Convective Capital raises $85M Fund II to back disaster resilience tech as climate volatility drives insurer exodus

Goodbye.

All right. H

GMU economist. Always so much fun to talk to. Uh, well, our next guest is Bill from Convective Capital here with a new fund. Get that gong ready. And let's bring in Bill from Convective Capital into the TVN show. Welcome to the show. How you doing?

Doing great. Thanks for having me, guys.

Kick us off with the news. What happened today?

Yeah. So, uh we raised a new fund, $85 million.

There it is. Um

congratulations.

It's uh Thank you so much. It's up 2x from our from our last fund, and we're focused on disaster resilience. The the thesis of the fund

is that

the world's getting warmer, our our uh infrastructure is getting older, and that's literally a recipe for disaster. And so as as disasters rise and volatility rises in the world, there's got to be private markets that can respond and that can build solutions and services and technology to to stop that. And so we back founders that are building those things.

Give us uh an overview of the fire give us a fire market map. What's exciting in fire? It's top of mind right now. There's a fire burning in uh LA/ I think Ventura County. Uh, and so my house has been very it's been very smoky around my house.

Uh, and uh, yeah, I want to know this this feels like a a particularly brutal industry because there's these like insane spikes of interest and then people just kind of forget about

you thinking watchduty for-profit conversion.

Yes, that's got to happen.

Yes. Lead a series A and watch duty. Please

lever it up.

Yeah, John watch it. He's a good friend and we started, you know, I started my company around the same time he started that and he will never take that for profit. He's a diet in the wool. It's such a good first and it's actually become the standard not just for people that care about their homes but also, you know, people in the fire service use it. It's it's an amazing example of how technology can can address this problem. So, I guess to get to get to your question around market map, you know, we think about a lot of like who's the end buyer because that's actually what's kept people out of this space historically. you know, the you know, VCs typically don't get excited about companies that sell to utilities or insurance companies or government agencies. Um, and you know, our thesis is that that is in the middle of a really big change that you know, if you see like PGD went bankrupt a couple years ago, the insurance companies have had to leave California and some of these really large markets and that's changing behavior. you know, you lose $70 billion of market capitalization and you like you respond and you do something about it and you act differently. And so, you know, we think a lot about the market in terms of who's going to buy these technologies. We've had a lot of success investing in startups that sell to utilities like Overstory, which you know, uses satellite imagery to help utilities trim trees around power lines. Um, we just invested in fund in a company called Volt Air, which does autonomous drone power line inspections. So, you know, utilities cause about 11% of fire ignitions, but about 60% of the acres burned. And so, if you can actually just help reduce utility ignitions, that's like a huge leverage point.

Interesting.

Interesting.

Interesting. What What What's going on on uh disaster prevention in like more of the consumer proumer space. I uh I saw a house for sale over in Malibu and the it was uh by some actor and he had installed like fire shutters and like all this different equipment. and he was like living off grid and this was like his getaway. And it feels like I I saw after the LA fires like the autonomous water sprinkler that would be bolted to the top of the house. I think a lot of homeowners in Los Angeles at least were like, "Oh, I want one of those." And they would have clicked the button to buy it if they'd seen an ad that day, but then a year goes by and nothing happens in the next fire season and they think, "Ah, maybe not." But it does feel like there's some fertile ground in the consumer space. But is that more challenging than people might think it is in reality? I think you're totally right. Like consumer demand goes in spite. It's a very seasonal volatile business. You know, I just saw today Watch Duty is the number two downloaded app on the app store today. And you know, that probably was not the case a couple weeks ago. So, you know, it's certainly that's the nature of the beast here. Um, in terms of home hardening and things you can do to protect your home, I think that also kind of goes in waves to your point. But to me, the real unlock is going to be when insurance companies uh create incentives for people to actually install these things around their their home. So, we're investors in a company called Stand. Um, they help model homes. They use computational fluid dynamics to simulate wildfires moving through the property. They come up with a list of recommendations for the homeowner of what they should do with shutters and windows and remove certain vegetation. They remodel it and then they can actually provide discounts on insurance. I think that's going to be the real unlock that drives, you know, at scale consumer behavior.

Yeah. It has to be a real time like you're renewing your home insurance and they're like if you do spend you know in California it could be like spend $10,000 on this new system and if you do that we'll give you a $10,000 reduction this year and you know further discounts in the future so that you end up you know um effectively you know saving real money.

Yeah. Exactly. I think historically insurance companies have not done that, but um that's the that's the key to protecting, you know, homes in this kind of new era. And and it's it's got to happen. You know, the the California Fair Plan, which is like the statebacked insurer of last resort, uh just announced that they're going to raise rates 30% this year after the LA fires. And so, you know, if we don't actually reduce the probability of homes burning, housing and insurance is just going to become unaffordable.

How are you thinking about uh selling to the government? uh maybe in California or elsewhere. Uh Anderl has this interesting story where they built a firefighting tank. They were trying to sell it to California firefighters, but there was push back around job displacement even though it was ideally a new capability that would actually have support staff and not really take anyone's job because no firefighter can sit in the middle of a blaze like this particular firefighting tank could. But it was still became a political issue and ultimately did not become a real product. uh is there movement there? How are companies positioning themselves as additive? When I think about drone uh review of of of power lines, there's probably someone that went up there earlier. Cost savings is good. Doing more with less is great, but also there's always that push back around job displacement.

