Aug 16, 2023

Illustration by Angelica Alzona for Forbes; Photos by Paul Starosta/Getty Images, happyfoto/Getty Images, Robert Kirk/Getty Images, khoj_badami/Getty Images F For venture capitalist Bill Clerico, the risk of wildfire is personal. Five years ago, the Peach Fire came perilously close to his second home in Boonville, California, burning along the only road to his property. Horrified by that experience, Clerico began working as a local volunteer firefighter, and started pondering the role that tech could play in firefighting. Late last year, he founded Convective Capital , a $35 million fund with a portfolio of 10 startups, and the first venture capital firm to focus solely on so-called “firetech” startups, with the goal of “solving our wildfire crisis.” Recently, even places that haven’t had historical wildfires are starting to experience destructive blazes. The Maui wildfires have killed at least 99 people and damaged or destroyed over 2,000 structures, with local authorities estimating that the cost of rebuilding will be over $5.5 billion. Across the Pacific Ocean, the problem is particularly pressing in the Golden State, where record megafires have already burned millions of acres in the last five years alone. Put another way, seven of California’s top 10 most destructive fires in its recorded history have occurred within the last five years. California alone spends over $3 billion a year fighting fires, while at the federal level , billions of dollars are spent annually on wildland firefighting nationwide. In recent years, numerous startups have popped up, with different approaches ranging from AI-based software designed to help insurance companies evaluate fire risk ( ZestyAI ) to robots designed to undertake prescribed burns ( BurnBot ). One startup wants to deploy automated aircraft to fight fires ( Rain ), while another ( Torch ) wants to sell small outdoor smoke detectors to property owners. One company, Dryad , hopes to sell a similar hand-sized low-power sensor to large landowners, which can act as an “ultra-early” warning system primarily to public entities and power utilities. The Germany-based company Dryad Networks has developed a system for the early detection of forest fires: sensors sniff out the smell of a smoldering fire and sound the alarm. Patrick Pleul/dpa/Getty Images Venture capitalists, including Convective, have already poured hundreds of millions of dollars into this emerging category of technology. Last month, one of Convective Capital’s portfolio companies, Pano AI, which offers an early detection service, raised $17 million in a Series A extension round. In June, Gridware , a power utility monitoring company that is also in Convective Capital’s portfolio, raised $10.5 million in seed extension funding. But experts say that while the surge of new firetech startups is promising, the companies’ offerings are too new, and remain largely unproven in real-world situations. Plus, their solutions have not made an impact on the contracting insurance market in California, where three major insurers – Farmers, State Farm, and Allstate – announced they were no longer writing new homeowners insurance or limiting new coverage. This month, S&P Global Ratings even warned that increased insurance prices could drive up living costs further and contribute to the outflow of Californians to other states. “It’s a drop in the bucket relative to the immensity of the problem,” Clerico acknowledged, estimating that his investments and their tech will take several years to fully mature. “I don’t think firetech is where it can fundamentally change those insurance economics yet.” But early tests of firetech are currently underway. Cal Fire is testing new artificial intelligence tools for the first time, and this year has launched the new Office of Wildfire Technology Research and Development. Earlier this year, Cal Fire began a pilot program with firetech startup Dryad Networks, which makes AI-powered smoke sensors. The pilot will test 400 of the company's sensors in the Jackson Demonstration Forest in Mendocino County. Carsten Brinkschulte, the CEO of Dryad Networks, told Forbes that his model has two critical components: one is the actual sensor , which is designed to last for 10 years. The second component is the company’s own local mesh data network, which helps maintain connectivity in dense, rural forests where there is often little connectivity. “We are the AT&T of the forest,” he said. According to Dryad’s estimates, the company could cover all of California’s wildland-urban interface, the transitional zone between wildland and developed areas, which are especially at risk from wildfires. The system would cost approximately $29 million as a one-time fee, or around 1% of what Cal Fire spends now on its total annual budget, plus