Crop insurance has been available to farmers since the 1930s to protect the agriculture industry against the effects of adverse weather events. The impact of climate change has led to a rapid acceleration in the popularity of these products in recent years and the effects of climate change are beginning to be felt in other industries including travel. Sensible Weather is a climate data and risk analytics platform that seeks to understand and quantify how weather events can impact everyday life. The company’s first product is a “Weather Guarantee” product that protects travelers against adverse weather conditions whether for whole trips or specific parts of the vacation like excursions or events. Travelers are automatically reimbursed rapidly, without filing onerous claims, when weather impacts parts of their trip. The product is distributed through travel and related partners with plans to expand the product to over more types of events and activities with a focus on increasing the number of partners. Founded by a hedge fund quant, the Weather Guarantee relies on the company’s proprietary climate risk platform that offers dynamic pricing options in real-time to add incremental revenue to travel suppliers.
LA TechWatch caught up with Sensible Weather Founder and CEO Nick Cavanaugh to learn more about quantifying the impacts of weather to improve consumer experiences, how his passion for skiing and background using climate data led to the genesis of this business, the company’s strategic plans, latest round of funding, and much, much more…
Who were your investors and how much did you raise?
The Seed funding we announced comes from a mix of LA-area angel investors like Spencer Rascoff’s 75 & Sunny Ventures, seed funds including Wonder Ventures and Walkabout Ventures, strategic investors like Group 1001, and even a grant from the National Science Foundation. Including debt, total financing is close to $10M.
Tell us about your product or service.
The first service we’re offering is a “Weather Guarantee.” Weather Guarantees offer consumers more confidence to book vacations or event tickets knowing they’ll be reimbursed 100% for experiences that don’t meet expectations due to rain or other adverse weather. Consumers who opt to cover their trip or outdoor event with our Guarantee automatically get reimbursed if adverse weather, such as rain, is forecast to occur during their experience.
If a weather event such as rain is forecasted to occur during an outdoor experience, Sensible automatically texts the customer a link to easily collect their reimbursement the morning of that experience. Guarantee payments are processed immediately, with payouts based on the number of hours the experience is negatively impacted by weather. For example, three hours of rain on any day of a covered hotel stay results in an automatic 100% payout of the hotel reservation’s average daily rate.
What inspired the start of Sensible Weather?
Prior to Sensible, I was a hedge fund quant working in NYC, using sophisticated climate data and analytics to make bets on the weather in energy, agriculture, and weather derivatives markets. Most weekends during ski season, I would fly out West to different ski areas and use the hedge fund’s proprietary climate data to figure out which destination would get the best snow during my limited time off. This personal use case became the basis of the idea for Sensible: how can I use similar climate data analytics to create simple risk transfer contracts for consumers to help them de-risk weather’s impact on their vacations, ski trips, or other outdoor experiences?
How is it different?
Until now, the risk of weather interfering with plans was something consumers just had to live with. We’re working to change that with fintech and empower consumers with reimbursement options when their plans are impacted by increasing volatile weather.
One key point that makes us unique, which is resonating very well with consumers, is that we pay out on Guarantees the morning of the covered experience based on our forecast, before the bad weather even happens. Our platform’s bespoke parametric policy management system ensures Weather Guarantees are proactively identified and programmatically fulfilled on an hourly basis – in most cases before adverse weather events occur. Consumers can choose to change their plans, or better yet, continue knowing that they are now free.
What market you are targeting and how big is it?
We’re focused right now on the travel market, which is estimated to be around $1.8T globally (pre-COVID). Within travel, we’re focused on online travel marketplaces, hospitality brands, and in-destination tours & activities operators. One of the few travel verticals that grew during the COVID-19 pandemic was outdoor recreation – camping, glamping, national park tourism, and RV/van rentals – which are all travel use cases where we have a strong value prop. Next year, we will spend more time targeting live events, including multi-artist festivals, concerts, and live sporting events.
What’s your business model?
