could easily go to Google or Facebook. Yet, I’ve had success recruiting data scientists and other technical people via university-based programs. I came out of academia, so this approach has seemed natural and I’m often meeting with people in PhD programs working in a related field.
Of course, keeping the right team together is biggest part. It’s just so exciting that we can all move to Xylem.
Working with investors: How did you manage them, and how did they step up when needed? What should entrepreneurs be asking of their investors?
Although we secured early investors, we didn’t create a board until one of our seed rounds. Our investors were incredibly supportive. Whether they understood the water industry, or not, they had to have confidence in me as an entrepreneur and our team. I had to be transparent with them throughout the journey and keep them informed of Valor’s challenges and successes. I had to have their trust
As a nonprofit leveraging an accelerator model to solve water challenges globally, the “deployment for impact” concept is core to Imagine H2O’s approach and programming. How are you measuring impact at Valor and how will this shift now that you’re at Xylem?
We track our key performance indicators rigorously, both internally and on behalf of our clients. If we can’t demonstrate a strong Return on investment for our clients, the technology won’t be a success. A few of Valor’s impact KPIs include terms of gallons saved, located leaks, and dollars received using Valor’s product suite. Yet, I believe every dollar that Valor saves for a utility becomes a dollar that can be used to invest in its future. Simply put, utilities will have to do more with less and continue to optimize the core functions of the utility. Valor’s ability to equip utilities with the analytical tools to both conserve water and protect revenue will ultimately make them more resilient. At scale, with Xylem, I think we can change the utility model for the better — enabling them to provide safe, reliable water in a resource constrained future.
