WeatherBill Launches, Announces All Star Investors

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1. Juuso - Game Producer
   

   January 15th, 2007 at 4:44 am

   Hah, great way to get “insurance” for some companies.

2. Josh
   

   January 15th, 2007 at 4:58 am

   BRILLIANT! Finally some innovation on TC. Great idea. Whether it get traction or not, we’ll see.

3. Fashion Industry Ceo
   

   January 15th, 2007 at 5:02 am

   people be on anything now adays

4. Steve E
   

   January 15th, 2007 at 5:04 am

   This is very impressive now I can see it working, the quote tool is great!!

5. Michael Arrington
   

   January 15th, 2007 at 5:05 am

   Josh, yeah, I gotta say that seeing this is a nice. Something different at least.

6. Michael B
   

   January 15th, 2007 at 5:07 am

   Hey Michael, here’s your free idea for 2007.

   Launch DPBill.com and let us bet on how long it will take a company to go from new site announcement to falling into the deadpool?

   (I retain the right to receive a percentage of all profits…’-)

7. Michael Arrington
   

   January 15th, 2007 at 5:10 am

   good idea, but something tells me this one won’t be in the deadpool. The application is awesome and there’s a huge market for this. It’s all about marketing now.

8. Michael B
   

   January 15th, 2007 at 5:21 am

   yes. yes, I wasn’t speaking of this particular announcement. Just speaking in general.

9. Orson A
   

   January 15th, 2007 at 5:24 am

   This in is a very innovative idea; based on the accessibility of the quotes its perfect, i can see though it turning into more than just contracts for ACTUAL businesses but also a investors hedging / betting on weather for profit( at least i taught i could), its a great service and just to reiterate i see no dead pool for this one for a while my mates.

   On the flip side i would say is that you/ business have to be worth over at least 10 million to cover your business with these contracts, i would have taught that i could cover mines but hey i don’t worth that much ..yet.

   IF i did i would consider this option of coverage..( their quote tool is great )

10. Richard D
    

    January 15th, 2007 at 5:45 am

    well if you ask me its a pretty dull and gloomy sort of idea

11. jk
    

    January 15th, 2007 at 6:09 am

    I lost my stash on a rainy day

12. Nick
    

    January 15th, 2007 at 7:19 am

    Very interesting. I can see alot of businesses finding value in a service like this.

13. Say No to Crack
    

    January 15th, 2007 at 8:32 am

    I just tried this, and was almost ready to bid on a contract. I put in:

    Pay me $1,000
    Everytime the avg temp is below 45 degrees
    For Feb 1-3
    Southern PA (north of Baltimore)
    Max payout $3,000

    The cost was $1,700. Huh? I don’t think there’s ever been a day in early February out here where the average 24 hour temp was that high. Even now, with the days near 60, the nights are getting low enough to keep the averages around 43.

    Either something isn’t right, or there’s a lot of people who will be able to make a lot of money from their system.

    If anyone has used this, let us know,
    Anita

14. Robert Dewey
    

    January 15th, 2007 at 8:41 am

    Jobby was a good find indeed

    I was kind of disappointed that nothing ever really happened with it after Jobster acquired them - I still think with the right marketing and business plan, it could have been very successful (probably more so than Jobster, to tell you the truth).

15. Nitin Rai
    

    January 15th, 2007 at 9:04 am

    i wud say pretty innovative
    nice specially for small farmers IF it really wud do what it promises to!
    guess it wud be interesting to see how they wud make money based on the recently highly unpredictable weather, we have already seen instances of some of the weather algos being thrown out of the window.
    bottomline - a bet is a bet

16. Yohay Elam
    

    January 15th, 2007 at 9:21 am

    Gambling on the weather. Nice initiative.
    Well, Katrina showed us what bad weather can do…

17. more clued
    

    January 15th, 2007 at 9:25 am

    not an innovative idea and actually financially very dangerous for the investors.

    reinsurers have written policies on mother nature for decades and have been hammered, at times, by events that deviate away from their models (i.e. the successive hurricanes in Florida last year)

    they are better off writing options on the CBOE.

18. more clued
    

    January 15th, 2007 at 9:33 am

    complicated weather algorithms - LOL…LOL - all smoke and mirrors.

    there is no such thing s a successful prediction model for the weather. many have tried and will continue to fail. people sucked into this hype have lost their shirts in the past.

    there is no model that can predict random events. zero, nada, nyet.

19. JMike
    

    January 15th, 2007 at 9:50 am

    Following on to the earlier comment about a specific contract price: are you sure you didn’t accidentally pick Alabama?

    I tried a similar contract (total degree-days, i.e. average temperature below 65) for the nearest weather station to a zip code in central Massachusetts, and got a staggeringly low contract price. But before I mortgaged the house to buy as much as possible, I just checked in the GUI and pulled down Worcester Regional Airport, and it re-calculated the contract price to a price that is actually high enough that I would not want any part of it.

