In Return to Roots, Understory Raises $7.5M & Relocates HQ to WI

Understory is coming home to Wisconsin with $7.5 million in tow.

The weather technology startup, formerly known as Subsidence, was founded in Madison, WI, in 2012 and went through Wisconsin startup accelerator Gener8tor’s first session. A year later, the company received an investment and hands-on mentorship from Bolt in the hardware venture firm’s Boston space. Understory decided to stay in the area, and set up shop in the Greentown Labs incubator in nearby Somerville, MA.

Understory was emblematic of a challenge that has dogged Wisconsin at times—how can the state keep its promising tech startups from leaving for greener pastures?

But now, Understory is flipping that script. The company announced a $7.5 million Series A round and plans to open a Madison office that will serve as its new headquarters. At the same time, it will expand its team in Somerville.

“It’s great to move forward to the next chapter for the company,” co-founder and CEO Alex Kubicek says. “We’re really excited for what the future will bring.”

Understory has now raised about $9.7 million total in outside capital, Kubicek says. Two new investors led the Series A round: Madison-based 4490 Ventures and Monsanto Growth Ventures, the venture capital arm of agrochemical and seed giant Monsanto (NYSE: MON). Other investors in the round included new backer CSA Partners, based in Milwaukee, as well as previous investors True Ventures, RRE Ventures, and SK Ventures. 4490 Ventures managing director Greg Robinson and True Ventures partner Puneet Agarwal joined Understory’s board.

Understory developed a solar-powered device (see above) that monitors weather information, including wind speed and direction, temperature, humidity, rain, and hail. While traditional radar-enabled weather centers observe the atmosphere, Understory collects data directly at the Earth’s surface. This provides a more comprehensive and accurate picture of the movement and intensity of weather events, the company says. (Understory is a term for the area beneath a rainforest’s canopy.)

The idea is to install a dense network of Understory’s compact weather stations on the ground in various cities, creating a less expensive, more technologically advanced weather-tracking system than the current standard.

Understory initially intended to sell the devices to consumers, such as engineers and hobbyists, in order to crowdsource weather data. It later ditched that plan in favor of targeting large companies across a variety of industries.

So far, its main customers are insurers—Madison-based American Family Insurance, for instance—who are betting that Understory’s technology can help them save money and provide better customer service. An insurer can use Understory’s data to, say, recommend homeowners get their roof inspected for degradation due to hot temperatures and the sun’s rays, Kubicek says. Understory can also help insurers be more efficient and proactive in contacting customers whose property might’ve been damaged by a storm.

“Not everyone enjoys processing claims with their insurers,” Kubicek says. “This is a way to improve the claims experience as well as just create better dialog between the insurer and the policyholder.”

Understory executives think the technology also has potential applications in broadcasting, agriculture, and more. The investment by Monsanto Growth Ventures is an endorsement of that vision, and it will enable Understory to deploy its devices on farms and help growers better manage their fields, Kubicek says. Monsanto’s investment builds on its $930 million acquisition in 2013 of The Climate Corporation, which crunches weather data and underwrites insurance policies for farmers.

“We’re adding more markets to our scope,” Kubicek says.

To date, Understory has deployed 35 of its devices in the Kansas City area, 12 in and around Dallas, and two in Somerville, MA. The devices are typically installed two to four miles apart from each other, Kubicek says.

The company will use the cash windfall to install more devices in cities where it currently has a presence, and to expand to more cities, including Denver, he says.

“We’re manufacturing another 250 stations that we’ll be installing across the U.S.,” he says.

The new money will also fund new hires. Understory currently employs 10 people, and it intends to hire around 20 more this year, spread between Somerville and Madison, Kubicek says.

The Madison office will serve as the corporate headquarters and home base for Understory’s hardware engineering and data analytics teams. The Somerville operation will focus on product development and sales and marketing, Kubicek says. He and co-founders Bryan Dow and Alex Jacobs will move to Madison, but will spend time in both offices.

There were a few reasons for opening the Madison office and designating it the headquarters. For one, it makes Understory’s investors eligible for Wisconsin tax credits, Kubicek says.

But the move was also strategic for Understory. The Madison office puts it closer to its device networks in Kansas City and Dallas. And like New England, there are plenty of insurance companies based in the Midwest, Kubicek says. (Not to mention lots of farmland.)

“It just made sense for us to be in two locations,” Kubicek says. “Plus, we were founded in Madison, so it’s really great to return to our roots.”

When Xconomy interviewed Kubicek two years ago about the move to Boston, he said Understory needed “a stronger foundation to build what we’re trying to achieve.”

Since then, the environment for startups in Wisconsin has improved, he says. He cites efforts by groups like Gener8tor and the addition of new funding sources as examples.

“It’s getting better,” Kubicek says of Wisconsin’s startup community. “It still has a long way to go. That’s where we think we can help.”

Specifically, Kubicek wants to help Wisconsin attract and retain talent—a fitting mission for the prodigal tech company returning home. Details are still being worked out, but Understory wants to create a data science fellowship program in which it would hire researchers from Wisconsin colleges and universities, Kubicek says.

“There are a lot of people moving out to either coast,” Kubicek says. “We’d like to be one of those companies that helps bring people back to Wisconsin or helps keep people” here.

Jeff Engel is a senior editor at Xconomy. Email: jengel@xconomy.com Follow @JeffEngelXcon

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