SVB Analytics Report on The Internet of Things

The Internet of Things
Market Overview and Proprietary
Financial Intelligence

SVB Analytics
provides business
analytics solutions
to every stakeholder
in the venture
capital ecosystem.

Advisory Services:

Client Focus:

 Due diligence support
 Valuation Guidance
 Proprietary market intelligence

Corporate venture,
innovation and
development groups

Valuation Services:
 409A Valuations (Stock Options)
 Purchase Price Allocation
(post-M&A Accounting)
 Goodwill and Intangible Asset
Impairment

Client Focus:
Venture-backed
companies

6,000
Valuations completed since 2006

Research:

1,200

 Proprietary Research and Data
 Customized Studies
 Thought Leadership

Active clients in 2012

Client Focus:
Corporate and
venture ecosystem

2

Executive
Summary

11

Advancements in technology have
created a renaissance for the
Internet of Things. Specific
sub-sectors show promise, but
significant technological hurdles
still remain to realize the holistic
vision.

14

Dissonance exists between
products and services that large
tech companies are pushing and
where strong growth is observed.

21

Innovation capital providers
continue to be skeptical until
quantifiable benefits exist beyond
a promise of widespread benefits
to society.

3

Table of Contents

Overview of the Internet of Things
6

The Internet of Things in 2013

9

What has changed | Case Study in Apparel

11

Advancements Powering IoT v2

12

Challenges Facing IoT v2

Market Forces at Work
14

Push vs. Pull – A Clear Business Case

15

Relative Overall Performance of IoT Companies

16

Sales Trends of IoT Companies by Size

Financing the Internet of Things
20

VC Market Dynamics Affecting IoT

22

IoT investments – Who and How Much

24

Revenue Growth and Value Progression

Niche Performance Mapping
27

Internet of Things Segmentation

28

Enablement – Spotlight & Analysis

34

Connected Healthcare – Spotlight & Analysis

37

Energy Efficiency – Spotlight & Analysis

41

Summary and Key Takeaways

42

Definitions

4

Table of Contents

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Definitions

5

What is the Internet of Things in 2013?
The “Internet of Things” is not
an industry.
It is an umbrella term encapsulating a collection of
interrelated industries. Each sub-industry has its own
stakeholders, value chains, and economics, and
therefore each must be evaluated individually.
The Internet of Things is also the buzz word of 2013 in
the tech media, Kickstarter world (the “Quantified Self”),
and of large technology companies worldwide.

Qualcomm CEO Paul Jacobs at CES 2013, courtesy of TheVerge

6

Internet of Things v.2
Introducing the Gartner Hype Cycle

Re-Introducing the Gartner Hype Cycle

1998

2012 – 2013

MIT coins the term

Version 2 of IoT re-emerges at the top of large
enterprises’ key strategic initiatives, expectations
peaking

RFID to bring about a ubiquitously connected world by
2005

What happened to IoT v.1?
“It is important to take into account that the ‘Internet of Things’ is
a concept invented by academics, and not a response to any
expressed market need.”
– Bob Williams, Synthesis Journal, 2008

7

What Has Changed in IoT?
Successful IoT v1

Emerging IoT v2

M2M Communications

Consumer and Quantified Self

Wireless Patient Monitoring

Energy Management

Fleet Management and Asset Tracking

Mass Enablement Technologies

An “Internet of Some Things”
Primarily enterprise-class, dedicated
hosting, high investment, ROI-driven
solutions.

An “Internet of More Things”
A new class of tools and solutions
driven by decreasing hardware prices
and cloud infrastructure.

8

Case Study | Apparel Industry – IoT V1

Linear, one-dimensional information flow
 Static data points
 Focus on improving logistics
 Limited or no feedback to marketing/sales, design teams

9

Case Study | Apparel Industry – IoT V2

Complex, multi-dimensional information flow
 Dynamic, rich data points collected at many points in the distribution channel
 Real time data collection and analytics allowing agile product design and product
improvements
 Greatly enhanced product mix, market segment targeting and better customer experience
10

Advancements Powering IoT v2 | Key Convergences
Moore’s Law

Metcalfe’s Law

 Decreasing prices of wireless
sensors, hardware

 Penetration of smartphones and tablets
 Public, private, and hybrid cloud-based
architectures and resources

 Storage and compute
resources

 Wireless connectivity technologies
(3G/4G/LTE, WiFi, ZigBee, Bluetooth)

