They accidentally created a chemistry platform that’s shaking up a multi-billion dollar chemical cartel. What happens next is anyone’s guess.
CarboNet cofounders, from left to right: Barry Yates, CEO; Mike Carlson, CTO; Amielle Lake, CCO; and Bill Schonbrun, COO.
CarboNet makes chemistry that helps industry treat their wastewater and, when lucky, reclaim important minerals. That’s it. That’s the classic “About” part you’re looking for.
As a founder and operator myself, I was less interested in the Wikipedia of it all and more about how this startup found itself on the cutting edge of water chemistry at precisely the time when water, along with the climate, is in a free fall.
The Global Commission on the Economics of Water estimates that in seven years we will have overdrawn our freshwater reserves by 40%, and recent economic research suggests water insecurity will cost us a few trillion dollars by 2050.
This summer alone, the city of Phoenix stopped growing because they ran out of water. Spain had a snap election partly because the government mismanaged water. And in almost every country around the world, droughts or floods cost their citizens upward of $100billion in losses.
In the boardrooms of industrial brands, P&Ls are undergoing a form of corporate waterboarding: how do we slash costs? Reduce drawdown? How much can we recycle? What OPEX or CAPEX do we divest or invest in to compete? And the bogeyman of it all—how do we avoid regulatory or collective action?
Amidst this backdrop are the four founders of CarboNet who, on the face of it, accidentally invented a chemistry platform that’s shaking-up a multi-billion dollar chemical cartel. Like any rebel alliance, they’re an odd bunch—a burly scientist, a competitive swimmer, a tech salesman, and an ex-Bain consultant hunting for his swan song—but they’re also captivating and, having lived among them for several months, rather cunning.
Case in point: just two years after entering the Permian, the Texas fracking basin that’s finally given the United States the energy independence it sought for sixty years, the tiny upstart now owns more than half the market of produced water treatment.
They’ll need to be smart. The chemical giants may be slow, but they have an army of salespeople, PR reps, and lobbyists who crush anything that pokes at their hegemony. Will the Empire win? Or be Andor’d by the artful alliance? And what becomes of the world’s water and the poisonous chemicals we’ve left behind?
This is what was on my mind when I sat down with the four founders for drinks at Vancouver's Belgard room, a high-brow eatery encased in, fittingly, a low-brow industrial facade.
“I vividly remember him explaining the chemistry to me on a whiteboard and thinking 'at what point should I tell him I have no fucking idea what he’s talking about?'”
Mark Ury: Let’s start with the state of water. We’ve all seen the research. It’s terrifying. I look at it and think about water scarcity—that we don’t or won’t have enough. But Amielle—you tend to discuss “insecurity” when you speak.
Amielle Lake, CCO: Well, essentially, half the country has no water and the other half has too much. You have floods with dirty, unusable water and then droughts, where the ground is so parched it can’t even retain liquid. We need clean, usable water for our communities and industry—but it’s increasingly not available, or it’s in a form we can’t use.
Barry Yates, CEO: I just read a U.N. report that by 2050 roughly 1. 2 billion people will be displaced due to water insecurity. Try to imagine a billion refugees—what that will do to national security, let alone commerce or civil society. And the irony is—we have all the water we need. It’s just getting it to the right place in the right form.
MU: That reminds me—Bill, you mentioned oil pipelines might eventually be displaced by water pipelines.
Bill Schonbrun, COO: A couple of years ago they started tracking water on the same exchanges as gold and silver and oil. Water isn’t trading at the same value as oil, but it’s coming.
MU: Given the scope of what we’re discussing, why hasn’t water captured the same attention as carbon from investors or the media?
Mike Carlson, Chief Scientist: Well, in some countries it’s a huge issue with a lot of attention. But North America has been a bit shielded from the crisis because of good regulations and—thankfully—some areas that are blessed with lots of water. But it’s a root problem like CO2. And now, of course, people are starting to notice that the lakes aren’t coming back up or their micro-climates are changing because there’s less water in the air and ground.
MU: Let’s talk about noticing things. That’s part of CarboNet’s origin story, isn’t it? You were examining the biology of drug delivery mechanisms when you happened to notice a failed oil spill clean-up.
Mike: When I was doing my PhD I went through a bit of a crisis of confidence, as do most PhD students. I wanted to understand what I could actually DO with my degree.
UBC had started a business competition, so me and my friends tried to audit it, figuring we could learn how to write a business plan and make ourselves more employable. But they told us “you can’t audit this. Go do something first and then submit a business plan.”
I'd been working with polymers and noticed some weird things in how they were associating with surfactants when I was doing exchange experiments. I knew with the oil spill they'd use surfactants to break down particles, so I started working on the problem after hours, bit by bit, and eventually had some success.
