Microscopic water fleas, sewage-eating fly larvae and technology designed for a moon base are among 20 projects to win £100,000 each in the Water Innovation Fund’s second Water Discovery Challenge, a £7.5 million competition designed to open the water industry to businesses that have never worked in it.

The challenge, run by innovation prize experts Challenge Works, part of Nesta, in partnership with Arup and Isle Utilities, deliberately recruits innovators from outside the sector, including academia, energy, agriculture and farming, and environmental services. For smaller firms, that makes it a rare front door into an industry notoriously difficult for outsiders to break into.

Each finalist receives £100,000 in seed funding plus seven months of mentorship, sessions on data and commercial development, and expert guidance from water companies, support aimed squarely at converting ideas into viable businesses. In April 2027, as many as 10 finalists will win up to £550,000 each to develop and test their ideas further, with an additional five months of support to maximise their chances of launching successfully in the sector.

The prize money arrives as the wider innovation funding landscape tilts towards high-growth firms, and as climate tech accelerators multiply in response to demand from founders chasing the net zero opportunity.

The finalists are nothing if not inventive. Daphne Water Solutions, working with ATG Group, is deploying Daphnia, tiny water fleas about the size of a grain of rice, to strip forever chemicals, pharmaceuticals and microplastics from wastewater with no chemical treatment or energy input.

“Daphnia have been dormant in lake sediments since before the Industrial Revolution – and we have worked out that these tiny freshwater crustaceans function as biofilters to remove persistent pollutants from wastewater,” said Prof Luisa Orsini, co-founder and CEO of Daphne Water Solutions. “Our nature-based solution fits within existing processes, and does not require additional or energy, helping to enable safe, low-carbon water reuse. The Water Discovery Challenge will help us accelerate commercial deployment of our technology, so that we can protect rivers, biodiversity and human health.”

Rheya Labs is building back-up batteries for sewage pumping stations to stop raw sewage spilling into rivers during power cuts, paired with machine learning that predicts failures before they happen. Sewage spills remain a sore point for the industry, which has already seen a record £123 million fine handed down by Ofwat.

“Sewage pollution is an ever-growing crisis across the UK, and power resilience at pumping stations is one of its major, yet hidden, causes,” said Ben Taylor, co-founder of Rheya Labs.

The University of Glasgow’s Lunasonic project uses ultrasound to create microscopic bubbles that destroy forever chemicals, technology originally developed to purify frozen water at the lunar south pole for a future moon base. Entocycle, meanwhile, is testing whether black soldier fly larvae can clean contaminants from sewage sludge more cheaply than current methods, timely given Defra’s live consultation on reforming sludge regulations.

Jo Jolly, director of innovation at Ofwat, said: “In opening our doors to innovators outside the water sector, we have invited fresh perspectives to tackle head-on some of our greatest challenges. With this line-up of finalist projects, we are reminded that tackling the climate and nature crises isn’t limited by intellect or creativity. The array of new ideas from new players is astounding. The challenge is getting these ideas delivering impact on the ground, with the sense of urgency these times need.”

Details of all 20 finalists are available on the Water Discovery Challenge website.