The Pomp Podcast - #1211 Bill Clerico On Investing MILLIONS To Solve Wildfire Crisis

Episode Date: June 15, 2023

Bill Clerico is an investor at Convective Capital. He is an early investor in 50+ companies, and he is the former CEO of WePay which was acquired by JPMorgan. In this conversation, we talk about Bill's investment thesis - his entire firm is focused on investing in technology, software, & hardware related to wildfires. Bill and his team are looking for startups that are trying to help mitigate, treat, & prevent all of those issues. ======================= Pomp writes a daily letter to over 235,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/

What's up, everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. Bill Clerico is an investor at Convective Capital. He's an early investor in 50 plus companies, and he is the former CEO of WePay, which was acquired by J.P. Morgan. In this

conversation, we talk about Bill's, dare I say, wild investment thesis. His entire firm is focused on investing in technology, software, and hardware that is related to wildfires. That's right. Those fires that you read about in the news, Bill and his team are looking for startups that are trying to help mitigate, treat, and prevent all of those issues. I really enjoyed this conversation. This is exactly one of the types of conversations as to why I started the podcast. I learned a lot about a brand new area, so I hope that you enjoy this. Here is my conversation with Bill Clerico.

At Desjardins Insurance, we put the care in taking care of business, your business to be exact. Our agents take the time to understand your company so you get the right coverage at the right price. Whether you rent out your building, represent a condo corporation, or own a cleaning company, we make insurance easy to understand so you can focus on the big stuff. Like your small business. Get insurance that's really big on care.

Find an agent today at Desjardins.com slash business coverage. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. All right, guys. Bang, bang. I've got Bill here with me. The reason why we're talking is because

I put out a tweet and I said, who are the best young investors that I should be talking to? Paul Graham responded and he said, you being one of them. And so as I go ahead and I take a look at what you guys are doing, you are using venture capital to help fight wildfires or forest fires. Now, maybe we should just start with like, what's the difference between a wildfire and a forest fire? And then why do you care so much about this problem? Yeah, totally. So, you know, thanks again for having me on. I'm super excited to talk about this. You know, I think ultimately wildfire and forest fire is the same thing. But I think the reason that people are increasingly using the word wildfire to talk about these phenomenon

on is that it refers to sort of uncontrolled explosive wild fire. You know, fires have always burned in the forest for thousands of years in a very natural controlled state. And it's really a recent phenomenon of those fires have got become become sort of wild wildfires. And so that's sort of the name is referring to, you know, out of control fires in the wildland. All right. Now you've got a very personal story with this. You were kind of living out in the woods, right? Or kind of in a more rural area. And you were actually seeing these fires happen. They were coming up along the property line.

You were having some of the health, you know, kind of impact to you, family, friends, etc. Talk a little bit about that experience and like what spoke to you so much to go and spend, you know, a considerable amount of your time, energy on actually trying to solve the problem. Yeah, so I was a fintech entrepreneur. I started and sold a company called WePay to J.P. Morgan. And then I was spending some time at J.P. Morgan as part of that acquisition. And, you know, as part of that, spending a lot of time in rural Northern California in a town called Boonville in the Anderson Valley. And certainly over the last five years, we've seen an explosion in fire, particularly in Northern California.

We saw the Camp Fire, the Tubbs Fire, and a number of other just sort of large, large incidents. And those, you know, we had direct impacts that, you know, a fire called the Peach Fire burned on the access road to our property. And then the indirect impacts of smoke and all that that sort of comes with it. And it just kind of got to this point where I was just seeing it so constantly. And I was like, there's got to be something that we can do about this problem. And, you know, as I left J.P. Morgan, wanted to work on something new, wanted to sort of dive into a new topic. And I was just like, this is right in my backyard. It seems important.

It also seems like technology can play a role in helping solve it. And so it just kind of piqued my interest to learn more. So my understanding of these wildfires is, as you mentioned, they have happened forever, essentially. And there's actually a natural explanation and an importance to having the fire. There's a clearing out of brush and kind of this like natural process. Explain maybe like the positives and like why we actually need some fire. But then what happens when we cross over into these negative impacts? Is it just that like humans have moved far enough into the woods that all of a sudden now they're endangering themselves?

