Convective Capital raises an $85 million fund to build disaster resilience

The fire season has arrived early this year in California, with flames encroaching upon a former nuclear test site near Los Angeles. This alarming trend of increasing natural disasters both in California and globally has sparked a significant response from Silicon Valley, particularly in the realm of venture investments. On Thursday, Convective Capital, an early-stage venture fund spearheaded by Bill Clerico, announced the launch of a new $85 million fund. This follows their previous $35 million fund raised in 2022. While the initial fund primarily attracted wealthy individual investors, including Clerico, a co-founder of WePay, this latest initiative sees substantial backing from institutional investors, such as insurance companies and asset management firms. Originally focused on developing innovations in “firetech,” Convective has invested in companies like Pano, which utilizes AI-powered cameras for early fire detection; Raine, which designs autonomous aircraft for firefighting; Burnbot, a startup that creates robots for vegetation clearance; and Stand, an insurance company that helps homeowners fortify their properties against flames. With this new financial backing, Convective is broadening its scope to encompass a more comprehensive approach to resilience, aiming to provide risk management solutions for physical threats. Clerico highlighted the critical need for this shift, stating, “There’s $60 trillion of real estate at high risk from disasters, and the U.S. spends a trillion dollars a year on disaster mitigation and recovery. A fresh approach is essential.” He noted that the dire circumstances have created a fertile ground for private market solutions as traditional utilities face bankruptcy and insurers exit significant markets. The fund's initial investments include The Lumber Manufactory, which builds timber mills for cost-effective forest management; Drafted, which leverages AI for home design; Voltaire, a Y Combinator-backed startup creating drones for power line inspections; and Edge Technologies, which is developing an insurance product to hedge against volatile commodity prices. Convective's first fund successfully invested in firms that generated $100 million in revenue and collectively reached a valuation of $2 billion. Impressively, 79% of the companies from the first fund have progressed from seed funding to Series A—a figure that surpasses industry averages. However, the field remains in its infancy, and a significant part of Convective’s mission is to facilitate connections between founders and challenging customers, such as utility companies, insurers, and government entities. A crucial topic of discussion has been how to encourage insurers to invest in technologies that can alleviate disaster impacts. Clerico notes that this is gradually happening, partially due to the insurance startups Convective has supported, including Stand and Delos. “A wave of new insurers is stepping into the void left by traditional companies, presenting a remarkable opportunity for us as investors,” Clerico remarked. “This is prompting a necessary change in the incumbents’ business models.” Moreover, Clerico pointed out that AI technologies are enhancing productivity among early-stage teams while also creating new methodologies for identifying fires using sensor data and simulating their behaviors. The surge in data center construction driven by AI advancements is simultaneously increasing demand for the services provided by his portfolio companies. “AI is stressing our energy and water systems,” he commented. “This is not just a portfolio matter; it’s creating market opportunities by adding pressure to our physical resources.”