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Venture Capital helps MIOX Bring Clean Water to the World

clean water

"Venture capital has played a crucial role in our company," says Carlos Perea, MIOX CEO. After 3½ years at the helm of the Albuquerque-based water disinfection company, Carlos sees the benefits capital infusion has had for MIOX, allowing the firm to move into new markets and take advantage of significant worldwide trends.

Carlos was looking for a company in the telecom and semiconductor space that would benefit from capital and new management when he and a partner found MIOX instead. After spending 9 months doing due diligence, a group of investors was put together to invest in a controlling interest in the company that had previously been closely held by one individual.

MIOX had good technology and patents, and an impressive value proposition. Based on mixed-oxidant technology developed by Los Alamos Technical Associates to purify water for the U.S. Army, MIOX was incorporated in 1994.

While the company had attracted some sizable customers, mainly municipal water systems, it had not really taken off. Carlos thought that although it had a strong scientific presence, the R&D mindset was partly to blame for holding the company back.

Picking and Blending VCs

The A round in September 2005 was led by NMVCA member, Flywheel Ventures. MIOX's capital and executive structure were changed. While most scientists and midlevel managers were retained, the executive team was dismantled.

The next round of investment was led by Sierra Ventures, a larger fund than Flywheel and one from outside New Mexico. The key there was to start to commercialize and develop markets outside the government customers that had been MIOX's original base. The January 2007 capital infusion was seen as a way to take advantage of significant global market opportunities.

At issue was not just getting access to more capital and markets, but taking a group of investors focused on New Mexico and the Southwest and blending them with a larger investor from another region. "Flywheel has always given us good advice and been a strong partner. They helped enable the next round of investment," Carlos says.

The third and most recent round of investment was led by DCM Ventures in August 2008. Out of the 4 firms that offered to lead the round, MIOX chose DCM principally for its international expertise.

Now investors from Flywheel, Sierra, and DCM are all on the board. "The moral of the story is that it's one thing to have a good VC investor," Carlos says. "The trick is to get 3 like-minded investors to come to an agreement. We've been able to add new investors and keep the existing ones happy."

"Picking a VC is like picking your management team or your spouse. Choose wisely because it's probably easier to fire an executive or divorce a spouse than get rid of an investor with a board seat," Carlos remarks with a smile.

Carlos says that at each stage investment has increased, and that the company has benefited, not only from the infusion of money but also from the business connections and relevant technical expertise the VCs have contributed.

The Right Environment for Green Water Technology

Timing has also helped in the company's growth. "People are becoming more aware of water quality and there's a general sensitivity to environmental sustainability," Carlos says. "Our technology and products align with that perfectly."

MIOX products have always provided safety benefits as they enable water disinfection without the need to transport hazardous chlorine. In addition, the rising price of energy has driven up the cost of alternatives while the payback time for MIOX products has dropped significantly.

With corporations becoming more environmentally aware, MIOX is not only gaining new customers but finding existing customers eager to expand their use of the green technology. An upscale resort and spa has been utilizing MIOX to clean wastewater for reuse on their golf course. To reduce the use of hazardous chemicals and lower energy costs, the resort added a MIOX system for their outdoor pools and spa.

"We not only have the opportunity to make a good return on investment for the VCs and give employees good stock and careers, but we also have the gratification of being able to solve one of the world's most pressing problems—access to clean water," Carlos enthuses. He is proud that MIOX products help billion-dollar companies, as well as those at the lowest socioeconomic levels worldwide who simply need safer water.

Powering into New Markets for Improved Profits

The company is also aggressively pursuing the power generation market and beverage manufacturing. MIOX handles water for cooling towers and processed water used for power generation.

For beverage manufacturing, the initial application for a large bottler was disinfecting water that becomes part of the soft drinks. Currently there are eight different process steps that MIOX is being evaluated for, including cleaning and sterilizing glass bottles that are reused. Historically, caustic solutions were heated to a high temperature for cleaning. By switching to MIOX, the system can be run with benign chemicals at room temperature, saving energy and reducing risk.

New Mexico Grows Entrepreneurial Roots

"I don't believe that we have had very strong entrepreneurial roots in New Mexico, but that has changed. I would have seen it to be a disadvantage to be in New Mexico 10 years ago," says the Albuquerque native, "but now I see it as an advantage." Carlos believes companies in New Mexico can finally recruit the high quality executive talent that used to only be interested in jobs outside the state.

"The most critical issue is that we're missing a Google, a Cisco, one of those types of significant companies emerging on the local scene. MIOX has as good a shot at it as anyone. We're in an area that fills a fundamental need. There are only so many planes that need to be bought, but everyone needs water."

For more information about MIOX, its products and technology, visit their website at www.miox.com.

Portfolio companies are New Mexico companies that have received funding from one or more NMVCA member companies.