Convective Capital raises $85 million to fund physical world disaster resilience
Led by Bill Clerico, the new vehicle expands its mandate beyond wildfire to address $60 trillion in at-risk real estate, with initial investments in timber, AI design, and commodity hedging.
Convective Capital, an early-stage venture fund led by Bill Clerico, has raised an $85 million fund to invest in disaster resilience technologies. This follows a $35 million fund raised in 2022 that focused primarily on fire technology. The new fund is largely backed by institutions, including insurance companies and asset managers, and will expand its mandate beyond wildfire to broader physical world risk management. Initial investments include The Lumber Manufactory, Drafted, Voltaire, and Edge Technologies.
Clerico, a co-founder of WePay which was sold to JPMorgan for $300 million in 2017, highlighted that $60 trillion of real estate is at high risk from disasters and that the US spends a trillion dollars annually on disaster mitigation and recovery. Economic events such as utility bankruptcies and insurers leaving major markets are creating opportunities for private markets to provide new solutions. The rapid expansion of AI data centres is also creating demand for services provided by Convective’s portfolio companies by adding stress to energy and water systems.
The first four investments in the new fund are: The Lumber Manufactory, which builds timber mills to improve the economics of forest management; Drafted, which uses AI for home design; Voltaire, a Y Combinator-backed firm building drones to inspect power lines; and Edge Technologies, which creates an insurance product to hedge against volatile commodity prices.
Clerico noted that AI tools are increasing productivity for early-stage teams and enabling new methods for fire detection and simulation. He also noted that the rapid expansion of AI data centres is creating demand for services provided by Convective’s portfolio companies by adding stress to energy and water systems.
Convective’s first fund has invested in companies that earned $100 million of revenue and are worth a collective $2 billion. Clerico said 79% of his first fund’s portfolio companies have graduated from seed to Series A, which is much higher than industry benchmarks. Still, this is a nascent field, and a big part of Convective’s work has been helping founders connect with customers regarded by many entrepreneurs as tricky to work with, like utilities, insurers, and government agencies.
A big conversation in the field has been how to convince insurers to start investing directly in technologies that can mitigate the impact of disasters. Clerico says that is starting to happen, in part thanks to insurance startups Convective has backed, like Stand and Delos. “There’s like a wave of new insurers that are stepping into the void left by the incumbents,” Clerico said. “That’s a really amazing opportunity for us as investors, but also it’s provoking a response now from the incumbents, and they need to change the way that they’re doing business.”
Clerico said that AI tools are making his early-stage teams more productive, even as the technology enables new ways to spot fires with sensor data or model their behavior in simulations. But the industry’s wild push to build out data centers is also creating demand for exactly the services his companies supply. “[AI] is putting a lot of demand on the energy system and water system through data center construction,” he said. “It’s not just something in our portfolio, but it’s actually creating market opportunity for our portfolio by adding additional stress to our physical systems.”
