Insurance startup gains attention during LA wildfires as property owners seek protection

• The wildfires in LA have caused a significant increase in interest for Stand, just a month after announcing its first funding round and introducing its initial insurance product.
• In an interview, CEO Dan Preston stated that the inbound demand increased by 5-10 times immediately after the occurrence of certain events.
• Since the fires, property insurers have been abandoning California due to the escalating fire risk.

Dan Preston, a tech entrepreneur, launched Stand's first product aimed at safeguarding property in wildfire zones in mid-December. However, he should have had more time to collaborate with potential clients and advertise the product before any devastating wildfires occurred in the U.S.

In California, where Stand is based, the fire season typically occurs from early summer to October or November. On December 16, Stand, which Preston co-founded, announced a $30 million financing round and the launch of a new product, just before the start of winter.

No other winter has been as harsh as the one that followed Stand's launch. Just three weeks after its launch, wildfires devastated parts of Los Angeles, claiming the lives of over 25 people, burning 41,000 acres, and destroying at least 12,300 structures due to extreme winds.

"Preston stated in an interview this week that the current situation is not typical and has greatly impacted business. He explained that the inbound demand increased by 5-10 times immediately after the events started."

Preston has been striving to revolutionize the insurance industry, which is often characterized by monotony and sluggishness, for more than a decade. In 2013, he was appointed as the technology chief at auto insurance startup Metromile, and later assumed the role of CEO, leading the company to the public market in 2020 through a special purpose acquisition company (SPAC). Despite facing challenges after its SPAC, Metromile was eventually acquired by tech-driven insurer Lemonade in 2022. Preston remained with Lemonade for an additional year.

Preston is aiming to go big in a market that legacy insurers are rapidly abandoning because it's viewed as too risky. Since mid-2024, at least eight insurance carriers had left the state or limited their exposure. The California FAIR Plan, generally viewed as an insurer of last resort, had seen a 137% increase since 2019, and that was well before the latest LA fires began. About 10% of homes in Los Angeles are uninsured, according to LendingTree.

It's not surprising that insurers could face up to $30 billion in losses due to the LA fires, as firms are leaving the state.

Preston aims to provide affordable home insurance to wildfire zone homeowners through the use of technology and a new approach.

Recognizing the importance of fire prevention, property owners must take measures to reduce the likelihood of fires spreading out of control. This may involve pruning trees, replacing wooden fencing with steel, or adding concrete barriers between homes. Stand, an AI-powered company, offers customized mitigation recommendations based on physics-driven insights to help make properties insurable.

Preston stated that the company, with its current 13 employees, has insured only a few properties, but is in discussions with hundreds of potential customers. He added that this number is rapidly growing as property owners become aware of the risks posed by the LA fires.

""The next couple years will make it more difficult for people to find insurance due to this event, but we must take responsibility and aim higher to bring insurance back to the market," Preston stated."

Navigating the bottlenecks

Bill Clerico, one of Stand's co-founders and initial investors, had a busy January planned, but for very different reasons. He and his wife welcomed their second child on January 7th. Additionally, on the same day, Clerico's fire-tech focused venture firm, Convective Capital, filed to raise $75 million for its second fund.

Clerico stated that he cannot discuss Convective's fundraising at present, but he is utilizing the disaster to raise awareness about strategies for wildfire mitigation and the available tools and technologies. In a post on X on January 8th, Clerico wrote that four crucial elements for managing wildfires are forest and fuel management, rapid detection using cameras and satellites, "hardening" of homes and communities, and reducing fires caused by utilities.

"Adoption and deployment are the main bottlenecks for these technologies, as they are not necessarily new or advanced," Clerico stated in an interview. "Drones and satellites have been around for a long time. It's the cameras and software that have become ubiquitous in all aspects of society, except public safety."

Clerico was a co-founder and CEO of fintech startup WePay before launching Convective three years ago. He previously sold WePay to in 2017 and spent over three years as a managing director for a bank in the Bay Area.

San Francisco resident Clerico has a cabin in Anderson Valley, about 115 miles north of the city. A wildfire in the area in 2018 motivated him to volunteer at the local fire department and influenced his decision to invest in space.

In recent years, clean tech has attracted significant investment from VCs. However, these investors have largely shied away from companies focused on resiliency and adaptation, as the target market, primarily large, slow-moving institutions such as utilities, government, and insurance, have been slow to adopt new technologies.

Unlike other tech startups attempting to break into the insurance industry, Stand's unique selling point is the decreasing competition in its target market.

""If you have a better informed view on risk, it's a more favorable place for startups," Clerico said."

Still, it's an extremely tough market.

Preston stated that Stand is currently concentrating on homes valued between $2 million and $10 million, which he referred to as "distress properties." The company is collaborating with several reinsurers and anticipates reducing costs as it demonstrates the effectiveness of its model.

To effectively address the issue of Pacific Palisades in LA disappearing, it is necessary to make substantial changes in the neighborhood's behavior and structure. The focus must shift beyond safeguarding individual homes to a comprehensive approach that addresses the root causes of the problem.

If we collaborate with neighborhoods and mandate homeowners and city officials to create resilient neighborhoods, we could potentially have a greater impact on the state of safety, according to Preston.

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