    –JMike

20. w. heisenberg
    

    January 15th, 2007 at 10:17 am

    agree with #17 & #18. Mike, your “all-star investors” are tech guys. This is not a tech company. it might be flashy and AJAXy, but it is an insurance company, so the model matters, not the interface. i dont think any of these guys add anything to this company except cash. i really hope they have some other heavyweight advisors, or this thing will be newsworthy–for the wrong reasons. and the bigger it gets, the bigger it will fall when a correlated set of events hit that are unpredicted by the model. this also makes it tough from a marketing standpoint. no large company will use a company founded by tech guys to insure it against the weather, IMO. as i said in another post on this company, this is “When Genius Failed” without the genius.

21. Adam benayoun
    

    January 15th, 2007 at 10:20 am

    Now lets just wait for a dozens of copycats.

22. Patricia
    

    January 15th, 2007 at 10:23 am

    I agree that it’s going to all be in their marketing now. It’ll be interesting to see how they do.

23. sourabh niyogi
    

    January 15th, 2007 at 12:17 pm

    See also Hedgestreet, several years old now, who doesn’t have enough traction to be mentioned here.

24. Jessup
    

    January 15th, 2007 at 12:18 pm

    I’m saving up for a rainy day!

25. Drama 2.0
    

    January 15th, 2007 at 12:30 pm

    I just got “Our pricing system is currently unavailable. Please try again in a few minutes.”

    This, alongside the reports of other pricing issues, leaves me unimpressed despite my initial excitement when this was first posted this a few weeks ago.

    I asked an insurance industry executive about WeatherBill and he had some questions over the legality of what they’re doing so I hope these “all star” investors did their due diligence. I agree with w. heisenberg that these investors are technology people and not finance people therefore it’s not that impressive that they bought into it. It sounds great in theory but when I ask somebody from the insurance industry and she points out potential problems, I would have been a lot more impressed if their “all star” investors came from an industry related to the business. That would have been a real endorsement.

26. Allen.H
    

    January 15th, 2007 at 12:31 pm

    Many damaged businesses will find it pretty hard to prove their business was affected directly by the weather, since they are not necessarily dependent on weather conditions. But we shall wait and see how their “policies” are being built for each case.

    Allen.H

27. me
    

    January 15th, 2007 at 1:30 pm

    So basically, if you have the right backers, you get good press, no matter how impractical the idea.

28. Michael Arrington
    

    January 15th, 2007 at 1:53 pm

    Allen - You don’t show damages. This is a cash bet on the outcome of the weather.

29. jd
    

    January 15th, 2007 at 2:04 pm

    These guys make a nice interface. If you want to see if their prices are ballpark, build the same structure over at http://guaranteedweather.com/ If you find a price differential then you should open up two accounts and arb the spread.

    -JD

30. Aran
    

    January 15th, 2007 at 2:26 pm

    Fantastic interface.

    Thanks for the story, just found your site and like the design a ton!

    Cheers from Canada

    A

31. Juancho
    

    January 15th, 2007 at 2:40 pm

    weather betting! wohoo! finally better than gambling on horse races.

32. b
    

    January 15th, 2007 at 2:48 pm

    I tried to buy some insurance but you have to have a net worth of $5M(My NW is only $4.9M, so I’m SOL). Ergo, I wouldn’t call this a Web 2.0 company.

    I don’t even know what the point of the AJAX is, besides as a marketing gimmick that will hopefully get WeatherBill into the MSM and in front of HNWI.

    Regardless, I don’t think individuals or businesses with that kind of money making serious insurance decisions would do it themselves, and the CFO’s or Advisors who would do it for them probably have good enough tools already.

33. ginchy
    

    January 15th, 2007 at 4:00 pm

    A hundred bucks says it’s going to keep getting warmer.

34. Tom Paper
    

    January 15th, 2007 at 4:23 pm

    I think this is a great idea. Having worked in the grain industry and now forest products, I can see a real value here. I’m curious to know how they will actually make a market here. As everyone who’s traded futures knows, you can’t buy or sell something that doesn’t exist. Bravo for this venture.

35. jd
    

    January 15th, 2007 at 5:34 pm

    Tom, my background is also in ag products and I had the pleasure to work with weather derivatives the first time they came around (2000-2002). You raise a good point about buying or selling what does not exist. For a good intro on weather derivatives put the term in google or wikipedia. As you know from futures markets, there are a number of markets that settle financially, not physically. This is an example of a financially settled market.

    A good simple example would be two businesses: one sells umbrellas and the other sells ice cream. No one likes to eat ice cream when it is raining and no one needs an umbrella when it is sunny and warm. So these two businesses set up a weather swap where the umbrella guy pays the ice cream man $100 if there is 1″ or more of rain and the ice cream man pays the umbrella guy $100 if there is no rain, or rain less than an inch. This way they offset the risk and neither has to go bankrupt for lack of appropriate weather. What weatherbill seems to be doing is setting themselves up as market makers. They want to be in the middle making sure that either the umbrella guy or the ice cream man can find someone to take their weather risk. If weatherbill has someone on each side of the trade then they have no worries but if they get lopsided then they have to buy reinsurance. But that’s a more complex subject!