 Smaller, more diverse, and
powerful chips

 Ultra-low power Micro-controller Units
(MCUs)

Internet
of
Things

Big Data Analytics

A confluence
of technologies
have been key
drivers advancing the
Internet of Things

 Exploding volume of data
 Cloud storage systems are dated
 Converting data into actionable intelligence
 Controlling decisions, optimizing resources,
lowering uncertainty in real time

11


 Phasing out of 2G spectrum
 Fragmentation of Wireless
Communication Standards
 Battery technologies and alternative
power sources (solar, motion,
vibration, temperature)
 Software architectures and APIs
 Costs to retro-fit current generation
“things”
 Master ontology to facilitate interdevice communication

“A new Wireless Intelligence report estimates more than 200 LTE
networks will have launched around the world by 2015. That’s great
news, but they’ll use 38 different frequencies.”
— Kevin C. Tofel, GigaOm (December 2011)

12

Table of Contents

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Definitions

13

Push vs. Pull | A Clear Business Case

Large Tech

Buyers are pulling through:

Push demand for products

Low cost, high utility

High need, high ROI

Mobile Operators
Push demand for services

Large, and frequently slow-growth, enterprises have been the main drivers of IoT use cases. Particularly around the
connected home, investments in “marketing the future” have failed to drive widespread consumer demand for those services.
Conversely, innovation in Healthcare IT and Energy Management has come directly from the VC-backed market, and in
response to buyer-driven business cases.

14

Relative Overall Performance
IoT Companies Struggle at the Early Stages Relative to a Broad index of Same-Size Peers

0.43%

0.50%

Sales Growth Relative to SVB Universe

0.22%

IoT companies with less than $10M
in revenue underperform relative to
a broad peer group. However,
companies with more than $10M in
revenue outperform their peers.

0.00%

This can be seen in the progression
of comparable sales growth from
the sub-$1.5M sales growth
segment to the large, over-$10M
segment.

-0.50%
-0.48%
-1.00%

-1.50%

-2.00%

-2.50%
-2.75%

-3.00%
All IoT

Sub $1.5 M
n=14
Median Sales:
$403K

$1.5 to $10 M
n=17
Median Sales:
$4.24M

Over $10 M
n=12
Median Sales:
$13.9M

Source: SVB Analytics

15

Small IoT | Net Sales Less Than $1.5M
Viral Growth is Observed
REVENUE/EXPENSE
GROWTH
(ANNUALIZED %)

Small IoT companies are able to
grow revenues faster then their
sales and marketing spending. This
ability to grow revenues faster than
their operating expenses is an
indication of viral growth.

4.50
4.00

Revenue
(67.3%)

3.50
3.00

COGS
(76.9%)

Operating
Expenses
(28.1%)

However, given their small sales
volume, these companies lack
economies of scale and struggle to
keep their production costs (COGS)
in check. As such, we observe high
fixed costs relative to net revenue.

2.50
2.00
1.50
1.00
0.50

2.50
2.00
1.50

VIABILITY RATIO
1.00

n=14

Q3.12

Q2.12

Q1.12

Q4.11

Q3.11

Q2.11

Q1.11

Q4.10

Q3.10

Q2.10

0.50

Q1.10

Viability Ratio
(1.95)

CHANGE IN NET REVENUE
CHANGE IN OPERATING EXPENSES

Median Sales: $403K


16

Medium IoT | Net Sales Between $1.5M and $10M
Viral Growth Slows, Acquisition Costs Accelerate
REVENUE/EXPENSE
GROWTH
(ANNUALIZED %)

Revenue
(14.2%)

As they grow, revenues at IoT
companies continue to outpace
sales and marketing spending (as
tracked by their operating
expenses), exhibiting slower yet still
present organic growth.

2.00

1.75

1.50
COGS
(22.8%)

Operating
Expenses
(6.6%)

However, the widening gap
between Revenue growth and
COGS growth indicates trouble
scaling from early-adopters to a
wider customer base.

