The Internet of Things

croutonsgruesomeRéseaux et Communications

16 févr. 2014 (il y a 3 années et 4 mois)

102 vue(s)
























































The Internet of Things
Market Overview and Proprietary
Financial Intelligence
2
Advisory Services:
 Due diligence support
 Valuation Guidance
 Proprietary market intelligence
Valuation Services:
 409A Valuations (Stock Options)
 Purchase Price Allocation
(post-M&A Accounting)
 Goodwill and Intangible Asset
Impairment
Research:
 Proprietary Research and Data
 Customized Studies
 Thought Leadership
Client Focus:
Corporate venture,
innovation and
development groups
Client Focus:
Venture-backed
companies
Client Focus:
Corporate and
venture ecosystem
SVB Analytics
provides business
analytics solutions
to every stakeholder
in the venture
capital ecosystem.

6,000
Valuations completed since 2006
1,200
Active clients in 2012
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




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
Table of Contents
4




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
Table of Contents
5




What is the Internet of Things in 2013?
6
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




Internet of Things v.2
7
1998

MIT coins the term

RFID to bring about a ubiquitously connected world by
2005

2012 – 2013

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

Introducing the Gartner Hype Cycle
Re-Introducing the Gartner Hype Cycle




What Has Changed in IoT?
8
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.
Consumer and Quantified Self M2M Communications
Successful IoT v1 Emerging IoT v2
Energy Management Wireless Patient Monitoring
Mass Enablement Technologies Fleet Management and Asset Tracking




Linear, one-dimensional information flow
Case Study |
Apparel Industry – IoT V1
 Static data points
 Focus on improving logistics
 Limited or no feedback to marketing/sales, design teams
9




Complex, multi-dimensional information flow
Case Study |
Apparel Industry – IoT V2
 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
11
A confluence
of technologies
have been key
drivers advancing the
Internet of Things
Moore’s Law
 Decreasing prices of wireless
sensors, hardware
 Storage and compute
resources
 Smaller, more diverse, and
powerful chips
Metcalfe’s Law
 Penetration of smartphones and tablets
 Public, private, and hybrid cloud-based
architectures and resources
 Wireless connectivity technologies
(3G/4G/LTE, WiFi, ZigBee, Bluetooth)
 Ultra-low power Micro-controller Units
(MCUs)
Big Data Analytics
 Exploding volume of data
 Cloud storage systems are dated
 Converting data into actionable intelligence
 Controlling decisions, optimizing resources,
lowering uncertainty in real time
Internet
of
Things




Challenges Facing IoT v2
 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 inter-
device communication




12
“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)




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
Table of Contents
13




Push vs. Pull | A Clear Business Case
14
Push demand for products
Push demand for services
Buyers are pulling through:
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.
Large Tech
Mobile Operators
Low cost, high utility High need, high ROI




IoT Companies Struggle at the Early Stages Relative to a Broad index of Same-Size Peers
Relative Overall Performance
Source: SVB Analytics
15
0.22%
-2.75%
-0.48%
0.43%
-3.00%
-2.50%
-2.00%
-1.50%
-1.00%
-0.50%
0.00%
0.50%
All IoT Sub $1.5 M $1.5 to $10 M Over $10 M
Sales Growth Relative to SVB Universe

n=14
Median Sales:
$403K
n=17
Median Sales:
$4.24M
n=12
Median Sales:
$13.9M
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.

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
.