Or is there something else going on that takes it from like that natural evolution of, you know, fire and nature to now we actually have to solve the problem or stop these fires from spreading? Yeah, it's partially people moving into harm's way. But the much bigger issue is, as you said, for thousands and thousands of years, like fires burned in the landscape and they burned very frequently. But because they burned so frequently, they burned at low severity. So maybe every five, six, seven years, you'd have a low severity wildfire come through. It would burn, you know, ground cover and brush. It would leave the mature trees. It would leave the forest in this very resilient state.

And those fires would start because of lightning, but also because indigenous people would actually light them to help manage the land and create, you know, pathways and clear brush and stuff like that. And then 100 years ago, we, you know, a little more than 100 years ago, we went and colonized the, you know, west coast of the United States. And we started putting out these fires at much greater rates. You know, we we had timber and agriculture and grazing and we had these assets to protect. And so we created, you know, these forestry departments that would actually go and suppress these fires and actually worked fairly well for for 50 or 100 years. You know, we were able to control these fires, but it was kind of this spring that we've just been loading over the past century where we've just been suppressing so much stuff. Stuff's not burning. Now you've got just tremendous fuel density out in the forest. And so, you know, you take that, you know, huge fuel density. Some people estimate it's about four or five times denser than it was 100 years ago. You layer on climate change where, you know, now the fire seasons are longer and hotter. You go put a bunch of houses right in the middle of it. And then you string hundreds of thousands of miles of power lines through it all. And that's kind of the recipe for disaster that we've created. But it's largely self-inflicted.

Um, I think the good news is that we can, we can undo a lot of that. And I think it is a solvable problem, but that's sort of the situation we're in. Before we get into some of the technology that you think can solve the problem and some of the numbers behind this talk a little bit as to kind of the human interaction with the forest or with these fires. So, uh, on the East coast, something that people would be familiar with is like flood zones, right? When you buy a house, they tell you, Hey, you had a higher susceptibility to a flood. And so insurance changes, uh, people may not buy the home. Homes could be built on stilts. There's all these things that happen around floods. Is the same thing happening now on the West Coast around these fires where people are getting zoned? And so

they know that there's a higher susceptibility. Is there insurance premium changes? Are there homes that are being built in a different way? Just talk about maybe some of the things that are happening now that this is becoming a more frequent occurrence. Yeah, we're just starting to figure a lot of that out. Floods, I think, have been a pretty well-understood phenomenon for a long time. But, you know, extreme wildfire is actually a fairly recent phenomenon. It's eight of the 10 most destructive wildfires in U.S. history have happened since 2017. So it's like, you know, it's really become only in the last, say, five to 10 years, it's reached this tipping point. And you're right, it's driving all of those types of changes that we've seen with other types

of natural disasters, but we're still kind of at the very early days. You know, we saw in California in the last couple of weeks, you know, all states stopped writing new homeowners policies, state farm has as well. And so you have these insurers that aren't really sure what to do. They're kind of ill-equipped to understand the real risk to these homes. All they know is it's going exponential. And so they're trying to kind of step back until they can figure it out. I think that's the opportunity for entrepreneurs and for, you know, founders in particular to step in and say, okay, there's solutions we can build to these problems, right? We can manage vegetation around homes. We can build homes of different materials. We can, you know, cover gutters, cover ember vents

or cover vents to protect them from embers. So there's things we can do, but I think a lot of the housing stock has not been built with that in mind. And that's sort of where we are today. So let's talk how these fires get started. If people just read headlines, they always remember the one that like got started by the idiot who like set off a firework or, you know, did it being malicious or nefarious. Is that the majority or are these natural occurrences where maybe lightning strikes or like, like just talk, you know, kind of what, what are the ways the fires are started? And then is there a probability or like a distribution in terms of human driven versus nature driven? Sure. Yeah. So, so lightning definitely causes some fire it's on the order of

magnitude of maybe 15 or 20% of wildfires started by lightning. I think, you know, the vast majority is caused by humans in various ways. It's, you know, the campfire that, you know, someone didn't watch enough Smokey the Bear ads. And so they left, left the campfire burning. It's the gender a reveal party. It's stuff like that. But one of the really big and important causes is that utilities cause a huge amount of wildfire. It's about 11% of ignitions get caused by utilities, but it's actually about 50% of the damage gets caused by utilities because it's those same high winds that cause a tree to fall on those power lines are the same high winds that cause that wildfire to go from a small fire that can be contained quickly to a huge inferno in record