1.25

1.00

0.75

0.50

1.50
1.25
1.00

VIABILITY RATIO
0.75

n=17

Q3.12

Q2.12

Q1.12

Q4.11

Q3.11

Q2.11

Q1.11

Q4.10

Q3.10

Q2.10

0.50

Q1.10

Viability Ratio
(1.19)


Median Sales: $4.24M


17

Large IoT | Net Sales Greater Than $10M
Scale is Achieved
REVENUE/EXPENSE
GROWTH
(ANNUALIZED %)

Revenue
(23.3%)

As IoT companies achieve size and
scale, revenue growth not only
outstrips sales and marketing costs,
but also production costs (i.e.
COGS growth). In contrast to
smaller companies, large
companies’ operating expenses
begin to be affected by the scale of
revenues

2.00

1.75

1.50
COGS
(17.3%)

Operating
Expenses
(11.6%)

1.25

1.00

As can be observed in all three
revenue buckets, IoT companies
exhibit the ability to grow revenues
without excessive investments in
sales and marketing expenses.

0.75

0.50

1.50
1.25
1.00

VIABILITY RATIO
0.75

n=12

Q3.12

Q2.12

Q1.12

Q4.11

Q3.11

Q2.11

Q1.11

Q4.10

Q3.10

Q2.10

0.50

Q1.10

Viability Ratio
(1.28)


Median Sales: $13.9M


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Definitions

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The “Series A Crunch”

Declining Venture Capital Investment
Venture Dollars Raised Fall 27% Below
15-Year Trailing Median
Tomasz Tunguz, Tech Crunch, July 22, 2012

Dan Lyons, CB Insights, December 3, 2012

There are more angel/seed-funded companies than institutional dollars available
to continue to fund them.
20

Does a “Series A Crunch” Affect IoT
Disproportionately?
IoT Companies by Round of Funding
Estimates of Silicon Valley Bank’s market share in the VC-backed
market exceed 50% in the U.S.. A review of identified IoT
companies shows an even distribution by stage of development
between Series A, B, and C.

Series D
11%
Series A
30%

However, IoT companies as a % of SVB’s total client base is small
(~3%), indicating an overall lack of VC enthusiasm for the space
thus far.
An important thing to note, SVB’s portfolio does not cover a
majority of the angel-backed market (or seed-stage companies).
Activity in IoT at the seed-stage is high, but most products
being developed are not “venture fundable.”

Series C
30%
Series B
28%

Note: Chart may not add up to 100% due to rounding


21

Who is Investing in IoT?
Investor Types and Round Preference
FUNDING
DISTRIBUTION

INVESTOR ACTIVITY

11%

Strategic
Angels/Individuals
VC

Series A

30%

32%
50%

Series B
Series C

30%
Series D

18%

28%

The ratio of Strategic-to-VC (excluding angels) is higher in IoT than other sectors.
This further illustrates the strategic imperative for large enterprises to create a market for IoTrelated products and services.
The even distribution between Series A, Series B, and Series C supports the view of two
iterations of IoT and that certain sub-industries have progressed from product development
to product-market fit.
Notable VCs include KPCB, DAG, Khosla, Lighthouse, and NEA.
Notable Strategic Investors include Intel, BestBuy, Cisco, and Comcast.


22

How Much are VCs Investing?

Total Invested Capital

$47

$50

Median Round Size

$US Millions

$45
$40
$35

$29

$30
$25

$18

$20

$12

$15
$10

$18

$6

$11

Series B

Series C

$6

$5
$0

Series A

Series D

Important Note: “Series A” in SVB databases refers to institutional VC rounds. Angel rounds are
considered to be “Seed” rounds.
To get a product to market and successfully expand (Series C and beyond), it takes, on average,
$30M+ in total invested capital. Given some of the quick hits in recent years (e.g. Instagram), IoT
factors such as hardware development, inventory management, long sales cycles and/or slower
than expected up-take may explain the lack of investment activity.


23

Revenue by Stage of Development
Median Revenue at Financing
Revenue progression from Series B to Series C indicates that
many mid-stage IoT companies experience trouble creating
rapid growth.

$25

Successful Series C companies take invested capital and fuel
strong growth going into their Series D rounds. There are
much fewer Series D companies than Series C, indicating that
winners and losers separate at this stage of development.

$20

$US Millions

Lucrative for those that execute
(survivorship from Series C to
Series D)

Unfortunately, the cost to get an IoT company through its
Series C financing is high (~ $30M.)

$15

$21.8
$10
Traction challenges

$5
$6.1
$4.7
$0.1
$0
Series A

Series B

Series C

Series D


24

Value Progression

Up-Rounds
Flat Rounds
Down Rounds

80%

75%

75% of Series D
rounds are at higher
valuations than the
Series C

70%
60%

60%
53%

50%
37%

40%
30%
20%

17%

25%

23%
11%

10%
0%

The relatively higher proportion
of down-rounds at the Series C
financing again highlights the
growth challenges mid-stage
companies face.

