Back in 2014, Understory co-founder and CEO Alex Kubicek was on a mission to deploy a network of ground-level weather stations to track the weather in real time and anticipate needs, such as deploying resources to an area after or during a storm.
At the time, Kubicek worked with Brian Dow to build a weather station with the goal of adding an extra 10 to 15 minutes to thunderstorm and tornado warnings, but it turned out that much of the data used to forecast the weather was from the 1980s.
“We needed a better weather data set, so we teamed up with Brian Dow and built a weather station,” Kubicek told TechCrunch. “It's a solid-state measurement device that measures wind, rain, and hail 125,000 times per second, and it also measures temperature, air pressure, and humidity. This gives us a really deep, detailed understanding of what's going on on the ground.”
Over the next eight years, Madison, Wisconsin-based Understory set up weather stations, called “dots,” around the world to gather more data, and the company also raised about $40 million in funding, including its first round of $1.9 million in funding led by True Ventures in 2014.
Leveraging the vast amount of data, the company was able to build global catastrophe models to better understand the risks of individual assets. These models were validated by reinsurance partners, who advised Understory that it should sell this historical data set as a software-as-a-service or data-services product, Kubicek said.
An Understory Dot on the roof of a dealership. Image courtesy of Understory
But Kubicek and Dow had bigger plans: They met Neil Irwin, then a senior executive at one of the world's leading insurance brokers, and decided to start their own insurance company.
Kubicek said Irwin joined as co-founder and international president to learn about the insurance industry and “take Understory to a really exciting next level.”
Understory began offering insurance products, also known as parametric insurance, to address the growing threat of severe weather risk, such as its Dealers Open Lot insurance solution, which provides risk management to U.S. auto dealerships. It has since protected dealer inventory at nearly 1,000 locations across the U.S.
Understory has helped clients avoid hundreds of millions of dollars in damages by providing early notice to car dealerships, with one client reducing hail damage to a car from $110 million to $50 million simply through early notice, Irwin said.
“In the audit world, we're not just helping people who are struggling with climate-related risks, which of course is a big thing,” Irwin says. “We've been able to avoid 10 serious incidents and about $3 million in losses that would have otherwise occurred.”
Understory has experienced 500% year-over-year growth over the past year, and now the company is moving in a new direction, launching a product focused on the renewable energy sector, made possible by a $15 million Series A funding round co-led by True Ventures and Prelude Ventures.
Kubicek said the company's proprietary risk mitigation technology can enable solar power plants to leverage their large-scale purchasing power to save 50% on hail damage repair costs, for example. Some of the company's models can predict weather events 45 minutes in advance, giving solar plant operators time to stow or move panels and deflect hail by changing the angle of impact.
With the right approach, he said, it's possible to turn a $10 million loss into a $5 million loss, or even a $2.5 million loss into a $500,000 loss.
“The solar industry right now is in a real crisis,” Kubicek says. “The only places you want to build large solar projects are in areas where the sky is literally trying to kill you, so a lot of contracts are being canceled. Our technology helps us mitigate that risk.”