time. So humans definitely cause it. It's definitely sort of carelessness on the part of people that causes a chunk of them. But really, utilities cause the majority of the really extreme wildfires. And I think that's a really important thing to know because it's a solvable problem by these utilities, or at least it can be mitigated in pretty large ways. So we have a fire that gets started. It starts spreading. Obviously, wind and other things can really kind of accelerate these uh if anyone's seen the movie only the brave i think it was the granite mountain hot shots is uh the group there i had to look that up to remember it but uh they look awesome right like they're like you know going into the fire they're digging the trenches

they're trying to fight these things control them talk a little bit about uh maybe the reaction that people have today and kind of how we're treating it before we get to things that you all are trying to do you know in kind of a preventative way but like what is the hot shots and kind of this forest fire fighting forces that we have that we deploy whenever these things kick up? Yeah, we have an incredible heroic workforce that we have US Forest Service, we have state agencies like CAL FIRE in California,

we have local fire department. And like for 99.9% of the wildfires, like that apparatus works really flawlessly. 911 call goes in, they dispatch, they can contain stuff quickly and early. And I think that really does work and it's worked really well for a long period of time. I think the challenge is that we're just seeing

this like crazy new fire behavior that's never been seen before. And you can get these starts in the wrong conditions where it's 70 mile an hour winds outside. It's incredibly dry. It's the feeling of a giant hairdryer everywhere. And you start a fire in those conditions, there's almost nothing you can do to stop it.

Like it's just, it grows so quickly and exponentially that even if you had the crews really close and unseen and, you know, could get there immediately. Just really, really difficult to contain fire in those conditions. And so I think that's what sort of leads you to say, okay, suppression alone cannot be the solution. We have to actually think about how do you mitigate,

how do you do things to mitigate fire damage and fire intensity long before they start to give those suppression resources a chance in those extreme conditions. Let's talk some numbers real quick. So you guys came out and when you announced that you were gonna do this, you had about a $35 million fund.

I'm assuming that you guys have aspirations to raise future funds and kind of continue to grow the capital base that you can go and deploy into this. There's about $5 billion in the latest infrastructure bill that is specifically devoted to these issues and kind of complex challenges. But the U.S. Forest Service, I've seen you say, estimate that there's about $50 billion that's going to be needed to actually handle this stuff. How big is kind of the addressable market when you look at it as a venture capitalist and you say, okay, we're going to go deploy capital into this? Are we talking about there can be $100 million dollar outcomes billion dollar multi-billion dollar outcomes how many of these

companies do you think are going to be built like just talk a little numbers and kind of what the opportunity set is as an investor yeah i believe there's going to be over a dozen uh unicorn companies built in fire tech i think it's that big of a problem and and that big of an opportunity and you're right there's a there's record federal spending on wildfire you know we've got money in the infrastructure bill um money in the ira uh the agencies are really doing land treatment and suppression and investing in technology at, you know, sort of record levels, given the depth of the challenge. And I think that's, as we've talked about, only the beginning of what's actually needed. But, you know, for entrepreneurs, you know, government dollars and public dollars is one

potential market, but there's really big opportunities in helping utilities adapt, insurance companies adapt, timber companies adapt, real estate companies adapt. These are, you know, huge, huge industries, some of the largest industries on the planet that are being turned upside down by wildfire in some really important regions. You think about PG&E, who's the major utility in Northern California. They lost $80 billion of market capitalization after the campfire. They went bankrupt. They got fined $25 billion. The CEO lost their job. That is not a small thing. That is not a small disruption to operations. It literally turned the company inside out. And so now they spend $7 or $8 billion a year on wildfire mitigation across the board.