0%
A-to-B

B-to-C

C-to-D

200%
Average Step-up
Average Step-down

Those that successfully execute
are rewarded with higher
valuations in the Series D round.

157%
150%
100%
58%
50%

23%
0%

0%
-50%

-45%

-45%

-100%
A-to-B

B-to-C

C-to-D


25

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Definitions

26

IoT Segmentation

Communication
• Backhaul
• Data Transfer

Connected
Healthcare
• Remote
Monitoring
• Telehealth

Energy and
Environment

Enterprise
and IT

• Water Sensor
• Smart
Meter/Utilities

• Data Center
Monitoring
• MDM

Enablement
• Toolkits
• Cloud
Services

Retail and
Commerce

Heavy Industry
• Process
Control
• PetroChemical

• Locationbased
Commerce

Security and
Safety
• Emergency
Response
• Data Privacy

Smart Buildings
• Automation
• Energy
Management

Transportation
and Logistics
• Supply Chain
Management
• Asset
Tracking

Distribution of SVB IoT Companies

35%
30%
25%
20%
15%
10%
5%
0%
Communication

Connected
Healthcare

Enablement

Energy and
Environment

Enterprise
and IT

Heavy Industry

Retail and
Commerce

Security and
Safety

Smart
Buildings

Transportation
and Logistics


27

Niche Spotlight | Enablement

The Brains

Software

 Enables underlying M2M
interactions, creating a unifying
experience across platforms
 Maximizes the limits of the
operating environment through
intelligent, robust and lean
software
 Increases the focus on an
information and decision-based
world delivered through apps

The Sensory Network

Hardware

 The majority of connected
devices in IoT are located at
the “last inch” of the network
 Bridging the gap between
access networks such as the
Internet or utility networks to
a localized home area
network or sensor nodes

Source: ZTE Technologies - Opportunities, Challenges and Practices of the Internet of Things [2010]

28

Spotlight | Enabling the Internet of Things
Hardware

Software

Enabling late-stage consumer-facing product development

Empowering IoT end-to-end and unifying user experience

1. Interoperability through Standardized Protocols
 Uniformity across frequencies, communications protocols
 Minimize device, node and band fragmentation
 TCP/IP support along the communications channel

1. Single Control Interface
 Creating rich, cross-platform native experiences across
connected devices

2. Superior Power Efficiency
 Ability to operate for months/years on low power sources
 Ability to harvest energy from environment

3. Ease of Installation/Deployment
 Consumer-facing devices with negligible capacity for user
error, ease of installation in a host of environments
 Developer-facing devices with ease of developing and
deploying firmware updates, design, debug and optimize

2. App-Platform Consolidation
 Build out application-development environments spanning
multiple devices
 Enable development of consumer electronics devices –
tablets, smartphones, set-top boxes, social TV, in-car
entertainment

3. Optimize Cloud-Based Service Deployments
 Developing smart software for tracking, situational
awareness, decision analytics, resource and process
optimization – all deployed and controlled through the cloud
 Enhanced network optimization for content delivery

29

Niche Analysis | Enablement
Organic Growth Observed
REVENUE/EXPENSE
GROWTH
(ANNUALIZED %)

Revenue
(27.3%)

IoT enablement technologies are
the base upon which all other IoT
products are built, and this
dependence is reflected in the
robust sales growth.

2.00

1.75

1.50
COGS
(27.4%)

Operating
Expenses
(18.7%)

However, strong organic growth is
matched with increasing COGS and
operating expenses.

1.25

1.00

0.75

0.50

1.50
1.25
1.00

VIABILITY RATIO
0.75

Q3.12

Q2.12

Q1.12

Q4.11

Q3.11

Q2.11

Q1.11

Q4.10

Q3.10

Q2.10

0.50

Q1.10

Viability Ratio
(1.07)


Distribution of Companies in this Niche ($M):

Sub $1.5

$1.5 to $10

Over $10


30

Enablement | Software
REVENUE/EXPENSE
GROWTH
(ANNUALIZED %)

Much of the current excitement in
the IoT enablement space is driven
by advancements in Big Data.

3.00
2.75

Revenue
(44.0%)

2.50

The Cloud links sensors, networks,
people and applications, allowing
for the analysis of Big Data.
Software revenue models allow for
fast scaling after high initial
investments in R&D.

