Igniting Change in Wildfire Risk Management

Pete Miller [00:39]: Welcome to the podcast! Today, we’re joined by Bill Clerico, founder of Convective Capital, a venture capital fund investing in early-stage wildfire technology companies. Prior to starting Convective Capital, Bill was co-founder & CEO of WePay, a fintech company that was acquired by J.P. Morgan Chase in 2017.

Bill’s journey from fintech entrepreneur to wildfire prevention advocate began after a close encounter with a wildfire near his property in Northern California. In our conversation, we explore how fire tech companies are working with insurers and others to address the three key areas of wildfire management:

• building resilient landscapes
• creating fire-adapted communities
• and ensuring safe and effective response.

Bill shares fascinating insights into how technology startups are tackling these challenges — from AI-powered fire detection cameras to innovative prescribed burning solutions. You’ll also hear about the crucial role that insurers can play in wildfire risk mitigation and the importance of collaboration across industries to solve this pressing issue.

Get ready for an illuminating discussion on the future of wildfire prevention and risk management!

Pete Miller [01:57]: Bill, what brought you to focus on the threats of wildfires and, and in particular technology that can have an impact on that risk.

Bill Clerico [02:07]: So I was a technology entrepreneur. started a company called WePay back in 2008 and we were in the online payments world. were kind of a very early fintech company and led that as the CEO for about 10 years and we ultimately sold the company to JP Morgan Chase. As part of a treat to myself when we sold the company, I bought a bunch of rural property up in the Anderson Valley in Northern California in 2017 and spent a lot of time up there. I’ve always been a big outdoors person. I’ve always loved to be outside.

And we had a wildfire burn on the access road to that property. It’s about six miles up a dirt road, one way in, one way out. And there’s about a hundred-acre wildfire at the base of the road. And that was a real wake up call for me that, you wildfire wasn’t something that was happening somewhere else. It was happening in our backyard. And then I saw over the next five years, just the terrible run of wildfire that we had in California with the Camp fire and the Tubbs fire and red sky day and, just sort of all the, the craziness that was happening. And I just got really interested in the problem. and I went and volunteered as a firefighter up in Anderson Valley and went out on some wildfires and tried to learn as much as I could about the problem. And the more I learned about it, the more I was convinced that technology could play a really positive role in making a difference.

We were tackling this large compounding problem with tools from the ‘70s. so thinking about how we can apply some of what I learned in the tech world to this really got me excited. And so ultimately led me to start Convective Capital, which is a venture capital fund that invests in early-stage wildfire technology companies.

Pete Miller [03:55]: Typically how much would you invest in a company?

Bill Clerico [03:58]: So our first fund is a $35 million fund and we invest one to $2 million at a time at the very early stages of company formation. So we love the crazy ideas and the entrepreneurs that are just getting started. And we love to be their first partner or one of their first partners in helping fund these ideas. I think as I dove more into the lack of technology around the problem I realized that it was really not a gap around founder willingness. There was tons of smart people trying to build stuff, but there was really a gap in capital funding for this problem.

A lot of Silicon Valley VCs that I had worked with in the fintech world just didn’t really understand wildfire and weren’t interested in companies that sold solutions to utilities or insurance companies or governments. They thought those were large, slow, bureaucratic institutions. You know, so I thought I could help fill that gap. I could try to bring some capital to help entrepreneurs get started and fielding some of these solutions.

Pete Miller [05:00]: So as a venture capitalist, you said you’re kind of focused on this sector. You have a unique view on many, not only many of the problems associated with wildfire, but the kind of solutions given your background that can be brought to bear. So can you give us some high-level views of some of the big wildfire problems that the startups you’re interested in are solving?

Bill Clerico [05:24]: Yeah, for sure. you know, I didn’t try to recreate the solution to the problem. I just went and looked at the, there’s this thing called the National Cohesive Framework, which was developed in 2014 to talk about how we as a nation should address wildfire. And the people that wrote that report really distilled it down nicely into these three categories:

We have to go build resilient landscapes. So that means returning our forests to a condition where they have a healthy relationship with fire and aren’t prone to these incredibly high intensity fire incidents.

We need to build fire-adapted communities. So how do we build towns and cities and houses and structures and infrastructure in a way that it can coexist with wildfire and be hardened against wildfire incursion and be able to recover after wildfire threatens communities?