MU: You won the competition…
Mike: Yeah. Each of us had come up with different ideas, but mine was the only one that worked so it was the one we submitted. And we won. But it was all lab scale and never really worked in the ocean, so I put it on the back burner while I finished my PhD.
MU: Enter Amielle.
Amielle: I was in love from the beginning.
MU: How did you guys meet?
Amielle: I was a competition mentor. We got to talking. Mike is crazy smart. Just crazy. I vividly remember him explaining the chemistry to me on a whiteboard and thinking, “at what point should I tell him I have no fucking idea what he’s talking about?” But he’s as humble as he is brilliant and I eventually got it.
MU: Was he explaining NanoNets at this point?
Amielle: Kind of. The concept was there, but not the who, what, where, etc. But it didn’t matter. I knew instinctively this was big. And I knew we were going to build a company together.
MU: So when did NanoNets, and the idea of them as a platform, emerge as the central idea?
Mike: Polymers and surfactants have a broad applicability and can be arranged to do a lot of different things. Amielle kept asking “can it do this? Can it do that?” And I kept saying “with time and money, it can do all of it.” And eventually she said: “This isn’t a product. It’s a platform.”
Barry: It could also concentrate the blue from blueberries.
Barry: We had some early chats with Mike about commercializing NanoNets and he was talking about stuff that has, like, a 20-year sales cycle. I ask “What else you got?” and he explained “I can take the blue out of blueberries.”
Not much of a market for that.
MU: But clearly you saw a market. What lured you in?
Amielle: Like I said, love at first sight.
Barry: I had been invited to run the entrepreneurship program at UBC and my board chair said, “you know, our big fear is you're going to come here, find a venture, and leave us”—which turned out to be the case. But it wasn’t the plan.
MU: Mike changed the plan.
Barry: I remember when I first saw him: predator ridge hat, long hair, scruffy beard. Sat there very cool and quiet. But then he explained the technology and I was blown away.
Amielle had come aboard as EIR and—I have to say, I’ve seen hundreds of ventures—I kept thinking about the opportunity and the potential for this to be a purpose-driven organization that could have a lasting impact.
Amielle: So we went for it.
Barry: So we went for it.
“I remember on one site there were the charred remains of an exploded tank and a crew member recounted how it had blown up and sent a car 50ft into the air. Everyone laughed and shrugged without missing a beat.”
MU: Bill, Barry brings you aboard. You’ve had a successful career in tech, you understand complex markets. What’s your first impression of the water treatment industry?
Bill: We went down to the Permian in West Texas. There was a company working with chlorine dioxide—the kind of stuff that if you screw up you create mustard gas.
MU: Totally safe.
Bill: Totally. They had 18-foot trailers with all this equipment and an “explosive proof” house where they mixed stuff. I remember on one site there were the charred remains of an exploded tank and a crew member recounted how it had blown up and sent a car 50ft into the air. Everyone laughed and shrugged without missing a beat.
MU: So, just like SaaS software.
Bill: Yeah. No strategic sales. No value equation conversations. No “total costs” and stuff like that. It was all about price. Things have changed, especially as we’ve grown with and beyond the Permian. But that’s where we started.
Mike: The Permian is not like any other place. It’s a boom market, and a market that’s provided the U.S with energy independence. But it hasn’t been operating for decades. It doesn’t have established rules and norms. You don’t publish white papers and take years of permitting and regulatory approval to get going. If things work and it’s the right price, people buy it.
MU: So—the right place for a young company experimenting with water chemistry?
Amielle: In our case, yes. We really lucked into things.
MU: How so?
Amielle: We were in discussions with a customer and initially working on lowering iron levels in water, almost like a coagulant. But then their head of water treatment asked if we could get rid of polyacrylamide. They hated using it. It’s shitty to deal with. It’s inconsistent…
Bill: …people despise PAM…
Amielle: So we went back to the lab and the guys figured it out pretty quickly.
MU: This is SimpleFloc, yeah?
Amielle: Yeah. We kinda cracked the case before we even understood what we had done. And they loved it.
Bill: We solved a huge pain point.
MU: In what way?
Bill: SimpleFloc is a no-make down solution. There’s no dry polymer. No concentrate to mix. You don’t need make-down equipment, and you don’t need water for make-down. Our totes just show up and they pump it directly into the line. No babysitting.
Bill: Crews don’t need to mix anything so they don’t need to adjust anything. Like, before us, they were mixing chemicals every hour. And not just during the day. Like, 1am, 2am, 3am…
Amielle: Just painful.
Bill: And cost is everything in the Permian. And we just made a bunch of costs go away. So not only was our product cheaper than PAM, but it removed all this OPEX and CAPEX.
Mike: Also—we didn’t just succeed with a customer. We succeeded with THE customer. They went on to become the dominant market leader and that built our credibility.
Amielle: We started getting introduced to everyone.
MU: I think I read you had captured more than half of the produced water market within two years.
Bill: Shh. But yeah.
