The last time I checked in with Bothell, WA-based Halosource in July, it was gaining momentum with a cheap, simple technology for purifying drinking water that was being used by a million people in India. Nine months later, privately held Halosource, a company with just 100 employees, appears to have a hit on its hands. More than 2 million people in India are now getting clean drinking water through its proprietary technique, and now it has its eyes on expanding into new markets in China and Brazil.
Today, Halosource is announcing another milestone to help it hit crack those markets: The U.S. Environmental Protection Agency has certified that its HaloPure system is safe and effective at providing clean drinking water. If all continues to go according to plan, this ought to help the company form more partnerships with distributors like the one in India that has turned HaloPure into a fast-growing product. I heard more about this strategy a few days ago during a phone conversation with chief financial officer James Thompson.
Clean drinking water may not sound like a big deal in this country, but something like a billion people on Earth don’t have enough of it, making this one of the biggest root causes for health disparities in developing countries. The UN estimates that 2.2 million people died from unclean drinking water in 2004. Since many countries lack basic municipal water purifying systems and sewers to keep their water clean, businesses in the developed world have their eyes on consumer products to provide clean drinking water. It’s a market that is worth an estimated $18 billion, and growing at 22 percent annually, according to research firm Frost & Sullivan.
Standard off-the-shelf products aren’t really up to this task: Carbon-filtering systems like Brita can get rid of dirt and sediment particles, but don’t kill viruses or bacteria that make people sick with diarrhea, dysentery, or cholera. Chlorine tablets can do that trick, but who wants water that tastes like that?
Some new technologies for consumers have come along in China and India, like reverse osmosis or ultraviolet lights in water tanks, although those cost $200 to $350 for a home system, and depend on reliable water pressure and electricity. That’s not realistic in many countries, Halosource CEO John Kaestle told me last summer.
Halosource, though, uses a system that depends on a power source that’s reliable everywhere, and costs nothing: gravity. The company makes a yo-yo like cartridge that sits at the bottom of a broad water jug, about the size of a Gatorade cooler. The water flows down by gravity through the Halosource cartridge, which is filled with tiny polystyrene beads coated with bromine, a chemical that kills germs like chlorine does, but without the bad taste.
“We believe HaloPure is the most important non-electric drinking water disinfection technology to reach full commercialization and regulatory approvals in the past decade,” says Andrew Clews, Halosource’s vice president of marketing, in an e-mail.
A small company like Halosource doesn’t have the cash or manpower to market and distribute this kind of thing effectively in a foreign country with 1 billion people, so it formed a partnership with Eureka Forbes, a company with a direct sales force in India, that markets this jug-and-cartridge product, AquaSure, to middle-class consumers for about $40 to $60. Halosource makes its money by selling replacement cartridges for $7 to $10, which typically need to be replaced every six months, Thompson says.
Eureka Forbes has been selling 25,000 to 50,000 of its jugs per month. Halosource, even though it’s privately held, made a curious appearance last month at a cleantech and renewable conference hosted by the investment bank Piper Jaffray in New York, as well as meetings with institutional investors hosted by Jeffries, Thompson says.
Halosource isn’t hurting for cash—it raised $11.5 million in July from Origo Sino-India, Unilever Technology Ventures, Masdar Clean Tech Fund, Credit Suisse, Siemens, and Consensus Business Group, among others. It has secured partners in China and Brazil, and has manufacturing capability in Washington State and China. It expects to have eight to 12 partnerships in place by the end of 2009, Thompson says. Still, Thompson made it clear that he wants to get out of the office and tell the company’s story along with Kaestle.
“There continues to be interest from investors,” Thompson says. “We want to continue to raise the profile of the company on every level,” he says.
The company has a goal to “grow the business and become profitable,” Thompson says. He didn’t put any time frame on when the company will achieve that. But Thompson—who was a member of Alexander Hutton Ventures before he joined Halosource in 2004—says there’s a different feeling around the office now. “I’ve been around this company for 10 years, and I’ve never seen the momentum at this level,” he says.