And the third category is around safe and effective response, which is sort how do we, when we decide we need to intervene in a wildfire, how do we do it safely, quickly, aggressively, effectively, and thinking about how technology can support that.

And so those are kind of the three big problems. We think about landscapes, we think about communities, and we think about response. And then, you know, there’s a myriad of ways that technology can help impact that, you know, and we’re very actually technology agnostic. It can be satellites or drones or AI or software or FinTech or insurance. There’s lots of ways to think about, or lots of tools that could be applied to those three big problems. But ultimately it’s about resilient landscapes, fire-adapted communities and safe and effective response.

Pete Miller [07:03]: Do you have an example of companies underneath each one of those three areas that you’re involved with?

Bill Clerico [07:09]: Sure, yeah. So in resilient landscapes, I think a great example is one of our companies is called BurnBot. And so what BurnBot is, is they’ve built a device that can do really safe and controlled prescribed burning. Kind of looks like a big tractor with blowtorches underneath of it. But they’ve built a bunch of technology around being able to calibrate that fire to the proper temperature and conditions and be able to control that fire and have this machinery operate in a range of different topographies.

And that really allows prescribed burning and fuel treatment to occur on a much broader range of weather conditions and a much broader range of topography. Traditionally prescribed burning is really difficult. It’s got to be dry enough to burn, but not so dry that you can’t control it. that becomes this very narrow window. BurnBot really helps broaden that window and allows folks to conduct prescribed fire operations in a much broader range of conditions with having to have less people and so it’s a really important tool and they’re having a lot of success, you know, they’ve signed a contract with US Forest Service to do some work in the Stanislaus Forest. They are working with various utilities and so really starting to have an impact on the landscape issue.

On the community side, you know, there’s a number of companies we have at work in communities. You know, I’d probably highlight two of them. One’s called Fire Aside. So Fire Aside builds software that allows fire departments to conduct defensible space inspections and actually record and capture all the data from that inspection. you know, previously maybe a firefighter would show up at a house and have a paper checklist and you know, hey, the branches are a little too close to the house and it goes in the drawer and that’s it. Fire Aside helps digitize all that. So there’s a tablet application. You can take pictures of the actual stuff. And then importantly, it creates a relationship with the resident that actually, you know, where the department actually encourages the residents to take action and say, hey, you had these issues, please remediate, send us back a picture to show that you’ve done it. And so it becomes less about inspection and more about a dialogue with the resident on how to make their property safer. And it encourages a lot more action. And so that’s a really important tool. And they’re working with, you know, folks in Tahoe and Marin and a bunch of other sort of jurisdictions to offer that technology.

We also have investors in an insurance company called Delos, which is using advanced modeling techniques to better underwrite properties. Having a lot of success in terms of underwriting properties in these high risk areas and doing it safely. Despite a really rough fire season in a couple of years, they’ve had a really acceptable and low loss ratio and are doing a great job thinking about using new types of data to understand this risk.

And then on the response side, you know, I would probably highlight a company called Pano. And so Pano has a network of sort of cell phone and mountaintop-mounted cameras, and they use AI to process those images. So once a minute, the camera does a 360-degree rotation, they process that image using AI and they look for fire starts. So, sort of the modern AI version of Angelina Jolie in that movie where she’s on top of the fire tower.

And, you know, the nice thing with these cameras is they never sleep, they work 365 days a year. They can be put in a lot more locations than a person can. And, you know, in addition to just being able to see a start, they give regular imagery to be able to see situational awareness. You may see the start, but then can also see how’s a fire growing and developing and tailor your response to be able to, to kind of meet the need. And so that type of visibility is a really important tool for, firefighters and helps.

So a couple examples, probably more than you wanted, but that’s some stuff in our portfolio.

Pete Miller [10:55]: No, those are great. It’s very interesting. There’s an organization, IBHS, Institute for Business Home and Safety. And they’ve done some good work around how far away vegetation needs to be, for example. And it’s pretty clear, being able to sort of track that and hopefully get people to act on it, because that seems to be the biggest problem, right? People kind of intuitively or with some training and some education know that, but getting them to do something, that’s another story. Are you seeing growth in the number of technology startups focused on catastrophic wildfires? And what are some of the barriers these companies are facing to adopt?

