The Internet of Things: An Update
Market Overview and Proprietary Financial Intelligence
Note: this is an adopted presentation of one delivered on April 14, 2014
Introduction
Internet of Things | April 14, 2014
SVB Analytics provides strategic advisory, research, and valuation services to the venture capital ecosystem.
In early-2013 we published a report on the Internet of Things. The following serves as a brief update a year later.
Original Report: http://www.svb.com/internet-of-things-2013-infographic/
Internet of Things | April 14, 2014
12,500,000,000Connected Devices
201020031998 2008
MIT coins “Internet of
Things”
IoT v1.0 500,000,000
Connected Devices
Apple launches iPhone
IoT v2.0 12,500,000,000
Connected Devices(mostly smartphones)
“Decade of Slow Progress”
Internet of (Some) Things v1.0
Internet of (More) Things v2.0
Rooted in the late-1990s, the Internet of Things is not new, however the latest iteration has been powered by the explosive growth of connectivity
Internet of Things | April 14, 2014
What’s Driving the Internet of Things?
Internet of Things
MOORE’S LAW
METCALFE’S LAW
BIG DATA ANALYTICS
Rapid decline in price & size of wireless sensors and compute resources
Proliferation of connected devices & adoption of wireless standards
Exploding volume of data creating need for actionable insights
Hardware advances and network effects
have been key accelerators, but big
data analytics capabilities have really propelled IoT version
2.0 forward
Internet of Things | April 14, 2014
The “Series A Crunch”
There are more angel/seed funded companies than institutional dollars available to continue to fund them.
Declining Venture Capital Investment
Venture Dollars Raised Fall 27% Below 15-Year Trailing MedianTomasz Tunguz July 22nd, 2012
“”
The “Series A Crunch”
Last year we predicted a Series A crunch as the number of seed-funded Internet of Things companies far exceeded the amount of funding that was
available—there were too many companies chasing too few dollars.
Internet of Things | April 14, 2014
The “Series A B Crunch?” Declining Venture Capital Investment
Venture Dollars Raised Fall 27% Below 15-Year Trailing MedianTomasz Tunguz July 22nd, 2012
Rising Crowdfunding Investment*
Instead, an explosion of crowdfunding filled the gap. It’s still unclear if this has fully filled the funding gap or just pushed things out to a Series B crunch. More importantly, crowdfunding now demonstrates a form of “crowdfiltering”, where consumers provide vetting of ideas early on.
There are more angel/seed funded companies than institutional dollars available to continue to fund them.
“”
Internet of Things | April 14, 2014
Fragmentation of Wireless Standards Industrial Internet Consortium (IIC)Launched by Cisco, AT&T, Intel, GE, & IBM – 3/27/2014
Challenges (Still) Facing IoT v 2.0
Though many challenges from a year ago still remain, industry is addressing these directly and progress has been made. One area that didn’t materialize was
consumer retrofitting, where adoption has been slow as consumers appear to be willing to wait for full replacement cycles before upgrading to “smart” devices.
Challenge Update
Power source limitations
Costs to retro-fit current generation ‘things’ and slow rate of replacement
Ultra-low-power circuits, Apple iBeacon & Bluetooth Low Energy (BLE)
Retrofitting consumer technologies will be transitional as horizontal is slow
Retrofitting industrial may accelerate through innovation due to higher replacement cost.
Internet of Things | April 14, 2014
Energy & Home Healthcare Enablement
Opportunities – Then and Today
Fastest-moving: proliferation has occurred in the
connected home
Up-and-coming: healthcare has seen
acceleration by reducing costs
Didn’t materialize: consumers slow to trade dumb devices
for smart ones
Internet of Things | April 14, 2014
Clear Use Cases Crowd-filtered Consumable Analytics
Smart CitiesEnergyAgriculture
RetailBuildingsBankingWaste Parking
Healthcare
The Next Perspective – Predictions
Compelling use cases will continue to languish without
clear business cases
Crowdfunding as “crowdfiltering” will
revolutionize the way products are brought
to market
Consumable analytics allows individuals to improve behavior
Internet of Everything
Internet of Things | April 14, 2014
Summary• Despite its enormous potential, there remain significant business and technical hurdles to
overcome for adoption of the “Internet of (Every)thing.” Until compelling use cases are translated into directly viable business cases, IoT adoption will proceed slowly.
• We predicted a Series A crunch that never came—instead a torrent of crowdfunding filled the gap, pushing many IoT companies into later stages. More importantly, this has served as a “pre-vetting” process, allowing market feedback before a product launch.
• Encouragingly, industry has responded to some of the biggest challenges—fragmented networks, power sources, and retro-fitting—in the last year, and progress has been made (though at times uneven– ie. consumer retro-fitting v. industrial adoption).
• In spite of these headwinds, significant opportunity exists. We continue to see the greatest opportunity in energy and home management, health care, and enablement technologies. The former two witnessed a strong year since our first report was published, though enablement on the consumer side has progressed more slowly.
• Looking ahead, we continue to see slower adoption of IoT until clearer business cases can be made. We also believe that crowdfunding will play an increasingly important role in IoTvalidation and vetting—representing an accelerant in the market. Finally, we expect to see a rise in consumable analytics that will drive IoT adoption by impacting real-time behavior.
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