Editor's note: This article is part of Inc.'s 2020 Best Industries report.
In 2016, after President Obama declared a state of emergency in Flint, Michigan, because of its contaminated drinking water, ?Zionsville, Indiana, resident Megan Glover wondered if the tap water in her own home was safe. She asked her local water company how to test it and was referred to a lab that sold testing kits for $3,500.
"I love my family, but that's ridiculous," Glover says.?
That same year, Glover co-founded 120 Water Audit to develop more affordable consumer water testing kits. Now the company also tests and manages drinking water programs for government agencies, public water systems, schools, and other facilities. 120 Water Audit is a leader among a growing group of startups serving utility companies and government agencies that have been forced to update systems and respond to growing consumer concerns in the wake of crises like Flint.
Turning on the tap
Glover, a former marketing and business development executive, launched 120 Water Audit with co-founders Chris Baggott and Dave Kohl. (Baggott and Kohl were never operational with the company, but Baggott is on the board of directors.) They initially bootstrapped the business and worked out of Glover's parents' garage until the company won its first contracts with the city of Pittsburgh, the state of Indiana, and utilities in Loveland, Colorado, and Lewisville, Texas.
To collect samples, the startup sends water bottles that customers fill from the source they wish to test. Each bottle comes with a prepaid return envelope that goes to an EPA-certified lab for testing. Individual water tests range from $54 to $84, depending on the type of analysis. Meanwhile, the company's software helps clients aggregate data and automate tasks like sending recurring reports.
120 Water Audit's tests detect toxins like lead, copper, and arsenic, which at certain levels have been linked to learning problems among children, reproductive issues, and, in rare cases, death, according to the Environmental Protection Agency. Some of these contaminants occur naturally, while others make their way into water supplies from manufacturing facilities or infrastructure failures such as old pipes. The Flint water crisis is one of the most recent instances of the latter: The city switched its water source in 2014; officials failed to treat the water and lead from older pipes seeped in. Some residents experienced lead poisoning, while low chlorine levels led to a deadly outbreak of Legionnaire's disease.
The Flint crisis raised consumer awareness of drinking water safety, and as a result, 120 Water Audit has seen a steady rise in sales since its launch. The company--named for the frequency it believes consumers should test their water, which is every 120 days--booked $3.3 million in revenue last year, up from about $2 million in 2018. Glover declined to share whether the company was profitable.
A flood of activity
Glover's startup isn't the only one to see an increase in activity: Last year, businesses working on clean water initiatives--which tackle a broad array of services, including producing drinkable water from new sources and real-time water monitoring--raised $50.7 million in venture capital funding, according to the data and research company PitchBook. That's a $10.9 million increase from 2014, but it's still a relatively low amount of VC funding for an entire industry.
120 Water Audit was one of the best-funded startups in the industry last year: It raised $7 million in venture capital, which makes up 13.8 percent of the industry's total venture capital dollars from last year, according to Pitchbook. In total, the company has raised $9.4 million, including a $100,000 first prize from former America Online CEO Steve Case's Rise of the Rest pitch competition. Glover credits a majority of 120 Water Audit's growth to newly implemented drinking water regulations and stricter water quality specifications in the wake of Flint.
"Consumers are getting a lot more vocal about the quality of their water," she says. "That's forcing [traditional water utility companies] to think differently about the programs they run and how they communicate with consumers."
Crises like Flint are leading consumers to take action by using these services or pushing government agencies for more testing, says Reese Tisdale, the president and CEO of Bluefield Research, an independent advisory firm that aims to help companies and organizations address regulatory and business trends in the water sector. "We expect to know what we're ingesting and understand what the impacts are on ourselves and the environment."
Today, 120 Water Audit works with clients in 14 states, including four statewide contracts, and its software has been implemented on more than 175,000 taps, Glover says. The majority of the business is built on partnerships with water systems, while about a fourth goes to state contracts, says Glover. However, she still receives a steady trickle of individual consumers seeking her water testing kits, but that makes up less than 1 percent of the company's revenue, Glover added. Prices vary depending on the customer's location and size of its water program, but the company's average contract value is just under $270,000 per year. Currently, Glover employs a team of 36 workers.
However, the startup still faces industry-specific challenges, like heavy regulation and a lack of funding from investors. "It's not a technology problem, it's that there aren't enough dollars to go around," Tisdale says. "There is no white knight out there with bags of money to save your municipal water supply."
What's more, startups in the clean water space will face stiff competition from larger companies that offer diversified services and have the financials to withstand market changes or slow adoption rates, Tisdale says. Prominent U.S.-based heavyweights include Xylem and Danaher, both of which are public companies that own multiple brands in the clean water space, he adds.
Glover is looking to expand 120 Water Audit's reach by launching a commercial application later this year. The program would give safe drinking water certifications to establishments like hotels and restaurants.
As for the results of the water analysis in her own home, Glover was relieved to learn her tap water was safe. She says she wants to give many more people the same peace of mind. "Once you know a lot of this stuff, you can't unknow it."