Consumers pay a fee for Weather Guarantee protection, typically 8-12% of the cost of the covered experience. We use our historical climate data to quantify risk of various weather events down to a specific latitude/longitude coordinate and hour of the day. As our data gets even more precise, and we improve our risk model, we’ll continue to refine Weather Guarantee pricing to ensure they remain useful and affordable for consumers, whether they are traveling across the country for a two-week family vacation or attending a sporting event in their hometown.
What are your post-COVID office plans?
We have a small office in Venice, just off Abbot Kinney. While no one is required to go in, it is there for anyone who needs or wants it. Since about half of our team is in the LA area, we use it for meetings or just a quiet space to get work done. For me personally, having just had my first kid in August, I’m there most days since working from home is not as easy as it used to be!
What was the funding process like?
As a fintech startup focused on climate, there is a lot of headline interest in the problem space we’re tackling. That said, because the Weather Guarantee service we’re bringing to the travel industry is so new, there were the inevitable questions about product-market fit, especially in the depths of COVID-19, when much of the travel industry was in crisis mode. We were fortunate to have a successful launch partner this summer, which helped provide some very compelling early data, though there will always be investors who will want to see more proof points or those who aren’t ready to commit.
As a fintech startup focused on climate, there is a lot of headline interest in the problem space we’re tackling. That said, because the Weather Guarantee service we’re bringing to the travel industry is so new, there were the inevitable questions about product-market fit, especially in the depths of COVID-19, when much of the travel industry was in crisis mode. We were fortunate to have a successful launch partner this summer, which helped provide some very compelling early data, though there will always be investors who will want to see more proof points or those who aren’t ready to commit.
What are the biggest challenges that you faced while raising capital?
In addition to launching a new product for the travel industry during a global pandemic, managing the demands of growing the team, tweaking the product, and signing up new channel partners, all while fielding investor questions, made for some long days (not to mention having a newborn at home!).
What factors about your business led your investors to write the check?
The success of the early pilot partner helped hit home product-market fit and made my pitch a lot less conceptual, but given the early stage of the business, our biggest selling point was our team. We are lucky to have a unique mix of climate scientists, engineers, as well as product and business development leads, with domain experience in insurtech and online travel.
The success of the early pilot partner helped hit home product-market fit and made my pitch a lot less conceptual, but given the early stage of the business, our biggest selling point was our team. We are lucky to have a unique mix of climate scientists, engineers, as well as product and business development leads, with domain experience in insurtech and online travel.
What are the milestones you plan to achieve in the next six months?
We’re focused on rolling out our Weather Guarantee service to as many channels as possible so more consumers can have peace of mind when traveling, while also continuing to demonstrate product-market fit across several use cases. Specifically, we’re working on new partner launches in ski, hospitality, camping/glamping, in-destination tours & activities, and completing an integration with a full-service online travel agency.
What advice can you offer companies in Los Angeles that do not have a fresh injection of capital in the bank?
LA offers a deep and diverse pool of investors, everything from angels who founded successful startups of their own, to seed funds, scout funds, corporate VCs, and more traditional institutional VCs. Not every investor profile will be right for your company, and that is okay. Try to be open-minded about how you build your investor base and consider non-dilutive sources of funding like grants or venture debt. We ended up securing a grant from the National Science Foundation’s “America’s Seed Fund” program, so, depending on your business, there may be similar grant programs that make sense for you.
I also encourage seed-stage founders to think about their early investors as strategic investors. Everyone who invested in our round brings unique value to Sensible beyond just their checks, so, to the extent possible, try to be intentional about you who bring on board, and leverage their networks and domain expertise to accelerate your business plan.
Where do you see the company going now over the near term?
I’m very focused on growing our team of engineers and scientists, continuing to build out our proprietary climate data and risk analytics platform, and expanding our Weather Guarantee service into new verticals to prove new use cases. We’ll soon be announcing our first cohort of partners and look forward to sharing more on our progress here.
What’s your favorite outdoor activity in LA?
Does skiing at Mammoth count? Outside of ski season, I try to get out to Big Dume or other surf spots within a 45-minute drive of our Venice office.