an additional $4.3 million or so to operate per year. “Compared to what Cal Fire spends now on firefighting, that’s nothing,” Brinkschulte added. “We are not saying we solve the entire problem of wildfires but we think we can play a vital role in mitigating it.” The German chief executive said he’s hopeful that his company will be able to impact the insurance market eventually, but knows that it will take time. “Insurance is an incredibly conservative industry,” he said. “If you speak to an insurer they will tell you your tech is great, can you show five years of data? Well, our company was founded three years ago. Our goal is to radically reduce the response time. If you can reduce the response time from hours to minutes then you dramatically increase the chances of extinguishment.” Even if the insurance companies have been slow to adopt firetech, utilities have gotten involved in funding new technologies, notably, Pacific Gas & Electric, the primary electric utility for northern California. PG&E lost $13 billion in market capitalization in 2018 after it informed the Securities and Exchange Commission that it may have been responsible for the 2018 Camp Fire in Butte County, the largest on record in the state. The following year, PG&E ultimately pled guilty to 84 counts of involuntary manslaughter and agreed to pay a $4 million fine. PG&E is now one of the primary sponsors of the XPrize Wildfire , which announced a $11 million prize this past spring, with the goal of “ending destructive wildfires.” Of that total, smaller purses will be awarded to teams that can autonomously detect and put out specific fires across a 1,000 square kilometer area (nearly eight times the size of San Francisco) and another to one that can detect all fires across a much larger area. This spring, PG&E also took a prescribed burn robot made by another startup, BurnBot , for a spin. “Wildfire is a big deal to most utility companies,” Clerico, the venture capitalist, told Forbes. “It’s not like you’re selling them a piece of HR software. You’re selling them solutions to their biggest existential threat.” Burnbot, a robotics startup working on fuel management to mitigate wildfire risk, created the BurnBot RX1 to help make containment lines for prescribed burns. Philip Pacheco/Bloomberg For their part, insurance companies claim that their recent decision to restrict coverage in California is only partly driven by the intensity of climate change-driven wildfires. These companies are also pushing for reforms to a 1988 state law known as Proposition 103, which limits their ability to increase premiums. (Consumer groups say the law has saved Californians billions of dollars.) Reached for comment, Farmers, State Farm, and Allstate referred Forbes to the Insurance Information Institute (III), an industry advocacy group. Janet Ruiz, an III spokesperson, cited the law as the reason for why California’s insurance rates have been “artificially low” for the past 35 years. “We lost 20 years of underwriting profit in California in the last 6 years in the insurance industry,” she said, attributing those years to intense wildfires, climate change, the rising cost of reinsurance, the high cost of construction, and inflation as additional contributing factors. However, Dave Jones , a former California insurance commissioner, and now the director of the Climate Risk Initiative at UC Berkeley’s Center for Law, Energy and the Environment, told Forbes that even with the level of wildfire-fueled destruction in California in recent years, the companies have still made money. “None of the companies went bust,” he said. “The rates were designed to let them make a profit and they did. It’s a free enterprise system: they’re not guaranteed profits.” Meanwhile, Daniel Swain , a climate scientist at the University of California, Los Angeles, wonders if conventional firefighting really needs Silicon Valley tech to improve its efficacy. He views most of these firetech innovations with what he calls “extreme skepticism.” After all, the science of reducing fire risk is fairly well understood: the undergrounding of power lines in high risk areas, home hardening , or the process of evaluating building materials and vegetation near a home to make it less susceptible to wildfire. Above all, Swain and others say, there needs to be more prescribed burns. “Wildfire is a natural process – part of the problem is that we have not had enough low-intensity fire,” he told Forbes. “Is it a desirable future goal to not have wildfires anymore? No. The problem is that if we prevent 99% of the smaller less intense fires, we are just going to have massive extreme fires that are so much larger. Less frequent, but worse. So what we want is more frequent and less severe fires and I'm not sure this moves the needle.” MORE FROM FORBES