Yeah, I think there's kind of two issues at play here. First is like is there actually job displacement? I think the reality is no. I mean, it's just we are so underresourced relative to the scale of these disasters. they're happening three times more frequently with huge severity. You know, CalFire is the largest and best resourced firefighting agency in the world, bar none. Like, that's not going to change. Uh, and I think we're it's really about how do we get leverage out of those um investments. I do think though, you're pointing out a cultural issue though, and that's something that we've really worked at trying to bridge. Um, you know, I think it can be really harmful if like a bunch of guys in Palo Alto sipping lattes like walk out to the fire line and try to tell people how to do their jobs. You know, there's just this huge disconnect. And so one of the things that we built is this conference called the Red Sky Summit where we actually get 600 fire chiefs and other emergency managers together every year in San Francisco and we kind of create like an off thereord venue for them to talk to people that are building stuff in technology and it kind of creates this great sharing back and forth where you know the you can show the value of this technology you can have these two-way conversations. It sort of changes the tenor and that's been a real unlock. We've seen a lot of buying behavior come out of that event. Um I think things like watchd duty that show how impactful technology can be the firefighters see that and you know I think the tide and the cultural tide is really changing and so it's it's an exciting time to be building in this space.

Yeah. H uh is there any relevance like we talked to some other sector specific funds or thematic funds? Uh and the classic example is like in in CPG they can be a harder business sometimes but there's a number of like clear acquirers for midscale companies like a unilever Coca-Cola will take out a lot of these uh a lot of these companies at a unicorn valuation and so it sort of changes the underwriting. It's worked for a lot of funds in that category. Is there a 800 pound gorilla in this category that's maybe not being disrupted but maybe can be a partner at some point in time or are are is the thinking like everything is uh IPO, it needs to be a standalone business or bust or is anything different financially about these these businesses that you see?

Yeah, it's a good question. I I don't look at wildfire as like a market in and of itself. It's this sort of dynamic that touches these huge markets like energy, insurance, housing, real estate, forestry, you know, government, emergency response. And in each one of those categories, there are, you know, really large companies. There are, you know, contractors in the utility space or providers in in all of, you know, all of those those markets. So, I think there's certainly exit paths, but the economics here are just like immense. You know, the Bloomberg just published a report disasters cost the US economy a trillion dollars a year. That's like on par with what we pay for interest on the national debt or defense. Um and so it's like, you know, you there are really big public companies that will be built, you know, solving that because that that cost falls on these really large deep pocketed institutions. And you know, we think that there's just there's very big businesses to be built.

Yeah. Uh, is there opportunities for wearables uh for firefighters? I was uh once the the the Sandy fire started here in LA, I was I was showing uh my son some videos on like wild uh just like wildland firefighters and I was shocked that a lot of them just like weren't wearing gear. They were wearing they'll wear something like a piece of fabric over their face. seems like there's probably opportunities there and potentially a decent size market. Um,

yeah, I mean it's it's a travesty what we equip our firefighters with and send them out there. I mean it's like you know the the health impacts of wild and fire smoke are just terrible. I mean and so and there's really not a practical way currently to help filter that air for these wild and firefighters. So they're out there, you know, really with no masks, sleeping in smoke days at a time carrying packs. It's 110 120 degrees. You know, they're working hard with chainsaws and axes. I mean, it is it's a really dangerous, really grueling job. And I think, you know, part of the original thesis for convective was I was actually volunteering with my local fire department up in Menesino County and uh, you know, I just was watching this and I'm like, I can't believe we're doing this with, you know, trucks from the 1970s and, you know, axes and like that's the state-of-the-art. And so there's a huge opportunity there. And I think, you know, it's the and you can look at, you know, wild and fire as a as a market. It's a certain size, but it's also a path into all types of field service jobs, um, and all types of worker safety. And so, we've looked at a lot of companies there. We haven't made any investments yet, but that's that's a category we're really interested in.

Uh, we we we jump straight into discussion of the fund, the strategy. Can you take us back a little bit to uh what you were doing before, why start this fund, when you started it, uh, sort of the the prehistory of the fund? Yeah. So I was a founder. I started a company called Weepay back in 2008. Uh it was an early fintech company. Um and we built that up over about 12 years and sold it to JP.

How was that headquartered?

Overnight success.

Yeah. I wish. Um it was uh yeah it was uh it was headquartered in in Palo Alto.

Palatoto. Okay. Uh yeah I just remember running into it in Boston I think in like 2012 or something. That was around the time I was probably see

started in Boston.

Okay.

Started in Boston.

That's right. That's right. Yeah. Okay. Got it. Cool.

We started in Boston. We were funded by my cominator. Moved to the west coast. Um, built that up over about 12 years and then we sold at JP Morgan. Um, I left JP Morgan. Uh, and I think one of the things that really suited us well at Weepay was we were early to like the financial technology market. People thought it like banking technology at the time. Um, and a lot of the same skepticism that I hear around utilities and government, we heard, you know, we're trying to raise money from Boston VCs in 2008. And, um, you know, they were wrong. I mean, the fintech market was like the most exciting sector of technology over the next 10 years. And, you know, so as I was leaving JP Morgan, I wanted to work on something that was, you know, a market that was early and that we could be sort of one of a kind, that we could be a market leader in, um, and that also had a important mission where we're helping people and doing good for the world. And this sort of lined up all of those things. Um, my wife and I own a ranch up in Menescino County, a couple hours north of San Francisco, and a fire almost burned under the property. Uh, and you know, all the the dots started to connect and and here I am.

Yeah, that's amazing. It's uh, it's sort of like the VC version of like build something you use yourself, like the YC ethos, make something people want. Uh, well, thank you so much for coming on