Small IoT |
Net Sales Less Than $1.5M
16
Source: SVB Analytics
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
0.50
1.00
1.50
2.00
2.50
Q1.10
Q2.10
Q3.10
Q4.10
Q1.11
Q2.11
Q3.11
Q4.11
Q1.12
Q2.12
Q3.12
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.
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.
REVENUE/EXPENSE
GROWTH
(ANNUALIZED %)
Revenue
(67.3%)
COGS
(76.9%)
Operating
Expenses
(28.1%)



























































Viability Ratio
(1.95)
n=14 Median Sales: $403K
Viral Growth is Observed
VIABILITY RATIO

C
HANGE

IN
N
ET
R
EVENUE


C
HANGE

IN
O
PERATING
E
XPENSES






Medium IoT |
Net Sales Between $1.5M and $10M
17
Source: SVB Analytics
REVENUE/EXPENSE
GROWTH
(ANNUALIZED %)
Revenue
(14.2%)
COGS
(22.8%)
Operating
Expenses
(6.6%)


























































Viability Ratio
(1.19)
0.50
0.75
1.00
1.25
1.50
Q1.10
Q2.10
Q3.10
Q4.10
Q1.11
Q2.11
Q3.11
Q4.11
Q1.12
Q2.12
Q3.12
0.50
0.75
1.00
1.25
1.50
1.75
2.00
n=17 Median Sales: $4.24M
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.
However, the widening gap
between Revenue growth and
COGS growth indicates trouble
scaling from early-adopters to a
wider customer base.

VIABILITY RATIO

C
HANGE

IN
N
ET
R
EVENUE


C
HANGE

IN
O
PERATING
E
XPENSES


Viral Growth Slows, Acquisition Costs Accelerate




Scale is Achieved
REVENUE/EXPENSE
GROWTH
(ANNUALIZED %)
Revenue
(23.3%)
COGS
(17.3%)
Operating
Expenses
(11.6%)


























































Viability Ratio
(1.28)
n=12 Median Sales: $13.9M
0.50
0.75
1.00
1.25
1.50
Q1.10
Q2.10
Q3.10
Q4.10
Q1.11
Q2.11
Q3.11
Q4.11
Q1.12
Q2.12
Q3.12
0.50
0.75
1.00
1.25
1.50
1.75
2.00
Large IoT |
Net Sales Greater Than $10M
18
Source: SVB Analytics
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
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.
VIABILITY RATIO

C
HANGE

IN
N
ET
R
EVENUE


C
HANGE

IN
O
PERATING
E
XPENSES






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
Table of Contents
19




The “Series A Crunch” Declining Venture Capital Investment
VC Market Dynamics Affecting IoT
20
There are more angel/seed-funded companies than institutional dollars available
to continue to fund them.
Venture Dollars Raised Fall 27% Below
15-Year Trailing Median
Tomasz Tunguz, Tech Crunch, July 22, 2012
Dan Lyons, CB Insights, December 3, 2012




Does a “Series A Crunch” Affect IoT
Disproportionately?

Source: SVB Analytics
21
Series A
30%
Series B
28%
Series C
30%
Series D
11%
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.

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.”
IoT Companies by Round of Funding
Note: Chart may not add up to 100% due to rounding




INVESTOR ACTIVITY
Strategic
Angels/Individuals
VC
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 IoT-
related 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.
32%
18%
50%
30%
28%
30%
11%
Investor Types and Round Preference
FUNDING
DISTRIBUTION
Series A
Series B
Series C
Series D
Who is Investing in IoT?
Source: SVB Analytics
22




How Much are VCs Investing?
Source: SVB Analytics
23
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.
$6
$12
$11
$18
$6
$18
$29
$47
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
Series A Series B Series C Series D
$US Millions
Total Invested Capital
Median Round Size




Revenue by Stage of Development
Source: SVB Analytics
24
Revenue progression from Series B to Series C indicates that
many mid-stage IoT companies experience trouble creating
rapid growth.


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.


Unfortunately, the cost to get an IoT company through its
Series C financing is high (~ $30M.)
Median Revenue at Financing
$0.1
$4.7
$6.1
$21.8
$0
$5
$10
$15
$20
$25
Series A Series B Series C Series D
$US Millions
Traction challenges
Lucrative for those that execute
(survivorship from Series C to
Series D)




Value Progression
Source: SVB Analytics
25
60%
53%
75%
17%
11%
25%
23%
37%
0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
A-to-B B-to-C C-to-D
75% of Series D
rounds are at higher
valuations than the
Series C
157%
58%
23%
-45% -45%
0%
-100%
-50%
0%
50%
100%
150%
200%
A-to-B B-to-C C-to-D
Up-Rounds
Flat Rounds
Down Rounds
Average Step-up
Average Step-down
The relatively higher proportion
of down-rounds at the Series C
financing again highlights the
growth challenges mid-stage
companies face.

