As the nutrient recovery specialist is bought out, BlueTech CEO Paul O’Callaghan looks back on his time at the water technology start-up that created an entirely new business model.
Ostara, the Canadian resource-recovery specialist which became the ‘poster child’ of phosphorus recovery technology, has been fully acquired by its existing major investor and majority shareholder, Wheatsheaf Group. Wheatsheaf, which now owns 100% of the company, is part of the UK-based Grosvenor Estate, one of the world’s largest property firms famous for owning significant areas of central London. Rather than describing this deal as an acquisition, it is more accurate to say that the company essentially now has a single shareholder. It was by no means a home-run for the original investors, Frog Capital and Vantage Point Venture partners, and can be seen as a strategic reaction to current circumstances.
Had Covid 19 not happened, Ostara’s trajectory would have been to align with a new strategic investor or acquirer. However, in the midst of a global pandemic is not the time to run such a process. Instead, the existing majority shareholder saw the opportunity to take control of an important portfolio company.
As employee No. 5 at Ostara, in the period 2005-2007, I had a ringside seat to the fascinating and fun side of being an insider in a water technology start-up. Some of the highlights included managing the expectations of eccentric angel investors, who were fervent believers that the Law of Attraction could shorten the municipal sales cycle, and endless road-trips pitching a never-seen-before technology that offered the potential to actually generate revenue. We visited wastewater treatment plants from Saskatoon to Boise Idaho, and closed an institutional A Round of $10.5M. It was a fun ride and I made lifelong friends along the way.
The “brat-pack” of water technology
Ostara in the period 2005-2014 was the epitome of a water technology start-up. If there was the equivalent of a brat-pack around that time, it was NanoH2O, Oasys and Ostara. Ostara has taken an idea, and created a whole new technology class and business model. The business model is focused on creating a high value fertilizer product, that commands somewhere in the region of $400-$500 per ton. They have executed on this side of the business better than any other player in the market. In parts of the Netherlands, utilities are happy to accept €40 per tonne for powdered struvite they produce.
A testament to its success, is the fact that Ostara has gone so far as to produce the slow release fertilizer, not only from wastewater, but directly from raw materials, (Phosphoric acid, manganese, ammonia) in a granulator, as market demand exceeded the amount that could be generated from the installed base at wastewater treatment plants.
Viewed from an investment perspective, the company should have taken in about half as much money (it has raised over $50M so far) and exited several years earlier. They have in effect created what is a very finite market, for a host of fast-followers.
There are lots of plot twists to the story, including building the world’s largest, and it turned out somewhat oversized, phosphorus recovery plant in Stickney, Chicago; the Thames Water plant that never was, as process changes at the main plant rendered it non-viable. But that’s all just par for the course and is eclipsed by the total number of plants that are working world wide, from Tel Aviv to Portland Oregon.
For now, Ostara has found a safe port; a patient owner with deep pockets that is aligned with its goals.
BlueTech will be returning to the story of Ostara, as well as the technology and market developments in the phosphorus recovery sector over the past half-decade, later this year in an update of our Insight Report – Phosphorus recovery in municipal and industrial wastewater – technologies and market opportunities.