2.25
COGS
(51.1%)

2.00
1.75
1.50

Operating
Expenses
(26.9%)

1.25
1.00
0.75
0.50

1.50
1.25
1.00

VIABILITY RATIO
0.75

Q3.12

Q2.12

Q1.12

Q4.11

Q3.11

Q2.11

Q1.11

Q4.10

Q3.10

Q2.10

0.50

Q1.10

Viability Ratio
(1.14)



Sub $1.5

$1.5 to $10

Over $10


31

Enablement | Mobile Devices
Falling Hardware Prices
REVENUE/EXPENSE
GROWTH
(ANNUALIZED %)

Revenue
(-7.5%)

The prices of mobile enablement
devices have continued to fall,
resulting in decreased revenue
levels.

2.00

1.75

Production costs for these
companies have risen modestly but
have been offset by proactive
management of operating
expenses.

1.50
COGS
(3.7%)

Operating
Expenses
(-7.6%)

1.25

1.00

0.75

0.50

1.50
1.25
1.00

VIABILITY RATIO
0.75

Q3.12

Q2.12

Q1.12

Q4.11

Q3.11

Q2.11

Q1.11

Q4.10

Q3.10

Q2.10

0.50

Q1.10

Viability Ratio
(1.00)



Sub $1.5

$1.5 to $10

Over $10


32

Company Spotlights | Enablement
Hardware

Software

Overview

Overview

 Founded in 2011, Electric Imp is developing Imp, a platform that
leverages WiFi and cloud technologies to connect everyday electrical
devices to the Internet.

 Founded in 2000, UIEvolution provides the UIEngine platform, tool
suite, and specialized services to support real-time data application
services, rich storefront clients, multimedia applications, casual games,
and device/service User Interfaces (UIs) to a large number of devices
and wireless/broadband users. UIEvolution employs both a traditional
packaged software delivery model and an SaaS-based delivery model
for its products.

 Imp-enabled devices can be accessed through the web or mobile
devices using Electric Imp’s application or other third-party
applications.
 The Imp chip will be available as a user-installable card integrated with
a processor and WiFi capability. The chip can automatically recognize
the device in which it is inserted to retrieve software required to operate
the device.

Value Proposition
To Developers:

Value Proposition

 Write-once application logic that adapts to many native platforms and
adapts itself to different screen types.

To Developers:

To Manufacturers/Businesses:

 Open Imp API, which connects to most Web services, servers and
applications.

 The connected car vertical is very promising – from audio today to
enhanced driving and increased safety in the future.

 Web-based IDE maintains software and pushes new features instantly.

 Creates seamless rich, cross-platform native user experience on
multiple platforms across multiple devices.

To Manufacturers:
 Pre-built scalable, reliable and secure connectivity solution.
 Design, test and deploy network integration into unconventional
devices.

 Integrate back end services: takes your existing Enterprise web
services and optimizes them to work better with your mobile
applications.
 Diverse app management: easily modify the content of applications
across diverse platforms and screens.

33

Niche Spotlight | Connected Health
A Clear Business Case:
 Demographic changes leading to an increasing target market
 Rapid decrease in size and cost of devices
 Federally mandated re-admission penalties leading to increased provider
demand for telehealth and remote patient monitoring solutions
 Gradual shift in payer framework to accountable care organizations resulting
in greater reimbursement for connected healthcare solutions
 U.S. Department of Health and Human Services launching the Health Data
Initiative, which provides greater amounts of health data in more usable
formats

“While the focus of funding has been in the Health
Information Management [HIM] category, which
covers technologies on the Healthcare Practice
side, there is significant investment and funding
going into companies that engage the consumers—
like mobile health, telehealth, personal health, and
social health.”
– Mercom Capital Group “HIT 2012
Annual Funding and M&A Report”

Risks and Challenges:
 Long sales cycles associated with selling into healthcare markets lead to
delays in successful product commercialization
 Complex regulatory requirements associated with healthcare devices that
many technology entrepreneurs are unfamiliar with leading to product delays
 Security and privacy concerns related to the data generated by wireless
devices lead to delayed customer acceptance
 Lack of standards leads to fragmented solutions, inability to scale efficiently

Source: Perficient.com

34

Niche Analysis | Connected Health
Modest Growth, Lack of Scale
REVENUE/EXPENSE
GROWTH
(ANNUALIZED %)

Revenue
(11.5%)

IoT companies developing
patient-monitoring products are
seeing solid fundamental consumer
demand for their products.

