Gradiant’s bet is paying off

The business strategy of focusing first on industrial water users wasn’t intuitive (at all) when Prakash Govindan and Anurag Bajpayee started Gradiant out of their respective MIT research projects.

In the early 2000s Veolia’s ventures across North America were looking first and foremost at the municipal market, and when Siemens took over US Filter to make it an industrial synergy, it didn’t end up well. (Same stories for SUEZ and even GE Water’s Betz acquisition story)

Yet, as counter-intuitive as it was, that focus – coupled with strong business model takes – turned Gradiant into the first-ever water tech unicorn.

But many would still stop you with a smirk smile at congresses and tradeshows by saying, “Yay, that’s valuation, but the proof is in the pudding, isn’t it?”

So, let’s look at the pudding.

When I discussed with Prakash earlier this year, he shared how Gradiant reached a $200 Million revenue in 2023, with a $500 Million backlog.

That’s where this press release takes it to the next step: the company would have signed $337 Million of orders in Q1 of 2024, with over $500 Million over the entire first half.

(I’m using the conditional because, as Gradiant is not public, these results sharing are not binding)

What’s cooking here?

I’ve said it in the past; I’ll say it again: I’m a finance muggle. So, take my “analysis” with a pinch of salt 😀

Gradiant gained its unicorn status in 2023 through their $225 Million Series D. That same year, they reached the $200 Million of sales I just mentioned.

That’s a Price-to-Sales ratio of 5 to 1 (if you’re even more of a muggle than me, the P/S ratio is how much investors are willing to pay per dollar of sales)

For a Tech Company, that’s low. But for an industrial company, that’s high… so, let’s say it’s average if we say Gradiant is an “industrial cool kid”

Anyways, that’s not outrageous for a high-growth company.

Now, with (allegedly) $500 Million of orders in the first half of 2024, it would be reasonable to anticipate a $1 Billion full-year for Gradiant… which is their sales target for 2026!

Apply the same P/S, and that would mean Gradiant’s valuation would rise to $5 Billion. So give them one more year, and they are a decacorn!

Now…

That’s if Gradiant stays a private company. Because actually, this kind of PR to comment on the first half’s results is very common for… public companies!

So, IPO on the horizon?

I’ll keep watching. 🍿