Bill Clerico [11:40]: Yeah, so we track every wildfire technology company that we know of and the list is actually over 500 companies at this point. So, it’s really a long list and we see 30 or 40 new ones every single month. So, it’s I think a space that has a lot of attention and is growing fast and I think that’s a really great thing. To your point, it’s not for the faint of heart. There are some real barriers in this space.

I don’t think the barriers are really about technology, though. The technology exists, it’s been well proven in lots of other markets. And so it’s really about applying pre-existing technology to these problems and figuring out a business that can support that application. And so the barriers that we see are really around working with the buyers in this sort of wildfire market, right? It’s working with government that’s a major spender on depression and prevention and community preparedness. It’s working with utilities that have enormous infrastructure investments and enormous liability around starting wildfires. We all saw obviously what happened with PG&E in California, but also looking at Hawaiian Electric in Hawaii or looking at Pacific Corp. and how Warren Buffett talked about that in his annual meeting.

There’s some real issues around utility liability that create an opportunity for companies to help solve that for utilities. But utilities are very large, regulated entities and you can’t always be the most nimble. So working through that procurement process with utilities is always a core part of building 60 successful companies.

And then insurers are one of the other big buyers in this market. And there, think it’s about working with insurers to help understand the issues they’re going through and finding the insurers that are really leaning into this problem, right? Like I think insurance is traditionally a business of risk selection. But in order to really think about wildfire and, you know, insure property in this sort of rising era of climate risk, you know, I believe that insurers really have to start to get into the business of risk mitigation and can’t just select their way out of this. And so, you know, for our entrepreneurs, it’s about finding insurers that believe in that and that are willing to take sort of new approaches because it’s unfortunately the future doesn’t look like we’re going to able to risk select our way into the insurance business anymore. We’re have to really think about intervening and changing risk. Otherwise, the addressable market is going to continue to shrink.

Pete Miller [14:12]: Yeah, that’s a really good point. So when you think about insurers, are there specific kinds of fire mitigation and resilience solutions that in your conversations with folks involved in the industry that they’re finding most appealing?

Bill Clerico [14:27]: Yeah, I think there’s a whole menu of options and there’s some great science around what works and what doesn’t, which is great. And folks like IBHS have done a great job. I think where I see the challenge is, like at a high level, everyone agrees, right? Like if you have a home that meets the Wildfire Prepared Home standard, it’s going to be safer than one that doesn’t, know, and materially safer. The problem is to get a homeowner to actually comply with that standard is incredibly difficult, right? Like people just, they love that Azalea Bush that they had next to their front door. And they, you know, they love that juniper tree in their backyard and they love the mulch beds and they love the, you know, siding that comes down to the bottom or whatever. And so they love that big oak tree that hangs over the roof.

And so, you know, just sort of publish, you know, can publish a standard that you know is safer, but if it becomes this like very high bar for homeowners to meet, you’re never going to actually get compliance at a scale that is meaningful.

And so I think the next step in this conversation in my mind is being able to kind of come down a level of detail and have a really nuanced conversation with the homeowner. Not about, hey, here’s the strict standard and you must comply with every single bucket. But what are the three or four things that you should do to your property that are going to have an outsized impact relative to, you know, on fire safety relative to the aesthetic impact on your property? And that’s going to be very property specific. And being able to do that, think requires application of technology to really understand that property and model the specific dynamics of that property and not just force people to sort of comply with this sort of obtuse standard.

And so I have yet to see companies that have really solved that problem, but I think if we’re actually going to make progress here, it’s the insurers have to really understand the risk of a specific tree or specific mulch bed and be able to have a nuanced risk-based conversation with the homeowner about mitigating those risks and not just sort of require everything. And so that’s an area I’m super excited about. And I think, you know, we’re starting to see some activity there from companies, but there’s a lot could happen.

Pete Miller [16:35]: Might be a good solution for Gen .ai, right?

Bill Clerico [16:39]: Absolutely, yeah. I mean, think that’s a great application, right? Even just to show a homeowner what their house could look like if you remove that tree or what would it look like if you replaced the juniper with a maple, you know, and because that could, know, junipers have a tremendous amount of thermal energy in them. And, you know, so a swap for a different type of tree could be a few thousand-dollar fix that really dramatically changes the ignition risk of the structure. That’s the level of conversation I think we need to get to. And we’re on our way and things like the standards have helped. But I think if we want to actually get mass market compliance with that, we need to take a little bit more of a nuance of you.

