BEI is delighted to bring you this mini-series on HBS alumni tackling problems related to water and climate change. Emotional and visible connection to a topic is key to driving action. There seem to be few issues and topics that conjure up greater personal connection and emotion – to family, to place, or to community – than water. We hope these stories showcase a range of ways in which some alumni have connected their bond with water to action in the business world. Thank you for reading, and please share your stories with us at! – Lynn Schenk, BEI Director

Climate Stories: Water Series - Episode #18: Tom Ferguson (MBA 2014) Venture Capitalist and Water Evangelist

“We need to get the water molecule on the same footing as the carbon molecule. This industry has not communicated effectively. Solving the water crisis will solve everything else.”

Tom Ferguson applied to Harvard Business School, thinking that his undergraduate studies in political economy, a short-lived acting career, and three-plus years on the Sustainability Strategy and Transformation team at the London consultancy ERM, would perhaps “bring a relatively novel perspective to the classroom.”

Indeed, he said, “HBS changed my life. The Socratic method made so much sense to me and I married someone whom I met in analytics, so….”

Anticipating his 10th HBS reunion, Tom has become an ardent evangelist for water and now has almost four years under his belt as an early stage investor helping entrepreneurs find solutions to the water crisis.

Tom named his company Burnt Island Ventures. “I try to be a tourist agent,” he laughed. The Burnt Islands, three small islands on the west coast of Scotland, his father’s homeland, have been his favorite view since childhood. But his mission is anything but nostalgic: to find and fund the best water entrepreneurs in the world.

“The water industry spends $3.6 trillion per year in infrastructure, waste water, irrigation and food production, plumbing and industrial needs as well as chip manufacturing,” Tom explained. “There hasn’t been a seed funding system for early-stage companies. A ‘seed fund of choice’ was asking to be built in 2020, something that would provide a check, help entrepreneurs with customers and investor introductions, as well as help them through the process of designing their companies. So I decided ‘I’ll give it a go.’”

Water industry opportunities are wide ranging including sanitation, water pipe repair and replacement, wastewater treatment, increasing access to and efficiency of irrigation, utility control and monitoring software. The list is very long indeed.

Tom is proud of his company’s track record to date. “We have a $30 million Fund I. Our overall multiple on our invested capital is 1.39 relative to the mean of 1.07 for other funds started in 2021. We currently have 16 companies in the fund with $54 million in bookings and $27 million in recognized revenue. Right now, we’re where we want to be.”

The numbers alone do not tell the story, however. “You need to prove that you can make money at the early stage. Markets are only obvious in retrospect. Fintech was thought of as a nonsense market in 2008.”

Tom explained, “Everything that’s worth doing is hard. To have the outcome we want, we must have excellent returns for our LPs. But we also want to prove that water is a huge and overlooked industry. We want to mobilize both the capital need and the political will to accelerate solutions to this enormous and growing problem.”

The lack of political will in the water space irritates Tom. “In America, lobbyists can change the rules to your favor and water has been reluctant to play the game on the field.” He added, “President Biden’s $1.4 trillion Inflation Reduction Act almost completely overlooked water. The omission is indicative of the unwillingness of water companies and utilities to work together effectively to influence federal and state legislation.”

Tom conceded that water has its own idiosyncratic complexities that make it harder to provide market-based support in the same way that energy and other elements of the climate-related economy have benefited from. But he insists, “It’s outrageous that we can get renewable energy down to 1 cent per kilowatt-hour through intervention, and the gallon has received next to no support. That support could ensure the deployment of an entire ecosystem of technologies from recycling & reuse, next generation treatment, contaminant destruction, to lead pipe replacement, decentralized water access, leak detection, utility software. It’s insane.”

Even in the absence of getting the politics right, Tom sees a “colossal commercial opportunity for water.” Why? “We are about to embark on an era of replacement and rebuilding and it’s a huge undertaking. Water infrastructure has aged out. Federal spending for water infrastructure stopped in the 1970s and has only started to recover, with $38 billion in capital spend on water and wastewater in 2020 growing to $68 billion last year. These assets are only supposed to last for 40 years. In Flint, Michigan, for example, core issues haven’t been solved even though the crisis there came to light a decade ago.”

Tom also sees opportunities in the global South, where, in many places, water infrastructure hasn’t even been built yet.

“If you look at Maslow’s hierarchy of needs, water is in the first tier. If you don’t have it, it's the first need you solve for each and every day.” Tom added, “Everything relies on the fundamental molecule – water – and if you solve it, you solve climate adaptation and resilience. We’re going to figure that out sooner or later, whether we like it or not.”

He concluded, “Our big job is to prove that water is an enormous economic and impact opportunity. 66% of GDP relies on it! This isn’t going away, and I hope more people come into the funding market. Our job will be to stay competitive.”

About the Author

Jacqueline Adams (MBA 1978) has spent her career as a journalist, author, and convener. She and Bonita C. Stewart (MBA 1983) are co-authors of “A Blessing: Women of Color Teaming Up to Lead, Empower and Thrive” as well as a series of groundbreaking proprietary surveys, Women of Color in Business: Cross-Generational Survey©.