2.00

1.75

However, companies in this niche
tend to be relatively small (less than
$10M in sales,) resulting in higher
COGS growth due to a lack of
scale.

1.50
COGS
(27.4%)

Operating
Expenses
(5.0%)

1.25

1.00

0.75

0.50

1.50
1.25
1.00

VIABILITY RATIO
0.75

Q3.12

Q2.12

Q1.12

Q4.11

Q3.11

Q2.11

Q1.11

Q4.10

Q3.10

Q2.10

0.50

Q1.10

Viability Ratio
(1.06)



Sub $1.5

$1.5 to $10

Over $10


35

Company Spotlight | Healthsense
Overview:
 Founded in 2003, Healthsense is a Minnesota based company
providing technology-enabled care solutions for the entire senior
care continuum.
 Healthsense has its platform in over 100 senior living communities
serving approximately 10,000 seniors.
 Full suite of WiFi-enabled products for remote monitoring, nurse
calling, emergency response and wellness management.
 Healthsense plans to offer their products and services to all at-home
care customers.

Value Proposition:
 Aging demographic yields large and growing market for senior care.
 PPACA (Obamacare) expected to increase incentives and financing
options for assisted living programs. Medicare and Medicaid
incentives driving more long-term preventative care spending.
 Potential to be a key provider of highly valuable data and services.
 Partnerships with strong partners such as Verizon, Sodexo, as well
as NIH.
 ROI benefits of a single standards-based platform solution.

36

Niche Spotlight | Energy Efficiency in the Home
Current State of the Smart Energy Home:
 Smart Energy technologies employ two primary approaches to reducing peak
demand:
 Energy Efficiency: Cutting unnecessary energy consumption, such as plug-load
waste and vacant home temperature control.
 Load Management: Shifting energy consumption away from peak demand times,
optimizing utility generating capacity.

 Energy efficiency models are already prevalent in the Smart Energy Home—
they enable real-time energy use monitoring, remote control of devices and
appliances, and aggregate consumption data and trends for better informed
decision making.
 Load management is critical to reducing peak energy demand but requires
residential customers to know the current price of electricity, and be charged
dynamically as opposed to a flat rate. Installing “smart meters”, digital meters
which enable two-way communication, is the first step a utility can make toward
enabling the Smart Energy Home.

Risks and Challenges:

Source: geappliances.com

 Metering: Legacy meters must be overhauled to enable two-way communication
of real-time electricity pricing based on peak demand.
 End Use: Residential energy consumption is fragmented over several dozen
end uses, each contributing differently to a user’s energy bill.
 Affordability: Broad consumer adoption requires technologies to be priced to
provide users with a reasonable rate of return on their energy expenses.
 Security & Privacy: Devices and technologies must be transparent about what
information is collected and communicated and for what purpose.

37

Niche Analysis | Energy Efficiency
REVENUE/EXPENSE
GROWTH
(ANNUALIZED %)

IoT companies focused on
developing products for improving
energy efficiency are performing
exceedingly well. Revenue growth
well exceeds increases in both
COGS and operating expenses.

4.50
4.00

Revenue
(71.4%)

3.50
3.00

COGS
(50.5%)

Operating
Expenses
(10.0%)

Benefits from improving energy is
easily quantifiable, making the case
for the adoption of products easy to
justify. For example, smart meters
for various utilities, such as electric,
natural gas and water, have proven
their value in reducing waste and
improving bottom lines.

2.50
2.00
1.50
1.00
0.50

3.50
3.00
2.50
2.00

VIABILITY RATIO

1.50
1.00

Q3.12

Q2.12

Q1.12

Q4.11

Q3.11

Q2.11

Q1.11

Q4.10

Q3.10

Q2.10

0.50

Q1.10

Viability Ratio
(1.56)



Sub $1.5

$1.5 to $10

Over $10


38

Company Spotlight | Energy Efficiency
Overview:
 Founded in 2008, ThinkEco is a New York City-based company developing
easy-to-use energy efficiency solutions for homes and businesses.
 Its flagship product, the Modlet—short for “modern outlet”—is a hardwaresoftware solution for saving money and energy on plug loads, both at home
and in the office.
 The Modlet plugs directly into any standard outlet and communicates wirelessly
to a user’s Internet-connected computer, allowing users to:
 Monitor real-time energy consumption;
 Remotely control plugged-in devices via the web or smartphone; and
 Set schedules for controlling plugged-in devices.