    Keep in mind that neither the umbrella guy or the ice cream man are gambling. They are just willing to give up some of their profits from good times in order to get some financial coverage when things go bad. If they DIDN’T do the weather swap they would be gambling that the weather would go their way. So the weather swap actually helps them reduce risk! Quite the opposite of gambling where people take on MORE risk.

    -JD

36. KCertify Free Mock Test : NJ Driving Test
    

    January 15th, 2007 at 6:22 pm

    This is like Web 3.0 : old time brick-mortar business like insurance launching new flavours on the web..great

37. Jon
    

    January 15th, 2007 at 6:36 pm

    Great product! The opportunities this gives to the service industry is incredible. Now a service provider will be able to offer a cash back guarantee based on the weather. There is a good write up on the product here http://www.incublog.com

38. Jonathan
    

    January 15th, 2007 at 6:53 pm

    This will fail as an insurance company.

    It may work as a gambling company though, the house never loses. Or an option market.

39. permanent hater
    

    January 15th, 2007 at 8:54 pm

    You’re all missing one point - this is simply illegal.

    “Qualified investors” or not, if this business ever gets traction, it will be eventually shut down for running an unlicensed gambling site. It’s that simple.

40. Cate Long
    

    January 16th, 2007 at 5:22 am

    Wonder what the numbers would look like for some ski companies in the Northeast…weather is the prime variable for revenue…hummm…

41. Allen Stern
    

    January 16th, 2007 at 12:48 pm

    FYI, I just posted an interview with the founder, David Friedberg. (click my name to listen). One thing to note is that this service is only available for businesses that have $1 million in net worth or individuals with over $5 million in net worth.

42. David Mackey
    

    January 16th, 2007 at 4:37 pm

    Pretty nifty idea. Seems like it would be good for big events - e.g. concerts.

43. more clued
    

    January 16th, 2007 at 6:26 pm

    jd:

    You are correct with your explanation if there was an EXCHANGE. But, there is not. This company is taking on all the risk by writing these derivatives. They don’t have an exchange to offset their risk, nor would dealer or market maker want to synthetically create one to offset it.

    These guys are playing a fools game - it’s called trying to track what nature is going to do next.

    What happened to Long Term Capital is that this group of “geniuses” were looking at regressions of spreads in the foreign debt markets. Similar to what market makers use to do with currency spreads when they were fixed to each other - i.e. British pound against the Deustchemark. Since the probability of the spread exceeding X standard deviation was small, they were making money hand over fist while the gettin was good.

    Guess what happened? These idiot geniuses were responsible for Greenspan to lower rates in 1998 3 times since the US banks were on the verge of getting hammered.

    Guess what caused that? The spreads went further than their “complicated algorithms” predicted. Since they were managing 4 -5 bilion dollars, and the banks were giving them credit on billions more, they had a portfolio worth hundreds of billions of dollars.

    I think if these investors paid me several millions dollars, I would save them more millions from this tragic model of weather forecasting.

    Anyone have a stone to make world class soup?

44. Wondering
    

    January 17th, 2007 at 2:40 pm

    One thing nobody has asked and WeatherBill really hasn’t informed anyone on is the size of their capital base. I mean seriously, if I purchase an option from them (or enter into a swap) what kind of credit risk am I carrying at that point? Seems to me any “qualified” buyer is going to do some due diligence and be looking for some type of investment grade rating or something to back this startup. Anybody have any ideas there?

    I also listened to the interview (thanks for the link), and was a little shocked to hear the CEO say they have no real competitors. Doesn’t seem like they did very good market intelligence there as plenty of insurance companies will write this type of coverage (parametric insurance etc) and also see the link above to GuaranteedWeather–looks like they have been doing this for several years now.

45. jd
    

    January 18th, 2007 at 11:00 am

    More Clued, yes, WeatherBill is not an exchange. They are more of an an OTC market maker. However most exchanges depend on market makers keeping liquidity up. There is no way to have liquidity without market makers taking the other end of a trade. If the WB guys really are dynamically repricing their quotes based on their book, then they are thinking more like an exchange.

    IMO, the really good point you raise is similar to the point raised by Wondering. That’s a question of weatherbill’s creditworthiness. This is a VERY important question that needs to be addressed.

    -JD

46. JJ
    

    January 18th, 2007 at 9:40 pm

    Really Neat Idea….I think every business out there will need this. Can’t imagine why something like this didn’t exist before…I also saw the CEOs interview on cnbc today. Here is the link
    http://www.cnbc.com/id/1584023.....amp;play=1