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




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
Table of Contents
26




Communication
• Backhaul
• Data Transfer
Connected
Healthcare
• Remote
Monitoring
• Telehealth
Enablement
• Toolkits
• Cloud
Services
Energy and
Environment
• Water Sensor
• Smart
Meter/Utilities
Enterprise
and IT
• Data Center
Monitoring
• MDM
Heavy Industry
• Process
Control
• Petro-
Chemical
Retail and
Commerce
• Location-
based
Commerce
Security and
Safety
• Emergency
Response
• Data Privacy
Smart Buildings
• Automation
• Energy
Management
Transportation
and Logistics
• Supply Chain
Management
• Asset
Tracking
0%
5%
10%
15%
20%
25%
30%
35%
Communication Connected
Healthcare
Enablement Energy and
Environment
Enterprise
and IT
Heavy Industry Retail and
Commerce
Security and
Safety
Smart
Buildings
Transportation
and Logistics
IoT Segmentation
Source: SVB Analytics
27
Distribution of SVB IoT Companies




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

28
 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

Hardware
Software
 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
The Brains
The Sensory Network




Hardware Software
Spotlight | Enabling the Internet of Things
29
Enabling late-stage consumer-facing product development
1.
Interoperability through Standardized Protocols
 Uniformity across frequencies, communications protocols
 Minimize device, node and band fragmentation
 TCP/IP support along the communications channel



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

Empowering IoT end-to-end and unifying user experience
1.
Single Control Interface
 Creating rich, cross-platform native experiences across
connected devices



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




IoT enablement technologies are
the base upon which all other IoT
products are built, and this
dependence is reflected in the
robust sales growth.
However, strong organic growth is
matched with increasing COGS and
operating expenses.


REVENUE/EXPENSE
GROWTH
(ANNUALIZED %)
Revenue
(27.3%)
COGS
(27.4%)
Operating
Expenses
(18.7%)
Viability Ratio
(1.07)
Organic Growth Observed
0.50
0.75
1.00
1.25
1.50
Q1.10
Q2.10
Q3.10
Q4.10
Q1.11
Q2.11
Q3.11
Q4.11
Q1.12
Q2.12
Q3.12
0.50
0.75
1.00
1.25
1.50
1.75
2.00
Niche Analysis |
Enablement
30
VIABILITY RATIO

C
HANGE

IN
N
ET
R
EVENUE


C
HANGE

IN
O
PERATING
E
XPENSES


Distribution of Companies in this Niche ($M):


Sub $1.5 $1.5 to $10 Over $10
Source: SVB Analytics




Much of the current excitement in
the IoT enablement space is driven
by advancements in Big Data.
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.
REVENUE/EXPENSE
GROWTH
(ANNUALIZED %)
Revenue
(44.0%)
COGS
(51.1%)
Operating
Expenses
(26.9%)
Viability Ratio
(1.14)
Organic Growth Observed
0.50
0.75
1.00
1.25
1.50
Q1.10
Q2.10
Q3.10
Q4.10
Q1.11
Q2.11
Q3.11
Q4.11
Q1.12
Q2.12
Q3.12
0.50
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2.75
3.00
Enablement |
Software
Source: SVB Analytics
31
VIABILITY RATIO

C
HANGE

IN
N
ET
R
EVENUE


C
HANGE

IN
O
PERATING
E
XPENSES


Distribution of Companies in this Niche ($M):


