Private Equity Opportunity in Water Tech: Capturing Growth and Resilience in a Critical Sector

Executive Summary

As the climate crisis intensifies and the global demand for water security accelerates, the economic and strategic value of water infrastructure and innovation is being brought into sharp focus. What was once considered a slow-moving, utility-driven market is rapidly transforming into a dynamic space of technological advancement and investment activity. Venture capital firms have begun to recognize this shift, significantly increasing their deal flow and capital deployment into water-focused startups. However, the most transformative phase of this market—scaling, consolidation, and infrastructure modernization—remains an open field for private equity (PE) sponsors. This report aims to build a comprehensive case for private equity investment in the water technology sector by highlighting its sustained market growth, strong early-stage investment momentum, and favorable structural characteristics that create defensible moats for long-term investors.

Water Markets: A Decade of Predictable, Strong Growth

The global water market, which includes the full spectrum of water supply, purification, and infrastructure technologies, is forecasted to expand significantly over the coming decade. In 2023, the total global water market was valued at $880 billion. 

By 2032, this figure is expected to grow to $1.3 trillion, indicating a compound annual growth rate (CAGR) of 4.43%. This is not speculative growth. It is rooted in expanding urban populations, heightened industrial demand, and the critical need for climate resilience in both developed and developing nations.

A closer look reveals that certain segments within this broader market are accelerating even faster. The global water and wastewater treatment sector, for example, was worth $347 billion in 2024 and is projected to grow to $597 billion by 2032. This represents a much stronger CAGR of 7.02%, underpinned by both public and private investment in critical infrastructure, pollution control mandates, and water reuse technologies.

This growth is not limited to treatment alone. The combined market for water treatment and treatment systems shows a parallel trajectory. From 2025 to 2032, water treatment services are forecasted to grow from $75 billion to $120 billion, while treatment systems are expected to expand from $45 billion to $78 billion. This reveals a dual opportunity across services and capital-intensive technologies such as membrane systems, chemical treatments, and integrated plant solutions.

Venture Capital Investment as an Early Indicator of Sector Dynamism

One of the most compelling signals for the private equity community comes from the surge in venture capital investment in water technology. As of Q1 2025, data from PitchBook Data, Inc. shows sustained levels of deal activity and capital deployment, pointing to an established pattern rather than a one-off spike.

Behind these numbers lies a strong regional concentration and technological focus. North America continues to dominate the water tech landscape, accounting for more than 77% of total VC deal value in 2023. This is followed by Europe and Asia, both of which have strong policy tailwinds pushing investment in climate-resilient infrastructure. The sub-segments attracting the most funding are water treatment, desalination, efficiency monitoring, and water reuse platforms. Companies like Gradiant, ZwitterCo, and Gross-Wen Technologies are prime examples of venture-backed startups delivering advanced solutions in areas like industrial wastewater treatment and membrane innovation.

PE’s Role: From Scaling Innovations to Platform Consolidation

While venture capital lays the groundwork for innovation, it is private equity that scales, integrates, and institutionalizes these businesses. We are beginning to see clear examples of this dynamic. Leading PE firms such as KKR, Bain Capital, Blackstone, Ember Infrastructure, and Ridgewood Infrastructure have already begun establishing a track record in water-related investments. Their activities span direct acquisitions, platform roll-ups, and strategic divestments.

KKR’s platform investment in Axius Water, which specializes in nutrient management for wastewater treatment, shows how scalable platforms can emerge in this space. Their 2024 exit from Ecorbit for $2.07 billion confirms that strategic buyers are willing to pay premium valuations for well-constructed water infrastructure platforms. Bain Capital has taken a different route, focusing on contaminant removal through its acquisition of AqueoUS Vets and enhancing infrastructure through Harrington Process Solutions. Blackstone’s investments in Desotec and Geosyntec reflect a focus on mobile filtration and engineering resilience.

Ember Infrastructure has gone further into sustainability-aligned water plays with its 2023 acquisition of H2O Innovation and a $500 million green fund dedicated to water reuse and decentralized infrastructure. Ridgewood, meanwhile, has shown how patient infrastructure capital can monetize large-scale water supply assets, recently closing a $1.2 billion fund dedicated entirely to strategic water assets.

