In 2015 industrial and enterprise IoT solutions attracted over 75% of funding as compared to consumer IoT companies; this trend is expected to continue in 2016
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| A file photo of the EHang 184 passenger-carrying drone at Consumer Electronics Show (CES) in Las Vegas, Nevada, US. |
With over $20 billion in merger and acquisition
(M&A) deals and close to $2 billion in funding, the Internet of Things
(IoT) witnessed significant traction in 2015.
Between 2010 and 2015, over $7.5 billion has been invested in IoT
companies globally in over 900 deals. While until 2014, consumer-focused IoT
solutions (primarily in Wearables and Quantified Self) garnered a slightly
higher share of total IoT investments, industrial and enterprise IoT solutions
attracted over 75% of funding in 2015 as compared to consumer IoT companies.
This trend is expected to continue in 2016 by a larger order of
magnitude—2-3 times more than consumer IoT.
IoT is defined as a worldwide network of “things” that include
identifiable devices, appliances, equipment, machinery of all forms and sizes
with the intelligence to seamlessly connect, communicate and control or manage
each other to perform a set of tasks with minimum intervention. The goal of IoT
is to enable things to be connected anytime, anyplace, and with anything or
anyone.
Industrial and enterprise IoT solutions are primarily in the
verticals of smart manufacturing, Industry 4.0, smart grids, oil rigs and
refineries, wind farms, retail and logistics. Most of these industries have had
sensors and been experimenting with sensor-enabled automation for a long time.
Now with IoT, the focus is on artificial intelligence and machine learning,
security and sensor computing.
Consumer IoT solutions are being developed in segments like home
automation, health care, quantified self (gaining self-knowledge by using
technology such as sensors on your smartphones or wearables to track your own
data such as heart rate, stress levels, etc.), sports, automotives, and
entertainment. And, the focus of consumer IoT extends much beyond the three
areas of industrial IoT, to include miniaturization, power management, mesh
networks, better connectivity protocols, interoperability and convergence
platforms.
We are witnessing disruptive innovation in the consumer IoT space
across verticals. These include charging pods mounted on street-light poles
wirelessly charging electric cars on the move; transparent, non-intrusive
heads-up display (HUD) for cars that can handle voice calls, text and e-mail
messages, music, radio, and map-based navigation; network-enabled,
cloud-powered, AI-driven dolls that can converse with kids and double up as
security devices; miniaturized and portable ambulatory/holter and stress analysis
ECG (electro cardiogram) machines that one can carry on person, avoiding a
visit to the big hospital; smart pots that allow users to remotely monitor soil
and light conditions and even water their plants through a mobile application;
and smart insoles that measure impact stress on a runner’s feet and knees and
provide intelligent analysis and guidance to improve one’s body dynamics and
performance.
Comparatively, in industrial IoT, innovation is incremental. Many
large technology companies are cautiously participating in the consumer IoT
innovation through corporate venture funds and accelerator programmes. But this
does not amount to a true open support of the innovation ecosystem.
From a professional venture capital investor’s point of view,
industrial IoT has short-term adoption and business potential, hence most
consumer IoT products are perceived as point solutions. And, this sentiment is
currently driving the investment decisions of professional venture capitalists
in the IoT space.
However, one key trend that we are observing in the consumer IoT
funding space is the rise of crowd-funding. Many consumer IoT companies, in
their early stages are using crowd-funding platforms to raise seed funds.
These companies seek professional venture capital funding only
once their idea is validated, the product developed and early adopters
garnered, and the solution and the company are ready to scale. This model of
democratizing the venture capital through crowd-funding (in the early stages)
is the most sustainable and scalable framework for consumer IoT ecosystem
growth, and is expected to continue for the next few years.
The recent regulatory breather—JOBS Act (in the US)—that allows
investors to buy securities through crowd-funding is effectively a welcome step
for the young IoT companies.
Currently, in the IoT evolution timeline, we are at a stage where
we were during the early 1990s of the internet era. The Google(s) and
Facebook(s) of the IoT are yet to be born and/or yet to come to the fore.
For IoT to evolve as a web of platforms for connected smart
objects, the biggest challenge will be to overcome the fragmentation of
vertically oriented closed systems and architectures and application areas
towards open systems and integrated environments and platforms.
For IoT to go mainstream, the industry needs to solve remaining
technological barriers (interoperability, security, etc.), explore integration
models, validate user acceptability, promote innovation on sensor/object
platforms, and demonstrate cross use-case issues. Moreover, industrial and
consumer IoT solutions need to be duly supported and evolve together.