Pete Miller [17:16]: So I very much agree with you around risk mitigation, right? But beyond that, as you talk to insurers, are there other areas that you believe insurers could play a larger role in preventing losses, maybe community resilience or more effective fire, or you mentioned a more nuanced conversation, but maybe things beyond that that you see?

Bill Clerico [17:38]: Yeah, I think that they have a huge role to play. Insurers have so much power and influence, right? You homeowners need to buy insurance. It’s just sort of they’re generally their people’s largest asset, financial asset, they need to protect it in this area of risk. Most folks have a mortgage on their home, have finance, which requires an insurance policy. So, you know, insurers are such a critical part of like the fabric of communities, and they have a huge alignment with the homeowner in terms of no one wants these houses to burn down, right? The homeowner doesn’t want that, the insurers don’t want that. And so, I think there’s an opportunity for the insurers to play a role in organizing communities and really pushing for community level resilience, and whether that’s a fire break, whether it’s new fire equipment, whether it’s evacuation routes, whether it’s water supplies.

You know, there’s ways I think for insurance standards and insurance advocacy that really drive behavior. And I think now that the science is really getting there in terms of showing the actual safety and sort of risk adjusted return of this stuff. Wow, what an opportunity for the industry to have a voice in speaking on behalf of people, you know? And so I think there’s a big opportunity there and I hope that the industry continues to lean into it.

Pete Miller [18:57]: Yeah, one of the things that’s very interesting to me is how do you get adoption? So how do fire tech startups overcome the challenge of working with companies in a heavily regulated industry that, you know, their ethos is kind of to manage risk, but it may slow their adoption to new technology. So what things have you found that can help that?

Bill Clerico [19:25]: Yeah, I generally give our companies two pieces of advice in terms of working with some of these institutions. One is you have to solve a very real problem. If you’re not solving a real problem for an organization or an executive at these organizations, you can yell all day till you’re blue in the face about how what you’re doing is important, but you’ve really got to solve a core business problem.

So in the utility world, a lot of that is about the solving risk, reducing risk, and helping also document risk reduction for regulatory purposes. Those are like really acute business problems for a utility. And so, I think companies that can be close to those acute business problems are really important.

And then the second is you have to find the innovative champions of these organizations. And there are people in these large organizations that realize that things need to be done differently and at different scale and using different tools. It may not be everyone at one of these organizations, but there are those people there and if you can build relationships with those folks and help solve real problems that they face, that’s usually the way in. Maybe it’s a pilot at first or something small to prove it and you do that well and you move on to the next thing.

So, yeah, I think it’s about being close to real business problems and then finding the innovators within the organization that can be your champion.

Pete Miller [20:48]: Let me just follow up a little bit on what insurance companies might do for this innovation to adapt their policies or maybe their practices for the risk mitigation, right? To help prevent wildfires and to encourage proactive risk reduction.

Bill Clerico [21:08]: Yeah, I think that there’s a little bit of a stalemate right now between sort of policyholders, regulators and the industry where everyone agrees we need to do mitigation. But, you know, the insurers don’t want to give discounts for it until it’s been done and the homeowners and the regulators don’t want to require it until there’s a discount. You know, it’s a little bit of a sort of slow standoff. I think insurers could really lean into this and say, OK, can we take a pot of money that’s not super material to the bottom line, but is enough to learn? And could we go give $10 million in credits to policyholders in high-risk areas to conduct mitigation and go do a bunch of the work? And maybe base that discount on whatever science exists, but knowing it’s not like going to pass the, you know, Nth sigma of actuarial analysis, but it’s, you know, sort of directionally correct. And, but it’s a trial, you know, and then go do it and then collect a bunch of data, right. And see how it actually works. Because if you can then, you know, go have that data, you know, a couple of years from now and see how it actually affects, you know, structure safety. Now you really have some, great stuff that you could, could really scale, you know, I think like just getting started and starting to collect some of this information. Even if there’s a small short-term cost, the discoveries in that $10 million trial could save billions of dollars over the next 20 years. So I think taking a little bit of contained risk could go a really long way.