Capital Intensity and Regulation: Strategic Moats, Not Headwinds

Investing in water tech is not for the faint of heart. The industry is shaped by two major structural barriers to entry: the high cost of infrastructure and an extensive, often burdensome regulatory framework. However, for well-capitalized PE sponsors, these barriers offer defensible moats. Technologies such as desalination, deep-sea reverse osmosis (DSRO), and industrial water treatment are all capital-intensive, requiring long development timelines, equipment integration, and bespoke engineering. These characteristics serve as natural filters against short-term capital and undifferentiated competitors.

From a regulatory standpoint, water touches everything from human health to food safety to environmental protection. In the United States alone, Environmental Protection Agency (EPA) standards for PFAS contamination, wastewater discharge, and drinking water quality create high compliance thresholds. Globally, UN Sustainable Development Goal 6 calls for universal clean water and sanitation, encouraging governments to subsidize or partner with private operators.

These barriers—while daunting for startups—create a favorable terrain for PE-backed platforms that can afford compliance teams, navigate permitting challenges, and maintain long-term operating agreements. Municipal customers, in particular, value this reliability and often prefer multiyear service contracts once trust and certification are in place.

Tailwinds Accelerating Investment Urgency

The urgency to invest in water infrastructure and innovation has never been clearer. A quarter of the global population lives in regions experiencing extreme water stress, defined as using more than 80% of renewable water supply annually. Climate change continues to alter rainfall patterns, increase drought frequency, and challenge traditional water systems. At the same time, global infrastructure is aging, with some urban networks losing 30–50% of clean water due to pipe leakage and inefficiency.

Governments are responding. In the U.S., for instance, the Biden administration's $27 billion Greenhouse Gas Reduction Fund includes provisions for clean water infrastructure. Internationally, water-related infrastructure investment is projected to require $6.7 trillion by 2030 and $22.6 trillion by 2050, According to Financial Times. This capital will not come from public sources alone. Private equity can play a catalytic role in bridging this funding gap.

Meanwhile, the startup ecosystem continues to generate circular solutions. From algae-based treatment systems that turn waste into fertilizer, to electro-ceramic membranes that remove metals from wastewater with reduced energy use, innovation is accelerating. These technologies enable new business models, such as water-as-a-service, which reduce customer CAPEX while generating recurring revenue for operators.

Conclusion: Water Tech as the Next Frontier for Private Equity

Water technology is no longer a niche or purely mission-driven space. It has evolved into a commercially viable, globally scalable sector with proven exit pathways, robust deal activity, and strong societal relevance. The foundations have been laid by venture capital and supported by mounting public concern and policy backing. Now, it is time for private equity sponsors to step in.

Whether through the scaling of venture-backed companies, consolidation of fragmented regional players, or partnerships with municipalities and corporates, the opportunity is clear: capture value in a rising market that underpins human health, industrial resilience, and environmental sustainability. The water tech sector offers long-duration, defensible assets that are poised to outperform in an increasingly resource-constrained world. For private equity firms seeking strong returns with a clear impact narrative, there is no better moment to dive in.

Sources & References

Financial Times. (2024). Climate investors see growing opportunities in water tech. https://www.ft.com/content/516f9896-05bb-4721-a9e2-4065d902d462 

PitchBook. (2025). PitchBook Analyst Note: Water Tech. https://pitchbook.com/news/reports/q3-2025-pitchbook-analyst-note-water-tech 

Smart Water Magazine. (2025). Private equity's expanding role in the water sector: key players, investments and strategic exits. https://smartwatermagazine.com/news/smart-water-magazine/private-equitys-expanding-role-water-sector-key-players-investments-and 

World Economic Forum. (2025). 3 start-up founders on the need and opportunities for investing in water innovation. https://www.weforum.org/stories/2024/09/3-founders-on-the-need-and-opportunities-for-investing-in-water-innovation/ 

World Resources Institute. (2023). 25 Countries, Housing One-Quarter of the Population, Face Extremely High Water Stress. https://www.wri.org/insights/highest-water-stressed-countries