That's one utility. And you can bet all the other utilities are watching that kind of stuff and don't want that to happen to them. And so, you know, the utility sector in particular spends a huge amount of money on wildfire mitigation, which is, you know, maybe tripled over the last couple of years. Insurance industry is losing between $10 and $15 billion a year in the U.S. Again, huge dollars at stake. You think about like the real estate industry, say take hotels

in some of the more recent Napa fires, some really large resorts burned to the ground. air quality affects travel and occupancy you know again these are like really big dollar amounts affecting really big businesses and there's a real willingness for these businesses to spend on uh on solutions so you know we you know if you take all that together you know we estimate that spending in the us is about 50 billion dollars a year on wildfire mitigation across all these different um sectors i think it's a really attractive market uh and it's growing quickly and there's an even bigger one internationally too let's talk about some of the companies that you guys have already invested in one of the uh big categories i think is what i'll call kind of

detection or camera and satellite type imaging uh maybe you can describe one or two of the businesses that you guys have uh funded there and like the importance of uh it seems at least from my perspective of identifying you know where could fires be occurring uh like what are like the the preconditions if you will in kind of higher likelihood areas but then also like hey is there a fire or is there not a fire it sounds like you've got a couple of companies that are doing that as well yeah so um one of the companies we've invested is called pano ai and so pano puts uh cameras on tops of mountains and cell phone towers uh and uses ai to analyze the video uh so that you can quickly detect a fire start uh you think of fire again growing exponentially

you can catch it in that first five or ten minutes your chances of being able to intervene before it gets really big go way up uh and in addition you also get situational awareness to know like okay what's the rate of spread where's it going you can tailor your dispatch uh whereas maybe previously all you have is a 911 call if someone says hey there's smoke behind my house you got to send an engine it takes 15 or 20 minutes for them to find it before they can sort of call out the full dispatch you're short-circuiting that whole process so you can make a smarter decision has a huge impact on the ability of suppression and it's a great application of of technology. Their big customers are landowners, but utilities as well that are trying to sort of

think about how do they de-risk fire starts in the regions where they're responsible. So those cameras are obviously, as you said, kind of near the ground. I've seen also that you guys have looked at things from satellites and kind of satellite imagery, things from that front. What do you think is possible from satellites that maybe the cameras can't do? Or have you guys said, hey, look, maybe the satellites actually can't help? Yeah, no, I think detection will be solved by kind of a layered approach. You know, cameras are really great at covering, you know, 50 or 100 square miles and giving you real-time situational awareness, which is awesome.

Satellites can cover much broader areas but have much lower resolution in terms of understanding what's actually happening and, you know, much lower sort of frequency or sorry, much higher latency in terms of seeing what's actually happening. So, you know, it's kind of a layered approach. You might use a satellite to monitor really rural areas, like, say, the interior of Australia. But you might use cameras to monitor the wildland urban interface around a town in Northern California. So I think it's kind of both working in concert.

That being said, we also are investors in a company called Overstory, which uses satellite imagery in a slightly different way. They actually help utilities understand vegetation risk to their power lines. So they'll help someone like a PG&E say, hey, you've got a diseased 40-foot Douglas fir tree within six feet of a power line. That's a very high-risk tree. You've got to go take that out. And it brings some visibility to a really big distribution network and helps them prioritize where they're going to do tree trimming, which is a huge way they prevent wildfire. So we've got kind of camera detection, satellite detection, et cetera. Once the fire starts, are there opportunities to invest around how to actually treat the fire, how to cut the fire's path of movement off?

What are some of the things you guys are either invested in or excited about in that area? At Desjardins Insurance, we know that when you own a nail salon, everything needs to be perfect from tip to toe. That's why our agents go the extra mile to understand your business and provide tailored solutions for all its unique needs. You put your heart into your company, so we put our heart into making sure it's protected. Get insurance that's really big on care. Find an agent today at Desjardins.com slash business coverage. Yeah, we've seen a bunch of different, you know, work happening there, you know, ranging from, you know, new types of chemicals to, you know, know, put out fire in a safer, more environmentally friendly way to, you know, all kinds of new types

of machinery to try to think about fire suppression. The thing that we're probably most excited about in the suppression category is drones or other types of technology that can help with rapid initial attack. So, you know, again, those first 5, 10, 15 minutes of a fire are so critical. You know, if you can detect it and then you can get retarded there quickly, you know, you have a chance to catch it before it gets out of control in some of these really adverse conditions. And so we're investors in a company called Rain that builds autonomous drones to do fire suppression, with the idea being that you get that fire start, you can actually have an aircraft in the air almost immediately and on its way there to be able to A, give you a size up and understand

what's happening, but B, actually start suppression operations, which again, short circuits that cycle as other resources are kind of making their way on site. Yeah, that makes a ton of sense. Talk to me about the home. You mentioned earlier covers. You mentioned maybe building materials. What are you guys seeing there? What are you investing in? What's exciting?

