WeatherBill, a startup that turns global warming from a threat into a business opportunity, on Wednesday captured a $12.5 million first round of funding.
The funding was co-led by investors New Enterprise Associates and Index Ventures. Allen & Company, Atomico Investments, and financier Sean Park also participated.
The round comes less than a week after former Vice President Al Gore’s Nobel Peace Prize splashed global-warming headlines worldwide. Through his video, “An Inconvenient Truth,” and personal appearances, Mr. Gore has warned of the dire consequence of inaction on global warming.
Unlike weather insurance providers and futures traded on weather-hedging exchanges, WeatherBill, founded by two former Google executives, lets businesses tailor specific weather-related hedges.
For instance, a retailer in Port Washington, New York, fretting that snow could cut into pre-Christmas business could pay $20 for a contract that would pay $500 per day if snowfall exceeds 6 inches on December 15 or 16.
“Today, there’s no other place you can go on the web to price what it costs you for coverage for adverse weather impact,” said Neil Rimer, a partner at Index Ventures who is joining WeatherBill’s board of directors. “Most businesses are painfully aware that bad weather or good weather negatively affects the business they’re in. The vast majority of businesses just don’t do anything about it.”
One of WeatherBill’s clients, Arizona ski resort Flagstaff Nordic Center, took out a contract that allows it to offer those who purchase a season pass before November 1 refunds if the area does not get about 2 feet of snow during the ski season. Other clients include farmers, restaurants, and event organizers.
The venture round follows a seed round of about $4.3 million from First Round Capital and other investors. In addition to announcing the venture funding, WeatherBill on Wednesday launched its service in the United Kingdom, Germany, Netherlands, Spain, and Norway.
WeatherBill built an online engine that could calculate the cost of a contract based on dates, conditions (snow, rain, heat, etc.), and payout.
Chief Executive David Friedberg said he had been toying with the notion of weather insurance for small businesses for years.
“I took notice that if you go to a movie theater on a sunny day, it’s totally empty,” he said. “I thought: ‘There must be a way for small businesses to protect themselves.’”
Unlike weather insurance, a WeatherBill contract has no claims process and there is no need to prove a loss, Mr. Friedberg said. WeatherBill simply monitors government weather stations near the business that took the coverage and if their report exceeds the contract parameters, a payout is made.
Shouldering the financial risk on the contracts is WeatherBill partner Bermuda-based Nephila Capital, an investment manager specializing in catastrophe bonds and weather derivatives.
Barney Schauble, a partner at Nephila, and Kittu Kolluri, a partner at NEA, also have joined the WeatherBill board.