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

Fire season kicked off early in California this year, with flames already approaching a former nuclear test site outside of Los Angeles. The rising number of natural disasters in California, and around the world, demand our attention — and, in Silicon Valley, venture investment. Convective Capital, an early-stage venture fund led by Bill Clerico, announced a new $85 million fund Thursday, following up on a $35 million fund raised in 2022. While the first fund was mainly backed by wealthy individuals (including Clerico, a cofounder of WePay who sold the startup to JPMorgan for $300 million in 2017), this latest fund is largely backed by institutions, including insurance companies and asset managers. Convective’s original mission was to develop the idea of “firetech,” investing in firms like Pano, which is building AI-powered cameras to spot fires early; Raine, which builds autonomous aircraft to dump water on fires; Burnbot, a startup creating robots for clearing brush and grasses; and an insurance company, Stand, which helps homeowners harden their homes against flames. With its new fund, Convective is expanding its mandate beyond the threat of wildfire to an evolved thesis focused on resilience to “provide risk management in the physical world.” “There’s $60 trillion of real estate at high risk from disasters, the U.S. spends a trillion dollars a year mitigating and recovering from disasters, we need a new approach to this,” Clerico told TechCrunch. “The silver lining is that it’s gotten so bad that the private markets can now take over — utilities going bankrupt, insurers leaving big markets, these are very large economic events, and those create markets for new solutions and products.” The first four investments from the new fund are in The Lumber Manufactory, a company building timber mills to help make forest management more economical; Drafted, a company using AI to do home design; Voltaire, a Y Combinator-backed firm building drones to inspect power lines; and Edge Technologies, a company building an insurance product to hedge against volatile commodity prices. 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.”