Yeah, so we're investors in a couple of things in that space. One is a company called Delos. And so Delos is building a new type of homeowner's insurance. So trying to basically, you know, these insurers are struggling to price wildfire risk. Delos has a bunch of really bright, you know, ML and AI scientists that are better understanding the dynamics of fire, better modeling it and are able to price risk more intelligently, which means they can insure

more homes than insurers might otherwise be able to. We're also taking a couple hard looks at some other companies in that space that are actually analyzing the home itself and saying, hey, this is what's attractive about this home in terms of its wildfire defensibility. Here's what's unattractive and helping trying to quantify some of that risk and ideally help the owner make those changes. And we're investors in a company that is called Fire Maps that sort of helped analyze those homes and actually helps the homeowner say, okay, I'm going to make these improvements or changes, put a new roof on my house or put a gutter guard to protect against ember intrusion, which is actually helping mitigate the risk of a home. And when you see other categories,

is there anything else that sticks out to you as like, hey, these are the really, really big opportunities. This is where we can go put money to work, pre-seed seed, and we think that it can grow and compound for a number of years. Yeah, so I think the other, so if you think about wildfire as a problem, I think suppression is one solution. You know, sort of asset protection or community hardening is another solution, so protecting homes. I think the third category is really around landscape resilience. So this is like, how do we take these really big forests and return them to a state of resilience, back to that natural state? And so we invested in a company called BurnBot that has actually built like a large robotic tractor device that has, you know, basically blowtorches underneath of it and a big fan.

And that can basically crawl through different terrain and conduct what's called prescribed burning. So you're actually going to burn fuel underneath that device, but you're doing it in a really contained way that's safe. You know, you're pulling a bunch of oxygen through, so you get really efficient combustion, which A, makes it faster, but B, reduces the smoke by a lot. So you can now do, you know, kind of fuel treatment in areas that you might not otherwise do or in times of the year when you might not otherwise be able to do it safely. This is a device that sort of is making fuel treatment more scalable. That's a huge part of the solution is actually returning good fire to the landscape in ways that it happened historically. That's the only way we're going to get this back in equilibrium. Now, many people will be thinking about air quality right now as we talk about wildfires, forest fires, because in New York City, for like the first time in forever, there was this horrible air quality.

It was kind of orange looking. All the pictures went viral online. It didn't come from New York. It obviously came from the fires up in Canada. But you had a statistic when you guys announced your venture capital firm that just blew me away, that 33,500 deaths annually are attributed to the air quality impact of wildfire. 33,500 deaths annually seems like such an absurdly high number for air quality, specifically related to wildfires. So talk about kind of what you all are seeing, West Coast, East Coast, obviously the thing in New York. And then are there potential solutions there that you all think are investment opportunities that can not only save lives, but also return capital? Yeah, it's a pretty stunning statistic, isn't it? Someone took, you know, basically air quality data and then looked at mortality rates and sort of correlated the two and determined that air quality from wildfires sort of contributed to deaths of this huge scale. You know, wildfires in a bad year will kill 100 people directly, which is, you know, a big, tragic number, but it's nowhere near the scale of, you know, 33,000, which the air quality impacts.

It's just less directed. It happens later. And so it's a little bit harder for people to wrap their heads around. But that's really the real danger of wildfires, this air quality that we're seeing. And it makes wildfire also not a West Coast regional issue, but truly a national or global issue, as we've seen. And so, you know, I think there's opportunity, though, for companies to help with that. You know, you can think about air filtration in homes. You know, how do we, we certainly, you know, during COVID, everyone had their sort of local little air filter.

But is that really the best we can do? Is that the end-all be-all or is there whole home filtration systems? Is there a future where built into your furnace or into your air conditioning, you've got real filtration for smoke because you're going to need that from air quality? The forecasts for air quality are also quite depressing. I looked at a study from NASA that was saying that by sort of 2060, 2070, the average air quality in the Bay Area will be equivalent to our really terrible summer of 2020 when had that orange sky day in San Francisco and that'll just be an average year. I think if we

don't get the fire problem under control, we're going to have to deal with this air quality issue and it's going to become a global public health crisis. I think there's opportunity for technology to help in terms of forecasting, in terms of filtration, but it's a pretty significant problem that needs to be taken seriously. Another thing that you called out was the impact on market value. And again, these numbers just kind of blew my mind. You said the 2018 campfire resulted in $25 billion in liability for PG&E, a guilty plea for homicide, and it erased over $80 billion in market capitalization. $25 billion liability, $80 billion market cap wipeout, and then a guilty homicide plea. I don't think people who haven't spent the time to look at this stuff really

