Dear , 

According to Ofwat, the industry regulator, the UK water supply network currently loses around 3,000 megalitres a day through leakages. This equates to roughly 20% of the total volume of water within the system and this despite recent investments in infrastructure costing in excess of £7.5bn.

The factors that contribute to the location and frequency of bursts and leaks are numerous, and include pipe corrosion, manufacturing flaws, installation errors and external pressure loading resulting from surrounding buildings, traffic and local topography. Work undertaken by Prof Ivan Stoianov and his team at Imperial College has investigated the correlation between the incidence of leak/burst events and the cumulative effect of all factors contributing to the pressure local networks operate under. They have discovered that variations in pressure stress the network and cause failure. Some of these variations may be large and destructive, though infrequent – unsteady state. Smaller variation is inevitable and contributes to failure over the longer term – steady state. 

Understanding the cumulative loading of steady and unsteady state hydraulic conditions is fundamental to the Inflowmatix solution.

The Technology

The water industry has been monitoring water pressure within its systems for some time. However, these low-resolution loggers are incapable of capturing the high-frequency pressure changes that Prof Stoianaov and his team have found contribute significantly to the system loading – and consequent failure. Inflowmatix has developed both high-resolution sensors that detect these high-frequency pressure transients and the analytics to interpret this data. Working with water companies, Inflowmatix is refining its technology with the intention of providing a suite of decision-support tools to enable the system operators to move to a proactive and ultimately predictive management approach. The cost savings are potentially colossal, together with the significant benefits resulting from improved customer service.

The team benefits from on-going work within Imperial College in areas such as water contamination detection. This will enable Inflowmatix to continually enrich its product offering to the water industry.

The Market

The business case directly supporting our investment was based exclusively on the market for high-resolution loggers in the UK. The ROI model predicts an 18-month payback on hardware sales and early client engagement supports an optimistic roll-out plan.

However, there are huge opportunities to develop a global offering, focussing on markets for which water costs are high. The most recent independent surveys of the size of the global smart water networks vary between $3.6bn and $5.8bn.

Finally, although much of the team’s work has focussed on opportunities within the water industry, the principles underpinning its product offering apply equally in other potential markets, such as Oil & Gas. 

Business Model

The company’s value proposition revolves around both the hardware – the high-resolution loggers – and critically the software/analytics that will inform the decision-making of the water operators and enable them to manage their assets proactively. Efficiency gains through corrective maintenance programmes, dynamic network optimisation and risk-based preventive maintenance can then be exploited. 

The Team

David Parker, Chairman, is known to Parkwalk through his Chairmanship of Perpetuum Lts, another portfolio company. David was CEO of SPI Lasers through to its acquisition by the Trumpf Group. He was CEO of Marconi Components from 1999 through to 2004 and is an Imperial Innovations venture partner.

Steve George, CEO, has 16 years water industry experience. He has formerly been a Director (IT) at Crowder and Suez.

Dr Mike Williams, CTO, is an expert in Enterprise software and systems development. Mike was formerly Software Director at i2O.

Robin Bell, VP Engineering, is an expert in industrial design and manufacturing. Robin was also a Director (of Engineering) at i2O.

Ivan Stoianov, CSO and Founder, is a recognised industry thought leader. He will have a non-executive role and will safeguard future IP and applications flow.

The team has a good mix of commercial, technology and industry skills. Perhaps unusually for a university spin-out, the business has very strong ties to its target market with the opportunity to make early commercial traction with both operators and potential partners.

The Investment Case

We are very attracted to the strong industry position of both the academic team and the commercial company assembled to exploit their discoveries. The inefficiencies of the water industry are well documented and will represent both a challenge and an opportunity, but our due-diligence enquiries found strong appetite within the industry for Inflowmatix’s technology. Our previous experience of the Chairman assures us that the company will be well run and focussed on delivering an acceptable outcome for our shareholders. There are many industry players for whom a successful Inflowmatix would ultimately represent an attractive acquisition target.

This financial promotion is issued by Parkwalk Advisors Limited (Parkwalk), which is authorised and regulated by the Financial Conduct Authority. Investments referred to in this newsletter are not suitable for all investors.  Interested parties are strongly recommended to seek specialist financial and tax advice before investing in any product.  Capital is at risk and investors may not get back the full amount invested. Tax treatment depends on the individual circumstances of each investor and may be subject to change. Past performance is not a reliable indicator of future results, and the value of investments may go down as well as up. Projections and forecasts are also not a reliable indicator of future performance. Investments in small and unquoted companies carry a higher risk than many other forms of investment. Any investment in a Parkwalk product must only be made on the basis of the terms of the full Information Memorandum. Parkwalk is not able to provide advice as to the suitability of investing in any product.