Pete Miller [22:50]: Yeah, I couldn’t agree more. I think that’s well, you know, it’s a long -term ROI. Plus just the value proposition to go into your policyholder and say, hey, guess what? I can help you prevent something that you really don’t want and is really bad.

Bill Clerico [23:04]: Absolutely, yeah. I’m sure my home in San Francisco with that Chubb and they gave me a discount to put on a whole house water shut off and you know, I was like a little bit of a pain but it was worth it, you know, and now and I’m when I’m out of town, I don’t worry about a water leak, you know, and, you know, they give me a significant discount and you know, pays for itself in a year or two and I’m happy to do it, you know, and so I think, you know, thinking about that same playbook that has worked in in other areas of risk and applying it to wildfire risk. It’s just a huge opportunity.

Pete Miller [23:35]: You talked a little bit earlier about kind of a standoff. So, you know, between regulators and the company and the policyholder and who’s going to do what first into the… So, tell me about the importance of a collaborative approach to solve this problem. Like what other stakeholders are collaborating with the folks, you know, the startups that you’re involved with and what can be the impact of everybody working together on that group effort?

Bill Clerico [24:01]: Yeah, so we, one of the things that we do at Convective is we host this annual event called the Red Sky Summit and it’s a big gathering and we really make an effort to make it interdisciplinary. So it’s focused around wildfire innovation, but we invite the utilities, the insurers, we invite the fire suppression agencies, we invite town managers, we invite entrepreneurs, we invite investors, we invite nonprofits and you know.

My observation was that so many of the conferences and discussions in this industry are so vertical specific, right? It’s sort of the utilities talk to the utilities and insurers talk to the insurers and the fire chiefs talk to the fire chiefs. But there’s just so much interconnection between, you know, that transmission line that starts the fire, the government agencies that try to intervene, the community located nearby, the recovery effort. The problem itself is, you know, really intertwined. And so one of the things we try to do is bring that whole cross-disciplinary group together. And it’s been pretty amazing. We just did it for the first time last year, but the types of conversations and ideas and collaboratives that come out of that are fascinating, right? You could see an insurer funding a camera to sort of detect fire around a community, right, if they have sufficient exposure, or you could see a utility funding that camera, or a utility and insurer going in together to fund that kind of stuff, you know.

Or ways to think about how to share data and information all around so that everyone has a complete picture and can sort of act optimally. And so I think we’re just starting to like scratch the surface of what’s possible, but you know, I think bringing all these folks together is super important. And the regulators are important part of that too, whether they’re energy regulators or insurance regulators to kind of set the rules of the road for folks and making them part of the discussion is important too.

Pete Miller [25:49]: Yeah, I applaud you for that. I think that’s very forward looking because it is, there’s a lot of integrated interests with a lot of different, but related sort of incentives, right? And, that kind of conference that that makes a lot of sense. You recently made an investment in a company OnSight Technology. Can you tell us a little bit about that and what, was attractive to you and, and how does wildfire pose a, you know, a threat to solar assets and things like that?

Bill Clerico [26:19]: Absolutely. So OnSight, they build a two products. They have a robotic device that with a set of cameras on it that can roam a utility solar site and actually examine the connectors on the back of all the panels. So, like in a large solar site, you might have a million connectors on a panel, right? And so if you have a, even if you’re, you know, successful installation rate is 99.9% you still have thousands of connectors on a solar site that have been installed incorrectly or could fail or whatever.

And typically when those connectors fail, cause thermal events, which are essentially fires. And so that ends up being a source of ignition. And so what OnSight does is they fit this robotic device that can conduct faster, more labor-efficient inspections. And, by the way, a lot of these solar sites are way out in the middle of nowhere. It’s really hard to get people out there. You know, if they’re hard, tough conditions could be 120 degrees, you know, going and inspecting a million connectors is not a fun job. And so, you know, being able to use technology to do that is a really big sort of source of leverage on this, on this problem. So that’s kind of the first product. The second product is a product called the OWL, which is a site specific fire detector. So it kind of goes up on the pole and it can detect, you know, ignitions across the site. And so these two products in concert, you know, really improve the reliability of the solar site, but also really improve the safety of it as well. And, you know, we thought that was a super interesting value proposition and companies growing quick and all that. the thing that really led us to invest was that the CEO, Derek Chase, ran one of the larger solar O&M companies. So he had, he had, you know, ran a really large services business that went out and service these sites and just experienced firsthand this problem and the issues around getting people to work these really difficult jobs. And after sort of building and selling that company, he decided he wanted to try it again, but using technology at its core to go do that. So that’s what led us to invest and we’re super excited.

