Halosource Nails Down $10M for Global Expansion of Water Purifying Technology

1/6/10Follow @xconomy

Halosource, the Bothell, WA-based company with a cheap and simple technology for purifying water in developing countries, has raised another $10 million in a venture financing that could be worth as much as $15 million, Xconomy has learned.

The investment is being led by Prime Partners Asia Merchant Capital of Singapore, according to Halosource’s chief financial officer, James Thompson. The financing, a Series D round, includes existing investors, although a majority of the money is coming from new investors, Thompson says. Halosource has a long list of investors that includes Credit Suisse, Siemens, the Abu Dhabi Investment Authority, and a few notable Seattle investors—Alexander Hutton Venture Partners, Buerk Dale Victor, and WRF Capital. The company has now raised about $30 million since 2007.

Roughly 1 billion people around the world lack access to clean drinking water, and this is the root cause of a variety of illnesses that kill an estimated 2.2 million people a year, according to the United Nations. But as more people emerge from poverty, businesses like Halosource have discovered they are demanding consumer products to provide them with clean water. The market is worth an estimated $18 billion worldwide, and growing at a clip of 19 percent annually, according to research firm Frost & Sullivan.

Halosource has been a pioneer in this emerging market over the past couple years, with a product it calls Halopure. The technology is now being used to purify water for about 4 million people in India. That’s about twice as many people as who were using it a year earlier, Thompson says. Halosource is privately held and doesn’t disclose its sales figures, although Thompson said the company recently recorded its first profitable month, and that it is aiming to reach sustainable profitability in the near future. The company has about 100 employees now, and will look to hire a few more with this new shot of cash.

“This is capital that will continue to fuel our growth globally,” Thompson says. “We want to build a great company around a significant need in the marketplace.”

I wrote about a big break Halosource got back in March, when it was certified as safe and effective by the U.S. Environmental Protection Agency. It’s not really that strategically important for Halosource in the U.S., where we take clean water for granted, but it was a key validation for the company as it seeks approval from regulators around the world, who look to the EPA for guidance.

One of the most important future markets for Halosource still hasn’t quite opened up—China. Halosource has a manufacturing plant in Shanghai, and relationships with distributors there who export the Halopure product, but it is still seeking clearance from the Chinese Ministry of Health in order to begin selling its product to the vast domestic market in China. “We are getting through the final stages of our application. We look forward to being able to sell in the vast China market,” Thompson says.

For those who missed our earlier stories on Halosource, here’s some background on how this works. As Thompson explained to me back in March, carbon-filtering systems like Brita or PUR can get rid of dirt and sediment particles, but they don’t kill viruses or bacteria that make people sick with diarrhea, dysentery, or cholera. Chlorine tablets can do that trick, but nobody really wants to drink bad-tasting chlorinated water.

Some new technologies for consumers have come along in China and India, like reverse osmosis or ultraviolet lights in water tanks, but 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 in July 2008.

Halosource got some of its early traction with a system that depends on a power source that’s free and reliable everywhere: gravity. In India, the Halosource technology is built into 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 cartridge, which is filled with tiny polystyrene beads coated with bromine. That’s a chemical that kills germs like chlorine does, but without the bad taste.

Halosource has formed a partnership in India with Eureka Forbes, which has a giant direct sales force in India that knocks on people’s doors and has retail outlets where it sells a jug called AquaSure for $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.

But that’s not the only way the Halosource technology works to purify water. The technology has also been combined with reverse osmosis systems, and with standard household filtering systems like those people attach to their kitchen faucets, Thompson says. “Our technology is like the Intel chip inside the computer. Our technology makes the device work,” he says.

Distributing the Halopure product around the world is one of the key challenges, because a company in Washington state needs partners to go after such a fragmented market with so many players in so many countries. Last year, it had two partners—one in India, and another in China. Now it has nine partners to help with that critical distribution task, and is in discussions with another 40 to 50, Thompson says.

Thong Le, a managing director with WRF Capital and a board observer of Halosource, said he’s been excited by the progress Halosource has made over the past year. “The problem with clean water is a significant one, and these guys have a great technology for it.”

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  • Fan Quanchao

    I hope Halosource can open its market in China soon. Water condition in china is not good. Actually with industrial polution and more and more golf field in China, water condition is getting worse and worse. Halosource have a enormous potential market in China!