A Depressing Startup Opportunity

Posted on January 17, 2020. Filed under: Uncategorized |

“Be fearful when others are greedy and greedy when others are fearful.” – Warren Buffet

I live downtown on the Hudson River in NYC (Flood Zone 1). During Hurricane Sandy, the Hudson enveloped my building and I spent the evening bailing water out of our entranceway, trying to protect the mechanical room from flooding. We live in a Co-Op and everyone who stayed, even the late Lou Reed, took turns both witnessing the craziness of our street becoming the river, and trying to protect the building, which is a Co-Op (we are all on the hook for the buildings health economically), from serious damage.

I sit on the board of our building, and after that event, we implemented a new flood protocol, made some tweaks to our physical infrastructure, and upped our investment in flood insurance. Securing additional flood insurance wasn’t easy, and my understanding is that in areas of high risk, it’s getting harder and harder by the day to find an insurance company who will underwrite the risk.

Generally speaking, the entire carrier market is fearful, as it should be. At the same time, demand for flood insurance is going to keep growing. In such a situation, it feels like the way underwriters approach this type of risk, the inputs to their actuarial models, and their economic agreement with customers needs an overhaul. I am far from an insurance expert, but it feels like there’s an opportunity for a new entrant to shake things up in this segment of the market.

I am inspired by USV’s commitment to investing in solutions to our climate problem. I think that’s the first order need. As bleak as it sounds, after reading Alberts post, I couldn’t help but ask “well what is investable if we don’t fix this fast enough or well enough?” There’s an entire class of businesses that will be built over the next 50 years not only to fight climate change, but to help us adapt as it inevitably progresses.

There’s a tinge of heartless capitalism in asking how companies will profit from such a destructive and existential challenge, but the reality is we have a responsibility to our planet AND also to maintaining or improving quality of life for those most affected by these changes. What services will be built to help people adapt to new reality? I think modern flood insurance fits that bill, but it’s a much broader question. Holler if you are working on something like this and thinking about raising capital: jordan@pacecapital.com