Pete Miller [28:26]: I’ve made the drive several times between Phoenix and LA on I-10 through Death Valley and seen those solar panels there and I was, you know.

Bill Clerico [28:35]: Yeah. You don’t want to get out of your car and spend 12 hours walking around out there. Drive two, drive three hours to work every day. I mean, it’s, is, it’s tough. and so, and not that this, you know, eliminates the need for people out there on those sites, but it, you know, it takes away some of the more tedious work and, and makes it safer.

Pete Miller [28:55]: So let’s suppose it’s 10 years from now and this has gone well, right? In other words, there’s been investments, wildfire, like what would have been the two or three key things that you think would have happened and that would have been really instrumental in moving the ball on this?

Bill Clerico [29:13]: Yeah, think just to go back to that framework, I think we’ve taken our forests and we’ve transformed them to a much more resilient state. there’s been some studies that show forests are about three times denser now than they were 100 years ago because we’ve suppressed all these fires. And so can we return those forests to that condition of 100 years ago where they’re less dense, they’re more mature, they’re much more fire resistant and technology has played a role in that.

I think on the community side, it’s about building, you know, getting homes and creating incentives with insurance being a really core part of this to sort of transform the way we build and maintain homes and communities to make them, you know, fire safe. Like we’re never going to eliminate wildfire, but if we can make these communities, you know, resisted to fire or able to co-exist with fire, think that’s, that’s huge. And I think there’s software as part of that. There’s insurance as part of that. There’s government as part of that. and then on the response side, I think it’s about being able to detect fires really quickly and respond quickly and aggressively when we decide that that’s what we want to do. And so things like cameras and satellites to be able to sort of enhance that detection loop. And then, you know, our ability to intervene using, you know, equipment, you know, whether that’s autonomous helicopters or other types of tools, so that when you see that ignition, you can get on it really quickly and aggressively before it becomes a, you know, 400,000 acre fire that we have burning today in California.

I think we can do those three things, which all of which I think are very solvable. We can really make a big impact on this problem. And I think it’s, you we can have an impact on it over the next 10 years. And so that makes me optimistic.

Pete Miller [30:49]: Well, I appreciate your leadership in this. I have to tell you, I was hiking a few weeks ago in Arizona. And as I was hiking, there’s a DC 10 going over, dropping the fire retardant. And then there’s another plane going the other way. And hopefully, Bill, with your work, that doesn’t happen anymore.

Bill Clerico [31:09]: Yeah, yeah, I’m hopeful. You I think we’ll always have wildfire, but I think we can eliminate the really catastrophic, you know, sort of deadly events and make it something that we manage and we coexist with versus something that we’re at the mercy of.

Pete Miller [31:24]: Bill, is there anything I missed, any question I should have asked, or anything you want to make sure that we cover?

Bill Clerico [31:32]: I think I would just sort of hammer that last point home that I think catastrophic wildfire is really solvable. It’s just a question of getting the right incentives and getting the right tools in the right people’s hands and sort of taking it seriously.  And obviously we’ve had a very bad run of wildfire over the last five to 10 years, but the upshot of that is that I think the momentum has really shifted.

We see it’s a bipartisan issue in Congress. We see a bunch of great founders and entrepreneurs working on it. We see utilities taking it seriously, insurers taking it seriously. And so, you know, the table has been set. I think we just have to go get to work now at this point. And I think it’s actually quite solveable.

Pete Miller [32:15]: Thank you for your time. Very fascinating. I wish you best of luck. Please keep in touch. I’d be very interested to know how these companies you invest in are doing. I think it’s fascinating. And I think, yeah, I mean, you’re making the world better and safer, right? So that’s always a good thing.

Bill Clerico [32:32]: Well, I appreciate all the work you’re doing, kind of spreading the good word to this industry.