This is an update to an in-depth analysis of the Internet of Things (IoT) published by SVB Analytics in 2013. IoT refers to everyday objects โ like cars, food, pets and toys โ that are connected to the Internet via smart chips which sense and share information about themselves and their surroundings. The report was developed as part of our strategic advisory service, which provides investors and entrepreneurs with an assessment of a company's value in support of acquisitions, mergers, investments, and other strategic financing activities.
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The Internet of Things - 2014 Update
1. 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
2. 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/
3. Internet of Things | April 14, 2014
12,500,000,000
Connected Devices
201020031998 2008
MIT coins
โInternet of
Thingsโ
IoT v1.0
500,000,000
Connected Devices
Apple
launches
iPhone
IoT v2.0
12,500,000,000
Connected Devices
(mostly smartphones)
โDecade of Slow
Progressโ
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
4. Internet of Things | April 14, 2014
Whatโs Driving the Internet of Things?
Internet of Things
MOOREโS
LAW
METCALFEโS
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
5. Internet of Things | April 14, 2014
The โSeries A Crunchโ
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 Median
Tomasz Tunguz July 22nd, 2012
โ
โ
The โSeries A Crunchโ
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
availableโthere were too many companies chasing too few dollars.
6. Internet of Things | April 14, 2014
The โSeries A B Crunch?โ
Declining Venture Capital Investment
Venture Dollars Raised Fall 27%
Below 15-Year Trailing Median
Tomasz Tunguz July 22nd, 2012
Rising Crowdfunding Investment*
Instead, an explosion of crowdfunding filled the gap. Itโs 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
โcrowdfilteringโ, where consumers provide vetting of ideas early on.
There are more angel/seed funded
companies than institutional dollars
available to continue to fund them.
โ
โ
7. Internet of Things | April 14, 2014
Fragmentation of Wireless Standards Industrial Internet Consortium (IIC)
Launched by Cisco, AT&T, Intel, GE, &
IBM โ 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 didnโt materialize was
consumer retrofitting, where adoption has been slow as consumers appear to be
willing to wait for full replacement cycles before upgrading to โsmartโ devices.
Challenge Update
Power source limitations
Costs to retro-fit current generation
โthingsโ 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.
8. Internet of Things | April 14, 2014
Energy & Home Healthcare Enablement
Opportunities โ Then and Today
Fastest-moving:
proliferation has
occurred in the
connected home
Up-and-coming:
healthcare has seen
acceleration by
reducing costs
Didnโt materialize:
consumers slow to
trade dumb devices
for smart ones
9. Internet of Things | April 14, 2014
Clear Use Cases Crowd-filtered Consumable Analytics
Smart Cities
Energy
Agriculture
Retail
Buildings
Banking
Waste
Parking
Healthcare
The Next Perspective โ Predictions
Compelling use
cases will continue
to languish without
clear business cases
Crowdfunding as
โcrowdfilteringโ will
revolutionize the way
products are brought
to market
Consumable analytics
allows individuals to
improve behavior ๏
Internet of Everything
10. Internet of Things | April 14, 2014
Summary
โข Despite its enormous potential, there remain significant business and technical hurdles to
overcome for adoption of the โInternet of (Every)thing.โ Until compelling use cases are
translated into directly viable business cases, IoT adoption will proceed slowly.
โข We predicted a Series A crunch that never cameโinstead a torrent of crowdfunding filled
the gap, pushing many IoT companies into later stages. More importantly, this has served
as a โpre-vettingโ process, allowing market feedback before a product launch.
โข Encouragingly, industry has responded to some of the biggest challengesโfragmented
networks, power sources, and retro-fittingโin the last year, and progress has been made
(though at times unevenโ ie. consumer retro-fitting v. industrial adoption).
โข 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.
โข 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 IoT
validation and vettingโrepresenting 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.
11. SVB Analytics
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San Francisco, California 94105
800.760.9644
svb.com
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