understand just how big those numbers are, what the impact is, etc. Describe a little bit more about that situation and kind of what the, what, what led to these, you know, kind of massive numbers to be impacted? Yeah. So the campfire in paradise was a, just a total absolute tragedy. You know, it started on a, you know, based on a faulty piece of equipment on a transmission line quickly within the span of a few hours, you know, burn the town of paradise and, you know, just, you know, kill a bunch of people and destroyed the entire town. It was, I mean, it's just truly, I think, a horrific tragedy. There's some documentaries that have been done on it. And I think if folks are interested or want a visceral sense of what this stuff is like,

it's worth watching. Ultimately, it was traced to a faulty hook on a transmission tower. That hook hadn't been replaced in nearly 100 years. And so it sort of slowly wore down and eventually caused, in this high wind condition, I think it was about 70 mile an hour winds, the hook failed, the wire fell, hit the tower, sent a shower, sparks, and then those same 70 mile an hour winds just carried those flames quickly through the town. PG&E, the utility, is liable for that. And that's particularly when you think about the negligence involved in maintenance. Now, since then, they've dramatically changed their approach to this. They're upgrading infrastructure left and right, and definitely do not want to do this again, and are investing

infrastructure at record levels. But the reality remains, they have 200,000 miles of power lines in Northern California. You can't upgrade that overnight. And even if you do, there's certain conditions where fires are still going to start. And so I think it's a really serious thing for utilities. It's really one of the only reasons a utility CEO can lose their job in the span of a weekend is they can go home on Friday and come back on Sunday and be out of a job if they start a wildfire. So it's not just PG&E that has this liability. It's utilities across lots of wildfire exposed areas, which is a big percentage of the country and world. Who's starting some of these startups? Are these like wildfire firefighters who are like, hey, I'm really familiar with the

problem? Are these people who live in these communities? Are these tech entrepreneurs who are like, how do I get as far away from a cubicle and office as possible? And let me get out into nature. Who are you running into as you're evaluating these companies and seeing who really the founders are yeah it's a mixture of all those things i don't think it's like a homogenous community you know it's we've got you know the ceo of pano sonia was a product manager at google you know on nest and really you know spent a bunch of time doing hardware design for cameras and then said hey i want to apply this technology that i know a lot about um to a problem that's a little bit more meaningful than tracking the amazon package showing up on someone's driveway and

uh you know thought about that hey you know computer vision could be used to detect wildfire and help protect people and i think it was sort of the mission that drew her into this uh this category you know the ceo of overstory uh which is the the satellite-based vegetation management solution for utilities he's a really accomplished data scientist that was working on climate analytics and realized that one of the highest leveraged problems in climate is wildfire prevention. And so kind of went deep on wildfire and thought about how he could apply his skill set there too. So it's a mix. And certainly across all these teams, we've got firefighters and foresters and various types of practitioners that kind of bring the real world experience

and can kind of combine it with the technology. And so I think that mixture is really the secret sauce. What are you seeing in terms of valuations? And you mentioned earlier a dozen $1 billion plus companies you think can come out of this sector. So what does that really look like in terms of how much capital they'll need to get there? Some businesses, especially that are outside of just pure software, they're incredibly capital intensive. Some businesses are incredibly capital light. What are you kind of anticipating here as you guys really kind of pioneer investing in this specific sector? Yeah, I think it's a mix. We're sector focused, but we're kind of technology agnostic. So we have some companies like Rain or Burnbot that are building real

serious hardware, you know, I would say heavy machinery, flying heavy machinery, which obviously is very capital intensive. And then we've got software companies that help, you know, fire departments do home inspections, and some of those companies are profitable. So, you know, it's, I think there's kind of a mix, it depends a little bit on their approach. I think one of the things about being pretty, like, vertically focused, though, is that a lot of our companies are just really close to their customer, they've got significant revenue, you You know, these are not like, we're going to go build a social network and sell ads later kind of businesses. They are, we're going to co-create with our customer. We're going to get paid along

