AI floods water tech – but procurement risks falling behind

European water tech is having a moment.

"It's has been a transformational year for water tech – and the first of many to come," Clayton MacDougald, investment director at Switzerland-based Emerald Technology Ventures, told Impact Loop.

"Water is no longer seen as a niche subset of climate; it’s increasingly recognised as an urgent, critical piece of the climate puzzle," he said.

Emerald itself hit a €60m first close on its Global Water Fund II this year, while others water tech-focused VCs in Europe continue to back startups across industrial wastewater, emerging contaminants, resource recovery, and digital water platforms.

AI takes over the water sector

Startups in the water sector pulled in $182m in 2025, Impact Loop's data shows. And across the board, AI has gone from novelty to default.

"AI-enabled services become the norm," says Andy Lurling of Lumo Labs, which led a seed round in Dutch leak monitoring startup HULO.ai earlier this year.

But for startups like HULO to scale, Lurling argues that water utilities must overhaul the way they procure technology.

"Public utilities and infrastructure organisations have traditionally procured hardware rather than subscribing to software or AI-powered platforms," he told Impact Loop. "As AI companies increasingly offer software-as-a-service solutions, these utilities must evolve… or risk being left behind."

What’s driving investor conviction

For MacDougald, the opportunity set heading into 2026 mainly spans industrial water reuse, infrastructure resilience, PFAS solutions, and AI-driven operations.

"Chronic water scarcity and climate-driven shock events are reinforcing water’s role as a core business input and strategic asset," he says.

PFAS, meanwhile, is becoming unavoidable. "Continued monitoring is revealing widespread contamination… creating a large, non-optional market for effective removal, destruction, and safer alternatives," MacDougald says.

Still, the gap between investment and need remains huge. "Even if we see well over $1B of VC investment in water through 2025, it’s still only a fraction of what’s needed annually to build a resilient global water system," says MacDougald.