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Israeli Success Story: Kinrot Ventures, “Not a drop is wasted”

By: Mickey Chesla

 

From right: Nir Balzar of Aqua Agro, Assaf Barnea Kinrot, Heiner Markoff and Michael Idelchik of GE Water

The Kinrot Ventures incubator is the only Israeli start-up incubator to focus solely on water, and is the largest investment body in the world in the water sector, in terms of the number of companies supported. Kinrot is already signed on significant strategic cooperations with GE Water and the Milwaukee Water Works, and is on the way to securing additional key partnerships.  The objective – to bring the world its next “Netafim” (Israel’s most successful water technology company).

 

Kinrot Ventures – ID:

Arena of activity:                     A technology incubator of the Israeli Ministry of Industry, Trade and Labor which is focused on the water industry.

Established:                             1993

Privatized:                               2006

Ownership:                              In 2010 ownership was transferred from the Canadian Roland Stern Group to Aqua Agro, part of Gaon Holdings (full ownership)

Headquarters:                        Lavi Kibbutz,Israel

CEO:                                            Assaf Barnea

Companies in the Portfolio:    13

 

As of 2006,Israelis home to a technology incubator in the water sector, after the Kinrot incubator was privatized and began to focus solely on water.  According to CEO Assaf Barnea, “Kinrot Ventures is the largest seed investor in the world in the water sector, in terms of the number of companies in the portfolio.” The seed investment is the first stage investment which is used to start the company on its way, after the entrepreneur comes up with the technological idea. Kinrot has a portfolio of 13 companies, each of which is active in the water sector in a variety of applicable areas, for smart agriculture, for home use (pressure control) and other areas.

The technology incubators of the Israel Ministry of Industry, Trade and Labor are investment bodies which can invest a seed investment of up to one million dollars in each company, in a 2-3 year timeframe. The incubators have all been privatized and are not owned by the state.  However, the Israeli government invests a large part of the necessary funding for the start-ups, and these funds are slated to return to the state in the form of royalties of future sales the companies will earn.

Non-Cleantech companies usually only have access to two years in the incubators, but since the Cleantech sector requires a longer period of research & development, these companies usually earn an extra year.   Kinrot is a rarity in the group of Israeli incubators, since it is the only incubator focused exclusively on the water sector, and essentially it isIsrael’s water incubator.  Another Israeli incubator is N.L. Technologies, based inHaifa, which invests in Cleantech in general.

Up to date, Kinrot has signed important strategic agreements with GE Water and the Milwaukee Water Works, and “We are on the way to building additional partnerships in Europe and Asia,” adds Assaf Barnea.

What differentiates Kinrot’s investment model?  According to Barnea, technology incubators in Europe and the U.S.are not investment groups but service providers, “But we both invest and sit on the boards of these young start-ups, so that almost every business or management decision is made with our involvement and cooperation,” he explains.  The objective is to raise companies which will bring significant water technology developments to the world – or in other words, will be the next Netafim.

Many companies reach the “chasm” of start-ups after the incubator stage, at which time they are not able to raise the necessary funds to bring them closer to the market.  About 30-50% of incubator start-ups fall at this stage, not just in the Cleantech arena but start-ups in general. In this sense two of the companies in Kinrot’s portfolio (see list to follow) which are very promising and have received funding beyond the original seed: Eltav and TaCuant.

Eltav was founded with the aid of a group of investors, some of whom were private investors including Israel Makov (formerly CEO of TEVA Pharmaceuticals) and others, who invested over $3.5 million, including the incubator investment (which was half a million dollars).  TaCuant gained investments from Hutchinson Water, under the management of Amikam Cohen and Dani Eldar, in the sum of $2.5 million in two rounds, out of a total of $3 million invested in the company.

Another positive indication on Kinrot’s activity is that in the years of being in the incubator, a company needs to earn the recommendation of the incubator and the approval of the Israeli Chief Scientist.  A company that did not advance and does not have a significant milestone ahead of her, will not make it to the next year. Today there are three companies in Kinrot’s portfolio which are entering their third year: Aquarius, which focuses on leak detection, Hydrospin, which creates energy from the flow of water in pipes, and Diffusaire, which reduces energy spend in wastewater treatment facilities.

For investors, knowing that companies which do not live up to their commitments are ejected from the incubator process is important, as it minimizes their investment risk.  On this Barnea adds, “We don’t continue to cultivate companies which don’t meet their milestones or are not able to get further investments.  There are companies with an idea that looks promising and are even able to meet the milestones that the Chief Scientist puts in front of them, but are not able to “cross the chasm,” meaning they don’t succeed in gaining further investment to fund their activity, and we are forced to stop sponsoring them.  Its not personal – we do the best that we can to support strong, breakthrough technologies, and we are committed to our investors.  Without funds its impossible to bring technologies to the market, and sometimes tough decisions have to be made.  This is how we minimize risk and increase the possibility that our portfolio companies will live up to their promises and will bring a return on investment down the road.”

Even today, Kinrot is working on recruiting additional investors, in order to further invest in the portfolio companies and advance its activities.

 

Kinrot Ventures Portfolio Companies:

  1. Aqua Digital Ltd. –  Digital flow meter solutions
  2. Aquarius Spectrum Ltd. – Municipal leak detection solutions
  3. Cooltek2GO Ltd. – “on the move” cold drinking water device
  4. Diffusaire Ltd. – energy saving technology for the wastewater industry
  5. EcoChemTech Ltd. –  Sophticated Brine Management
    Eltav Wireless Monitoring Ltd. – wireless monitoring of industrial ball valves
  6. FiltofleX Ltd. – Fine Filtratiom Media
  7. HydroSpin Monitoring Solutions Ltd. – self powered water monitoring
  8. Kolmir Water Technologies Ltd. -Ultrasonic solutions for water and wastewater treatment
  9. PML Ltd. – Innovative laser based particle monitoring technologies
  10. SPC Tech Ltd. – Sophisticated Pressure Control
  11. TACount Ltd. – Near real-time sesor for detection of reproducible microorganisms
  12. Wadis Ltd. – Water Disinfection Solutions

 


    Investment, Start-ups, Water
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