Sub $1.5 $1.5 to $10 Over $10




The prices of mobile enablement
devices have continued to fall,
resulting in decreased revenue
levels.
Production costs for these
companies have risen modestly but
have been offset by proactive
management of operating
expenses.
REVENUE/EXPENSE
GROWTH
(ANNUALIZED %)
Revenue
(-7.5%)
COGS
(3.7%)
Operating
Expenses
(-7.6%)
Viability Ratio
(1.00)
Falling Hardware Prices
0.50
0.75
1.00
1.25
1.50
Q1.10
Q2.10
Q3.10
Q4.10
Q1.11
Q2.11
Q3.11
Q4.11
Q1.12
Q2.12
Q3.12
0.50
0.75
1.00
1.25
1.50
1.75
2.00
Enablement |
Mobile Devices
Source: SVB Analytics
32
VIABILITY RATIO

C
HANGE

IN
N
ET
R
EVENUE


C
HANGE

IN
O
PERATING
E
XPENSES


Distribution of Companies in this Niche ($M):


Sub $1.5 $1.5 to $10 Over $10




Hardware Software
Company Spotlights |
Enablement
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.
 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:
 Open Imp API, which connects to most Web services, servers and
applications.
 Web-based IDE maintains software and pushes new features instantly.
To Manufacturers:
 Pre-built scalable, reliable and secure connectivity solution.
 Design, test and deploy network integration into unconventional
devices.
Overview
 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.
Value Proposition
To Developers:
 Write-once application logic that adapts to many native platforms and
adapts itself to different screen types.
To Manufacturers/Businesses:
 The connected car vertical is very promising – from audio today to
enhanced driving and increased safety in the future.
 Creates seamless rich, cross-platform native user experience on
multiple platforms across multiple 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

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
34
Source: Perficient.com
“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”




Niche Analysis |
Connected Health
Source: SVB Analytics
35
IoT companies developing
patient-monitoring products are
seeing solid fundamental consumer
demand for their products.
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.
REVENUE/EXPENSE
GROWTH
(ANNUALIZED %)
Revenue
(11.5%)
COGS
(27.4%)
Operating
Expenses
(5.0%)
Viability Ratio
(1.06)
Modest Growth, Lack of Scale
0.50
0.75
1.00
1.25
1.50
Q1.10
Q2.10
Q3.10
Q4.10
Q1.11
Q2.11
Q3.11
Q4.11
Q1.12
Q2.12
Q3.12
0.50
0.75
1.00
1.25
1.50
1.75
2.00
VIABILITY RATIO

C
HANGE

IN
N
ET
R
EVENUE


C
HANGE

IN
O
PERATING
E
XPENSES


Distribution of Companies in this Niche ($M):


Sub $1.5 $1.5 to $10 Over $10




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




Source: geappliances.com
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:
 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




0.50
1.00
1.50
2.00
2.50
3.00
3.50
Q1.10
Q2.10
Q3.10
Q4.10
Q1.11
Q2.11
Q3.11
Q4.11
Q1.12
Q2.12
Q3.12
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
Niche Analysis |
Energy Efficiency
Source: SVB Analytics
38
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.
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.
REVENUE/EXPENSE
GROWTH
(ANNUALIZED %)
Revenue
(71.4%)
COGS
(50.5%)
Operating
Expenses
(10.0%)
Viability Ratio
(1.56)
Organic Growth Observed
VIABILITY RATIO

C
HANGE

IN
N
ET
R
EVENUE


C
HANGE

IN
O
PERATING
E
XPENSES


Distribution of Companies in this Niche ($M):


Sub $1.5 $1.5 to $10 Over $10




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 hardware-
software 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.

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
 Internet of Things




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
Table of Contents
40




Summary and Key Takeaways
 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.

41
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.




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
43
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
Special
acknowledgement to Russ MacTough CFA, the principal
author of this report.


Contributing Authors:

Dan
Zaelit
Paul Schroeder

Steven
Kakowski
Sean Lawson

Amrit
Sareen
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























































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