the way and sort of grow, you know, grow alongside them. So, you know, it's kind of a mix. I don't think there's really any one type of company that we're funding. And then when you look at kind of co-investors, one of the things that at the precedency level is always interesting to me is like, you need other people to come along, right? Usually you're not going to take down an entire round. And then obviously you need people to follow on in series A, series B, series C. Who are you seeing participate in these deals? Are these just generalist venture capitalists? Are there other kind of, I guess, fire funds that are out there? What are you seeing in some of the round constructions? I haven't met anyone else crazy enough to start a fire fund just yet,

but maybe one day. I think maybe my job will be done when that happens. But there are a lot of other firms that are investing in wildfire as a market. There's certainly climate firms that see wildfire as a subset of climate. I'm happy to talk about that relationship. It's pretty interesting. But there's also just generalist VC firms that want to invest in software or AI or data companies and see the opportunity in this market as well. So part of my job is to be a bit of an evangelist to try to invite those folks in and to see the opportunity here and help co-invest alongside our companies. You mentioned the relationship between wildfire and climate. Describe that. Yeah. So wildfires cause 5% of global CO2 emissions. It's huge. It's bigger

than the country of Russia. So, you know, you could, if you think about trying to solve climate change and reduce carbon dioxide emissions, you know, you can put a heat pump in hundreds of millions of people's homes, or you can totally re-engineer the transportation sector, or we can find ways to intervene in wildfire and to create resilient landscapes and dramatically reduce the emissions caused by wildfire. And we can do it in a relatively short period of time. So I think it's actually in terms of like dollars in and time required, I think one of the easiest ways to reduce carbon emissions in the short term, you know, is to try to solve this wildfire problem. And we can really make a dent in global emissions if we do so, because it is this negative feedback

loop, you know, wildfires cause carbon emissions, which causes warming, which then causes more wildfires. And that's kind of a bad loop to be in, but the good news is we can interrupt it. And if we do so, I think it'll be one of the largest, shortest term levers on reducing carbon emissions. My last question for you is about your team. I noticed that you have a whole collection of people with very unique backgrounds. What's the pitch to get them to come work for you? How do you figure out who's got the skills and the experience versus just who's enthusiastic about this? What are you looking for in some of those team members? Yeah, totally. So I think the thing attracts people to this market in general and hopefully to convective as well is that you know

we're working on a really important problem and mission like if we can put better tools in the hands of practitioners um you know we can save people's lives we can you know uh help save our environment and we can have a massive impact on on the climate crisis uh so i think that mission helps attract people you know our team is myself i've got three part-time partners who are all former founders of really successful technology companies. One is George Whitesides, who is the CEO of Virgin Galactic. One's Ilya Volodarsky, who co-founded Segment. And then one is Anakul Akinis, who sold a company called Guavis to the Tails Group. And then we were joined by our director of operations, Aaron Wood, who was my assistant at WePay for 10 years. So the five of

us have kind of built companies before, and we know what that means, and we're really attracted to the mission here i think that's a really good combination you know we we think we can be helpful advisors to you know founders as they're as they're building their companies um and we all just kind of get it we know we know what the process is like uh and you know we get excited about building companies having a big impact makes uh makes complete sense to me where can we send people to find you on the internet or if they've got a company that they think uh potentially could be interesting do you guys send it to you yeah just on twitter at bill clerico or you can send me an email bill convectivecapital.com always happy to chat with folks working in the space

all right and now my last question you've been investing for a while now what is the one thing that has surprised you the most before you started investing that you know now that would have been helpful to know back then yeah i think um one of the mistakes that operators make when they turn to investors is they get excited about the idea and they think about how they could go execute that idea and i think what i've realized now as an investor is it's actually much more about the founder and the person you know the idea is part of it and it's easy to get excited about the idea but you have to get excited about the person and if and they're the ones that are actually going to do that work and that's you know so much more of our underwriting now around investments revolves

around the founders versus the the idea itself that is a great piece of advice bill i appreciate this i learned a ton today uh i never thought that i would be talking in such great detail about wildfires but i feel better informed now when i see it in the news and obviously you guys are doing fantastic work not you know and i think what's so inspiring about it is not just that you're trying to solve kind of the hard technical problem of the fire itself but the ramifications of saving lives saving property etc is uh is quite uh commendable so i appreciate everything you guys are doing. And we'll definitely do this again in the future. Thanks for having me on.