Expected to be completed in the first half of 2022, the deal also will raise up to $420 million to fund the startup’s plans for building a network of small radar satellites to improve its forecasts. The satellite network could allow the company to help scientists make more accurate, minute-to-minute predictions about killer storms and other catastrophic events, and ultimately create better climate models.
The company’s software already can be used to link its precise forecasts to specific advisories for business, such as when to de-ice a plane or halt a tennis match due to severe weather.
Tomorrow.io will trade under the symbol “TMW” once the deal closes.
The company was started six years ago by three Israeli military veterans, Shimon Elkabetz, Rei Goffer, and Itai Zlotnik, when they came to Boston for business school. Goffer and Elkabetz, former combat pilots, and Zlotnik, a veteran of Israeli special forces, all had encountered life-or-death situations in the field due to faulty weather forecasts.
Elkabetz testified before Congress in July, warning about the growth of extreme weather events and seeking greater investment in weather forecasting.
The startup’s customers include JetBlue, Uber, Ford, and the New England Patriots. Still, its sales so far are relatively tiny. Tomorrow.io said it expects to have $11 million of revenue this year, rising to $28 million next year and hitting $747 million in 2026. It expects to lose money on a cash flow basis until 2025.
The company could have continued raising money privately but sought the higher public profile of going public, chief executive Elkabetz said in an interview. And the SPAC route allowed Tomorrow.io to go public sooner than a traditional initial public offering.
”Our goal from day one was always to build the largest, most disruptive weather technology company in the world,” Elkabetz said. “Being public will help us with brand awareness, with a statement to the market that we’re here to stay, we’re here for the long run, and we’re building.”
Still, investors have soured on some recent SPAC deals, fearing that companies won’t be able to meet the rosy projections they offered. Elkabetz said Tomorrow.io is different because it already has many customers and real revenue, with an obvious path to growth. In September, the US Air Force signed a $19.3 million deal with the startup for access to data from its upcoming radar satellites. The company plans to launch two next year and a total of more than 30 by the end of 2024.
”We understand the sentiment [around SPACs] isn’t amazing,” Elkabetz said. “But I actually believe that this kind of vehicle was created for companies like us, that have a proven business model, a very tangible, competitive moat, and significant impact on the world, but are not traditional.”
The deal comes amid a miniboom of funding for climate tech startups. As of October, about $1 billion in venture capital had gone to Massachusetts climate tech companies this year, up from $864 million in 2020, according to PitchBook data. And that was before Commonwealth Fusion Systems’ $1.8 billion round last week.
”What we’re seeing in the market right now is a lot of momentum around anything that is related to climate solutions or climate change resiliency,” said venture capitalist Rob Day at Spring Lane Capital in Boston, who is not involved with Tomorrow.io. “Many corporate decision-makers and institutional investors, both, see the inevitability of climate change as both a widespread economic challenge and also a market opportunity.”
Aaron Pressman can be reached at aaron.pressman@globe.com. Follow him on Twitter @ampressman.
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