Amielle: Crews really love us. They threaten to quit if people don’t use our product.
Bill: We also hit at a time when the younger crowd were coming out of their MBAs and taking management roles. They were seeing that our stuff was cleaner and safer. And the accountants were seeing it's cheaper. And the operators were seeing that it actually worked and was easier to manage.
Amielle: Word spread like wildfire and it just, it took off.
“Cationic has broad applications. But it’s kinda like playing in a dive bar. It’s unsexy. But anionic? It's being used to stop freshwater from disappearing permanently. ”
MU: So you build a franchise on an anionic flocculant. Now you’re releasing a cationic product. If this was the music business, is this a new hit single?
Bill: To start, it wouldn’t be a single. It’d be an album. Anionic is a single. You iterate on the same thing—v1, v2, v3, etc. Cationic is more like a collection: you need variations for different industries, applications, and geographies. But, precisely because it can be applied so broadly, it’s massive. The customers in this space are enormous.
MU: So now you’re front-lining Glastonbury or Coachella.
Mike: It’s more like playing in a dive bar.
Mike: Cationic has broad applications—and Bill’s right, big customers—but the applications are kind of invisible and a bit unsexy. Like, cationic will make sure ponds don’t turn into sludge or tar pits. Your lakes will be crystal clear. But anionic? I mean, it's being used to stop freshwater from disappearing permanently.
Amielle: If we’re sticking with this analogy, let me play the band manager for a sec. What excites me with cat is that it’s an unlock: new markets, new customers, and—yes please—new revenue. And each new unlock expands our platform which, in turn, allows us to experiment more and have an even bigger impact…
MU: What Mike was saying…?
Amielle: Yes, on society and the world at large. Saving the water table, amazing. Clean lakes? Check. But now we have the capability to do bio-flocculants and targeting agents that are a huge net positive.
MU: In what way?
Amielle: Like removing thousands of acres of coal ponds that would otherwise go to landfill, and diverting the fly ash into cement, which then reduces net-new CO2 production. Or cutting chemicals entirely out of water treatment with organic flocculants, which helps decontaminate the water table.
Barry: The key is for us to be maniacally focused on where the tech is heading and where there is market demand. There’s just a ton of opportunities and possibilities. Our job is to be very thoughtful about what to pursue, with whom, and when.
Mike: That extends to talent, too. It’s important to me that CarboNet be a home for extremely talented people who can use our platforms to create an impact at scale.
MU: You said something to me about “the Bell Labs of water”
Mike: Exactly. We’re commercially driven, as Barry said, but we’re also investing in R&D and the next generation of scientists, engineers, and crew who want to solve important, gnarly problems.
MU: Like the coal ponds...
Mike: Right. You have two twentysomething women leading our work in resource recovery. Their results may change how an industry works and how governments and regulators think about water.
We may have originally stumbled into this venture, but I’m really proud of being able to create that kind of space for innovation.
“There are a lot of greybeards out there—guys with 40 years in the space—who smacked us on the back and said “we’ve been trying to do something like this for decades” and are kind of thrilled to see NanoNets emerge onto the scene.”
MU: You don’t get this far this fast without attracting unwanted attention.
Bill: Is it unwanted?
MU: You tell me. I can’t imagine the folks selling billions of dollars of PAM are super excited that your product works ten times better and cuts out 90% of their product.
Bill: I don’t think the battle lines are that clearly drawn. A lot of this is like statecraft: interests vs allies kind of thing. We’re actively working with big players to advance the state of the art.
Amielle: Also, remember that PAM is just one of a hundred chemical SKUs for the big guys. In some cases it’s a rounding error. Don’t get me wrong—there’s fierce competition for customers—but lots of times it’s not a zero-sum game.
MU: Barry, you’re the Bain guy. What’s the road ahead look like?
Barry: I think Bill and Amielle are right—it’s more about building partnerships than drawing lines in the sand. This may surprise you if you’re looking for a rebel alliance vs the empire narrative—we have a lot of supporters in those big companies. If the chemistry that Mike invented doesn’t one day win him a Nobel, it certainly has made fans out of many in the industry.
Bill: Yeah, there are a lot of greybeards out there—guys with 40 years in the space—who smacked us on the back and said “we’ve been trying to do something like this for decades” and are kind of thrilled to see NanoNets emerge onto the scene.
Mike: I can see a path where we continue developing our own unique products and selling direct, but also partner with companies that have reach so that new chemistry can move forward and have an impact faster.
MU: This sounds like the dream of every indie filmmaker: my vision, but with studio distribution power.
Amielle: Yup. Everything Everywhere All At Once. Could be our tagline.
Mark: I much prefer “clean chemistry for dirty water.”
Bill: Just because you wrote it doesn’t mean it’s good.
“We want this company to have an impact on the planet, on industry, and our people. So the one and only corporate policy is no assholes.”