Why We Invested in Previsico
If you were to add up the economic costs of natural disasters globally, the cost of flooding would far exceed the total cost of wind, fire, and ice combined. At a staggering $179.8 - $496 billion per year in the US alone, the cost of flooding shows no signs of relenting. Flood risk is hard to underwrite, price, prepare for, and recover from. It’s a nightmare for property owners and an existential threat to insurance companies, who increasingly can’t, and crucially won’t, cover flood damage in standard homeowner and commercial policies because the costs of recovery are so high. Floods are also really hard to predict. Even if property owners could do something to mitigate loss, they often don’t because they don’t trust the National Weather Alerts or otherwise - it’s just noise. Further, even if a property owner did trust an alarm, they still aren’t clear on what to do with that information.
There’s a long list of stakeholders that fall into this latter category - those that need to know reliably that a flood is coming AND what they can do about it. Water utilities need a better way to track and monitor potential combined sewage overflows so that they can act early and prevent sewage from literally overflowing into streets and waterways, and avoid the large fines associated with that. Energy utilities need early information on flood risk and drainage asset performance so that they can better respond and mitigate impacts to critical infrastructure, e.g. towers, power plants, and substations. Property owners and managers need early warning systems so that they can better prepare for coming floods, e.g. move the cars off the dealership lot, turn on pumps in the basement, turn off/move expensive electrical equipment, take the inventory off the warehouse floor, etc. Insurers need a better way to price and underwrite flood risk and avoid large payouts when catastrophe hits. Construction crews need to mitigate site impacts as a result of surface water flooding. Major swaths of our economy need accurate localized flood and water level data to act quickly, minimize interruption, and minimize loss.
Enter Previsco, a live flood forecasting solution targeting large asset holders who depend on this solution to deliver timely, accurate and high resolution predictions of floods and associated water depth levels. With an alert provided 48 hours in advance of an event, managers can take action to protect their property. Previsico uses their data to consult with their customers and support them to develop a flood response plan, so in the event of a flood, they can take action to move equipment to higher ground, slow down trains, evacuate customers, or turn on pumps. They significantly lower damages (and claims) from flooding and in doing so mitigate the overall costs of climate change and natural disasters. It’s a step-change in how we think about climate change adaptation, and we’re thrilled to be a part of the next step in the journey. Jonathan and the entire Previsico team, thanks for letting us tag along. Here’s why we did it.
A Market Begging for Something New
We all may know and love the local weatherman, but traditional weather forecasts are simply insufficient and often far too low resolution for property managers to take action during flooding events, leaving people woefully unprepared. Existing climate intelligence tools are often regionally focused and unable to provide the kind of resolution necessary to make key business decisions in the run up to flood events. The financial pain can be huge, and some insurance companies are restructuring their approaches for how to underwrite flood policies (see Floodbase, who are setting the standard for parametric insurance globally). But that does not help businesses avoid damage, or allow insurance companies to reduce liabilities. Previsco provides the kind of down-scaled resolution necessary to make key business decisions 48 hours prior to extreme weather events and at a scale and an accuracy rate that businesses can rely on. Previsico’s live flood model, combined with an IoT sensor network to ground-truth the data, creates a complete system for flood monitoring and alerts that customers are using to make live business decisions and save millions of dollars in damages.
A Product Unlike the Rest
Dubbed the ‘next generation of flood forecasting’, Previsico runs live hydrodynamic flood simulations and delivers real-time warnings at highly localized and granular levels. They include watercourse flooding (river and coastal) and pluvial floods (drainage system overflows) in their model, something no other competitor can account for. The use of the live hydrodynamic modeling software to predict, and off-the-shelf sensors to confirm, increases accuracy and controls for false positive alerts. They sit at up to 80% forecast accuracy today. Customers receive a 48-hour advance warning of impending danger and live updates on water levels throughout their property. Previsico allows customers to avoid the damage before it happens. They’re the type of product that if you don’t have it or you don’t use it, it is (or at least will be) a borderline fireable offense.
Growth & Customers
Previsico is growing at a significant clip. At 200+ customers at the close of 2024, they have grown over 80% year on year since 2022. This is a fast ramp for any company, demonstrating both the willingness and ability to pay for climate adaptation technologies. And Previsico provides a unique value proposition that is resonating with large asset owners. Several of their partner insurers require this technology as a condition for underwriting policies. Previsco delivers value to both its direct customers, such as Network Rail, and to its insurance channel partners, such as Zurich Municipal, where its product is a prerequisite for policy underwriting at certain asset levels. This multi-pronged go-to-market has been a fascinating growth engine. They have their first contracts in the US and with their insurance partners pushing the product hard, there is a lot of market to go after.
Market Size
Previsico is targeting three verticals with its flood warning product: insurers, construction, and utilities. It has made successful inroads into each of the verticals, most notably to date with insurers and utilities. They are just scratching the surface of each of these markets in the UK and EU via Zurich Insurance Group, and as of 2024 have made successful inroads into the US via two insurance partners, including Liberty Mutual. We estimate a combined flood warning and sensor market in the UK and US alone at £3.8bn, and Previsico is targeting a 10% foothold share its serviceable market in the next 6 years. Previsico also has the potential for a significant Net Revenue Retention engine with its clients as the market reveals itself. They have an enviable position, and they are just getting started.
Team
Jonathan Jackson (CEO) and his team demonstrate deep entrepreneurial skills, evident in our interactions across the company. From clear focus on the customer, to their brand positioning statement, to all of their supporting data, Jonathan makes understanding this business, for customers and investors, very easy. Jonathan is a career entrepreneur who got involved with the business via Loughborough University, from which it spun out. He has experience building internet B2B businesses, but is a world-class example of someone who has done the legwork in his chosen sector and is staying close to his customer. The company builds on the platform created by its co-founders. Professor Dapeng Yu (CTO) is a leading expert in computational flood modeling, Dr Avi Baruch (CPO) is an exceptional product mind. They’ve built a team of 40 staff across the UK and Hong Kong and are primed for the next stage of development.
Sitting on this trove of network and flooding data opens up an array of product development opportunities for clients to mitigate property damage and regulatory compliance around flooding and stormwater control. Indeed, they are already working on a coastal erosion analytics project for National Grid, among others. If they get this right, Previsico can become the de facto flood mitigation and climate adaptation software platform. We’re thrilled to be a part of the journey. Jonathan, Dapeng and Avi, thanks so much for letting us join along.