Internet of Things:
 The Modlet enables remote control and connectivity to virtually any
appliance that plugs into a standard outlet. Through the use of proprietary
algorithms, the Modlet software helps detect when electronic devices are
unused and turns them off at the source.

 Internet of Things

Clear Value Proposition:
 Prevention of plug-load waste, the fastest growing segment of commercial
energy use.
 6-8 month payback period, reducing home energy use by 6-10%.

39

Table of Contents

6


9


11


12


14


15


16


20


22


24


27


28


34


37


41


42

Definitions

40


 Despite the attention being paid to the Internet of Things by large tech companies and media,
there remain significant financial and technical hurdles to overcome.
 Compelling use cases have not, so far, translated directly into viable business cases, with the
exceptions of healthcare IT, energy efficiency, and enablement technologies.
 Venture Capital, and in turn, venture-backed companies, fuel innovation and disruption.
However, the future of the VC industry, and the thousands of seed-stage companies needing
funding, is uncertain.
 IoT companies appear to be starting strong out of the gates financially but fight strong
headwinds as they attempt to scale their businesses.

The Internet of Things offers the promise of enormous socio-economic benefits,
but the providers of innovation capital will continue to proceed cautiously until
use cases evolve into compelling business cases.

41

Definitions
Term

Definition

API

Application Programming Interface

CES

Consumer Electronics Show

COGS

Cost of Goods Sold

IoT

Internet of Things

M2M

Machine-to-machine

MDM

Mobile Device Management

Metcalfe's Law

The value of a network is equal to the square of the number of devices connected to it

Moore's Law

The number of transistors on integrated circuits doubles approximately every two years

Organic Sales

Growth that comes from existing customers, word of mouth, and viral sources, versus from increased sales and
marketing efforts

RFID

Radio-frequency identification

ROI

Return on Investment

SaaS

Software-as-a-Service

Step-up

Refers to the percentage increase in the original issuance price of the preferred securities between two rounds of
financing

SVB

Silicon Valley Bank

WSN

Wireless Sensor Network

42

SVB Biographies
Steve Allan | Managing Director
Steve Allan is a managing director with SVB Analytics, responsible for
leading SVB Analytics in executing client engagements, issuing valuation
opinions for private companies, and conducting research in the technology
and life science private financing arena. Allan brings a strong financial
background and passion for entrepreneurship to his leadership role at SVB
Analytics.
Sallan@SVB.com | 415.764.3135

Rob Tompkins | Director
Rob Tompkins is a director with SVB Analytics and leads SVBA’s research, strategy and
business development initiatives. Tompkins has extensive experience valuing privately-held
technology companies with a focus on the intersection of energy and technology. Prior to
joining SVB, Tompkins provided strategic and financial advisory services to startups in the
U.S. and Latin America.
Rtompkins@SVB.com | 512.372.6769

Special acknowledgement to Russ MacTough CFA, the principal
author of this report.
Contributing Authors:
Dan Zaelit
Paul Schroeder
Steven Kakowski
Sean Lawson
Amrit Sareen

43

SVB Financial Group
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Santa Clara, California 95054
408.654.7400
svb.com

SVB Analytics
555 Mission Street, Suite 900
San Francisco, California 94105
800.760.9644
svb.com

This material, including without limitation the statistical information herein, is provided for informational purposes only. The
material is based in part upon information from third-party sources that we believe to be reliable, but which has not been
independently verified by SVB Financial Group and, as such, we do not represent that the information is accurate or complete.
The information should not be viewed as tax, investment, legal or other advice nor is it to be relied on in making an investment or
other decisions. You should obtain relevant and specific professional advice before making any investment decision. Nothing
relating to the material should be construed as a solicitation or offer to acquire or dispose of any investment or transaction.
©2013 SVB Financial Group. All rights reserved. Member Federal Reserve System. SVB>, SVB>Find a way, SVB Financial
Group, and Silicon Valley Bank are registered trademarks. SVB Analytics is a member of SVB Financial Group and a non-bank
affiliate of Silicon Valley Bank. Products and services offered by SVB Analytics are not FDIC insured and are not deposits or other
obligations of Silicon Valley Bank. SVB Analytics does not provide tax or legal advice. Please consult your tax or legal advisors for
such guidance. Rev. 12-18-13

SVB Analytics Report on The Internet of Things

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