##  [Forbes]{.mark} 

Jan 6, 2003

Entrepreneurs

# Running Dry

Emily Lambert, 01.06.03

Ashok Gadgil wants to provide clean water to the world\'s poor.
Squabbling backers have held up his plans.

To the long list of great ideas gone bad, add the **UV Waterworks**\--a
simple, cheap device to purify filthy drinking water in poor countries.
**Ashok Gadgil** started with the best of intentions. A senior scientist
at Lawrence Berkeley National Laboratory, he watched in horror as a
cholera epidemic swept through his native India a decade ago. After two
years of tinkering he created a 16-pound version of the ultraviolet
water sterilizers that are commercially available in the U.S. for home
wells with contamination problems. The 254-nanometer light kills the
hardy waterborne polio virus, rotavirus (which causes vomiting, diarrhea
and dehydration), the bacterium that causes cholera, the virus that
gives rise to hepatitis A, and cysts of cryptosporidium (a nasty
parasite). UV Waterworks\' disinfection was three times as strong as
that required by the World Health Organization, giving a dose of 120
millijoules per square centimeter to water 4 centimeters deep. \"I
wanted to give back to give to the society I came from some fruit of the
knowledge I learned in the U.S.,\" says the 52-year-old inventor.

All well and good\--until various right-minded parties got involved.
Talked out of putting his design on the Web for all to download, Gadgil
got a patent, which attracted a company called **WaterHealth**, founded
in 1995 by **Elwyn Ewald**, a former humanitarian relief worker building
a socially conscious company. In 1996 WaterHealth agreed to pay an
undisclosed royalty on sales to the University of California, which
agreed to share a fraction of that with Gadgil, who says he stands to
make around \$100,000.

Ewald teamed up with **John Harrington**, president of **Harrington
Investments** and founder of Working Assets, the do-gooder fund that
invested in \"socially responsible\" companies. They raised \$3.7
million from Johnson & Johnson and from individual investors, borrowed
\$1.8 million and set out to make a business of water purifiers. In 1998
they field-tested the black box and priced it at \$1,000. The
contraption was intended to treat 4 gallons per minute, enough to
provide drinking water for 2,000 people.

But Ewald and Harrington were already at odds. Around the time
WaterHealth started testing, Ewald was talking to biotech giant
**Monsanto** (nyse: MON - news - people ) about selling it an 18%
interest for \$3 million. Harrington was appalled\--and armed: He and
other investors had a redemption clause, which allowed them to pull
their money out of WaterHealth. The Monsanto sale fell through and
Harrington resigned from the board, but the clause remained.

By late 1998 WaterHealth, which had put its business on hold during
negotiations with Monsanto, was nearly out of funds, saved only by a
\$400,000 convertible loan from J&J the following March. That October
J&J invested an additional \$950,000. Still not enough: By September
2000 WaterHealth was almost insolvent again.

Into the mess stepped **Plebys International**, a Rancho Santa
Margarita, Calif. investment firm dedicated to bringing technology to
the Third World. Run by **Tralance Addy**, a onetime vice president at
J&J, Plebys kicked in \$250,000 for a convertible note\--stipulating
that Addy become president. He and Ewald revamped the business plan.
Instead of selling individual units, they would offer a low-power system
that relied on a solar cell or car battery in remote areas without grid
electricity. Price: \$10,000\--steep until you amortize the cost over 30
years (the intended lifetime of the system); then it amounts to 17 cents
per person per year.

Even the new cash infusions couldn\'t cover WaterHealth\'s various
debts. Plebys dangled a \$2 million carrot but insisted the redemption
clause go. Harrington, still a prominent investor, refused to back down.
When the company filed for Chapter 11 in June 2002, he says his
investors lost \$3 million. He blames the bankruptcy on Ewald\'s
\"business inexperience.\" WaterHealth, he says, \"didn\'t have the
management capability to properly market itself, especially in the
developing world.\" After six years of R&D WaterHealth had burned
through \$6 million but had sold only 300 systems. \"We\'ve never had
sufficient capital,\" Ewald says. \"We should have recognized we needed
more money up front.\"

WaterHealth emerged from bankruptcy on Nov. 5, thanks to Plebys\' \$2
million, exchanged for 70% of the equity. Creditors were offered 100
cents on the dollar; some elected to take stock instead of cash. Now to
hot-wire sales. WaterHealth has systems in Mexico and the Philippines.
Addy recently traveled with U.S. Secretary of Commerce **Donald Evans**
to Ghana and South Africa to promote the device. He would also like to
expand the company\'s reach to Brazil and India by 2004 and to China
soon thereafter.

But WaterHealth may be headed for more trouble, since the two principals
have very different views on where to take the company. Ewald, who
personally lost more than \$600,000, wants to boost revenues by selling
a home-purification device to U.S. homeowners. Addy disagrees. \"It is
very tempting to divert your attention to where the money is,\" he says.
\"Once you go down that road, it is very difficult to take yourself out
of it.\" (The two insist they are on the same page today.)

Neither has the full support of water experts. **Alvaro Umana**, a
director at the U.N. Development Programme, points out the difficulty of
getting and transporting replacement parts for UV Waterworks systems in
developing countries. And while WaterHealth makes sure there is someone
in place locally who can maintain its systems, **Jody Camp**, a manager
at the nonprofit Water For People, argues that such skilled labor often
migrates to better wages elsewhere. A final drawback: Even purified
water can be reinfected if a community\'s sanitation is poor.

Where does this leave Gadgil? He tries to stay out of the fracas,
heading up R&D part time. Between teaching classes at the University of
California, Berkeley he is tending to other projects\--trying to protect
civilians from airborne chemical and biological threats, and folks in
the developing world from harmful cooking smoke. Commercialization
hasn\'t yet reached his other devices. Among them: a space heater for
residents of the Himalayas, a water heater for urban Indians, and
Airvest, a garment he says could save the lives of painters working in
industrial spray booths and trim energy bills at the same time. But his
experience shows that good inventions\--and good intentions\--are not
enough to make a product work.

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