Weather Derivatives Provider WeatherBill Takes $12.5 Million More
Duncan Riley
34 comments »
San Francisco-based weather insurance site WeatherBill has taken $12.5 million in a round led by New Enterprise Associates and Index Ventures. Original investors Allen & Company, Atomico Investments (Skype founder Niklas Zennstrom), del.icio.us founder Joshua Schachter and Howard Morgan also participated.
Barney Schauble, a partner at Nephila Capital and WeatherBill’s risk capacity partner, will join WeatherBill’s Board of Directors. Total funding for Weatherbill to date is now $16.5 million.
WeatherBill was founded by former Googler David Friedberg. The company offers weather insurance policies to businesses - such as ski resorts, farms, airlines, construction companies, and amusement parks - with more than $1 million in net worth that have suffered losses due to unfavorable weather in the past.
Users choose a weather station via a Google Maps mashup and choose whether you want it to pay out for each hot, cold, rainy or dry day. Temperatures are set by the user by degrees and precipitation by inches.
WeatherBill hedges their own risk via their weather algorithm and also sells their risk on the back end to a number of hedge funds, in theory delivering a guaranteed profit regardless of the weather.
CEO David Friedberg says that Weatherbill has hundreds of customers and faces such high demand that it needs to bring more people aboard to increase capacity. The site has launched not only in the US but Canada, the UK, the Netherlands, Spain, Germany, and Norway as well.
See our previous WeatherBill coverage here and here.
A weather betting site?
Now I’ve heard it all!
http://fakesteveballmer.blogspot.com
Seriously… is this a joke? I mean I’ve heard of weatherbill but what an insanely dumb idea. It just goes to show that there are alot of morons out there with money, or smart guys with too much money.
What about a site that pays you if your flight is delayed or late. There you go, if anyone wants to go build it, have at it. Let me know when you raise 12 mil.
What?! Indeed, we’re living on Twilight Zone days. Often an absurd idea turns into a really profitable business, but this one?! C’mon…I just can’t believe it! LOL!
apologies to anyone with deleted comments. A glitch duplicated the post. Feel free to comment now though
ideas like this, is why I’m actually HOPING for a bubble to happen. We need to trim the fat, and yes I know VCs have said in interviews, that they’d rather invest into a retarded idea than no idea….but COME ON.
Is cash betting legal in US?
I will bet on stormy weather for this company down the road.
this is not a business .. this is pure gambling ..
weather insurance for small businesses is the interesting part, not betting
@2 Well if you think this is dumb…try Chicago mercantile exchange..they trade on orange juice and guess what POLLUTION. BTw, they trade weather too. So in essence its not a unique idea. But I guess the peer to peer leg may just be. However as I posted back I don’t know if placing bets online is legal in US.
Also, Weather plays an important role in commodities such as Crude Oil. I work for Nymex so I kinda know that.
Seems like many small businesses will have a problem: they must have assets greater than $1M due to investment/exchange rules in U.S.
This is the most bizarre shit I’ve heard of in a while.
WeatherBill isn’t gambling. According to WeatherBill’s FAQ page, “If you are an eligible buyer, you are entering into a legal and binding Contract with WeatherBill when you purchase a Weather Contract. WeatherBill contracts are commodity contracts intended to be used as risk-management instruments that can help buyers manage financial risk tied to the weather.”
It’s also not insurance. With insurance you need proof of loss. With WeatherBill, that is, derivatives, you just need bad weather to get paid.
I’m confused with this whole US betting thing… I thought online betting was illegal?
Can someone please clarify (or point me to an article that does) the following:
- Are people in the US allowed to gamble online?
- How does this relate to gambling sites not based in the US?
thanks!
I’m confused!
After trying some wagers, it seems most of the odds are against you if you check local weather. So betting on a day to go above a certain temperature, the only way I could makemoney is if the temperature that day went a whole degree over what weather.com predicted. Which is reasonable I guess if you like gambling or think weather.com is that far off 4 days from now.
A good meteorologist could make a lot of money if he predicted a big hurricane forming before it got into everyone’s system.
This is betting against the weather in the form of risk management. Weather Derivatives have been around for years. This could do really well in my opinion. Good move getting Barney Schauble on board as well, he’s well respected in the weather risk management markets and runs a proper risk capacity provider.
Chicago Merc Exchange trades weather derivatives and has done for a while now, they’re legitimate risk management tools.
Now, who’s going to provide an online Catastrophe Bond market…???
Maybe insurance is too old fashion for techcrunch readers to understand. I mean there’s an actual business there!
I wonder if citigroup will sue them for sort of copying their logo
Our apologies for misleading everyone into thinking Weatherbill enables people to gamble the weather as if it were a casino game. The service is meant rather to provide insurance for companies that could be aversely affected by fluctuations in the weather.
Weatherbill’s CEO informs us that only companies with a net worth of at least $1 million can participate due to regulations of the Commodity Futures Trading Commission. He also says that Weatherbill is the first service to ever provide access to hedges on the weather (online or otherwise).
Also, for anyone wondering why we had two posts up about this story, that’s because Duncan and I reported on it independently by accident. I guess you could say we both find the weather very interesting.
They definitely have a good market. It ultimately boils down to how splified they make the process for individual customers.
does the beta come with $1 million and articles of incorporation?? if it does, sign me up!
This is perhaps brilliant - what an interesting way to apply the concept of insurance - paying a little bit along the way in case a ‘big bit’ is needed - I’m impressed. This is a fantastic example of new thinking coming from new possibilities.
I never heard from that before. Really interesting
CBOT/CBOE could put these guys out of business in a week.
WTF
This has “Enron” written all over it.
How many times is this title going to change? Grr.
As the manager of a small business, this looks like a perfect technology solution to weather related problems. By simply estimating my lost profit for certain events (for example, try to deliver pizza in Seattle when it snows 1/4 of an inch!), I can very quickly and easily hedge than loss. This is what web-based solutions should be doing: taking functionality that only made sense of large businesses (in terms of time, attention, and expertise), and making them accessible to all businesses.
I am having issues actually using the site in either Firefox or IE, so I have complaints. (Can anyone at Weatherbill get their quote service to produce a quote?)
But this is is a real service for real businesses: some of the initial comments appear to miss this point.
Murder_rate_in_Jersey.com
where you bet on what the murder rate is in Jersey each week, is that next?
http://fakesteveballmer.blogspot.com
Regarding Enron written all over it…
Yes, Enron were one of the first (if not the first) to trade in weather but it’s now a very active market with many participants.
Energy companies, clothing companies, air con manufacturers, golf courses, ski resorts, agriculture, insurers, banks, brokers, car insurers, holiday companies and even ice cream manufacturers have all participated in weather markets at some point over the last few years.
Temperature, rainfall, wind, snow, all can be used as measures and triggers.
There have been other online markets for this but Weatherbill seems to have got it right by aiming it at the businesses who really need to manage these risks rather than trying to get the big traders playing.
This was perhaps the one market Enron played in that was truely viable. Much more viable than trying to trade bandwidth etc (although there is a possibility there…).