Startup EarthRisk bets on bad weather

SAN DIEGO (Reuters) - Bad weather can mean big losses for businesses impacted by hurricanes, snow storms, floods, tornadoes and all manner of natural disasters. But entrepreneur Stephen Bennett has developed software that can predict severe weather patterns as much as 40 days ahead of time.

San Diego, California-based EarthRisk Technologies (earthrisktech.com), which Bennett co-founded and launched last year, has built an online forecasting tool that alerts clients, mostly energy companies, to potentially severe weather systems.

Bennett developed the technology over the last few years in conjunction with the Scripps Institution of Oceanography at the University of California, San Diego. The idea originally came from energy-sector companies who approached the university asking if it could help them predict severe weather beyond six days, said Bennett, who added it took 12 to 18 months to create the algorithms.

"The past winter was an excellent case study for EarthRisk's methodology," Bennett said, referring to the intense cold weather systems that afflicted both the U.S. and Europe, shutting down airports, paralyzing traffic and wreaking havoc with the electricity grid. "EarthRisk detected those changes and detected the risk that such a thing would develop between 20 and 30 days prior to the time that it actually occurred."

Late last year, the company released its cold-snap prediction tool - ColdRisk - and Bennett said internal metrics showed the technology accurately forecasted more than 80 percent of the severe cold fronts - at least 15 to 20 days in advance - that formed in the Midwest and Eastern U.S., between November 1, 2010 and March 31, 2011.

"The customers that use our technology are using it to manage their own resources," said Bennett, adding EarthRisk is used by energy companies to save money and by financial institutions "to make proactive investments to make money on this information."

Bennett said the research team looked at weather patterns over the past 60 years and developed a series of algorithms to help predict future storm systems at lead times between two to four weeks.

The algorithms incorporated variables from across the planet, including temperature at the top of the Earth's atmosphere, jetstream winds, pressure patterns and thunderstorms.

THE PITCH

As much as $485 billion a year of U.S. economic output is impacted by the weather, according to a study released in February by the Bulletin of the American Meteorological Society.

"We have demand across the globe," Bennett said, adding EarthRisk has specialized products for regions in the U.S., Europe and Asia and could also be applied to Australia. "One of our biggest challenges is determining how are we going to build out products because we have more of a demand than we can service early on."

EarthRisk earns revenue from subscription fees and by selling its proprietary research to companies to use as they see fit. Subscriptions range from "tens of thousands of dollars" to "10 to 20 times" more for highly-customized data, said Bennett.

"We expect in 2011 we'll significantly grow our subscription base well over double or triple where we started," he said, adding by 2012 he hopes the company will be able to launch new products in other sectors such as insurance, supply chain management and transportation. This month the company debuted HeatRisk, which forecasts the formation of heatwaves.

Bennett said EarthRisk is looking to expand beyond its five-person staff by hiring software developers and people qualified to determine how weather can impact business decision-making and risk management.

To date, the startup has raised about $500,000, said Bennett, including an undisclosed amount from San Diego- based venture capital firm SEAR Technologies. "We're largely operating on revenue generated by our customer base."

Bennett's biggest challenge to growing the company is getting the word out and managing new potential customers who want the software adapted to their industry.

"We're really looking to become the centralized place where businesses come to look at their weather risk."