Why It's Hot

Every statistic about water scarcity is more staggering than the next: One out of eight people in the world doesn't have access to clean water, and one out of every five deaths in children under the age of 5 is from water-related disease. But this one hits closest to home: If everyone in the world used as much water as the average American, the planet would run out of clean water within eight years, according to Visualizing.org.

For entrepreneurs with a background in engineering or biology, there has never been a better time to step up to the plate to fix this global problem. 

Taking advantage of the opportunities here in the U.S. is a good place to start since the domestic market is growing. Over the past five years, states such as California and Texas have endured severe droughts, which has increased the demand and the price of water across the country. Water supply and treatment centers are also increasingly becoming owned by private enterprises, rather than governments, making the industry more efficient.

Barriers to Entry

Don't let the high number of mergers and acquisitions in the industry fool you: This is not a market for quick exits. Most of the M&A activity has involved large water supply and utility companies, consolidating a once fragmented industry. The water conservation industry is characterized by a handful of very large utility companies and, on the other end of the spectrum, numerous much smaller start-ups. There's certainly opportunity to break into the industry without competition from the megafirms, but your start-up better be built to last.

Growth Potential

Water supply and irrigation is a $62 billion industry, according to IBISWorld, a Santa Monica–based market research firm. Though the number of enterprises has decreased because of a high volume of M&As, revenue across the industry is set to grow 14.8% by 2017. Meanwhile, according to industry research firm The Cleantech Group, in 2010, investors spent $257 million on water-related businesses, up from $140 million the year before.

Where the Action Is

According to Scott Bryan, COO of the San Francisco water start-up accelerator Imagine H20, two subsectors of the industry to watch are wastewater treatment and the water-energy connection. "Unlike energy, there's no replacement for water," Bryan says. "If you can somehow save or create energy with water usage and treatment, then that's how you’re going to get customers."