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PoV: Why is the launch of derivatives contracts on the NQH2O of interest to Mazarine Ventures?

Updated: Feb 17



The December 7th launch of derivatives contracts on the NQH2O (see background section in PDF version - below) immediately brings new participants to the water market who have a very specific objective, namely - arbitrage the future price of water (in California for now) for financial return. While this may seem diabolical, traders are neither buying paper-water nor wet-water so there shouldn’t be any conflict with water as a human right, which Mazarine believes in.


Our PoV is that this December 7th inflection (ie: new player at the table) is opening the door for software companies with tools that analyze data to accomplish one of two things:


1) predict near-future precipitation (ie: supply of water) for a specific region or parcel of land, or,


2) measure the water security risk for a specific parcel’s land use and business/operating model.


In short, we need better tools for understanding water quantity risk anyway, but as a result of a more sophisticated player at the table, those tools will be in everyone’s hands much sooner.


Mazarine’s Thesis:

Our thesis is that technology investors will do well by backing innovations that offer analytical tools to those seeking to manage direct-use water quantity risks like farmers, companies, and cities, but also those seeking to manage indirect water quantity risks (ie: exposure), like finance, insurance, investors, and derivative traders. This is a niche, but fast growth, corner of ‘water-tech’ investing, and December 7th represents a significant inflection point that will result in a growing numbers of commercial opportunities for data science innovations built to address market demand for water quantity risk tools.




Read Mazarine's Point of View below

Mazarine POV, NQH2O Derivatives Contract
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Download • 1.49MB


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