Why Venture Capital Is Flowing Into Internet of Things (IoT)

What is IoT?

The “Internet of Things” is a term that describes the objects in the physical world that are now connected to the web. We are preparing ourselves for a new world where personal devices, cars, glasses and watches will be connected to the internet for the benefits of the consumer. New smart cities connecting existing infrastructure promise a better environment for consumers. Our new connected homes are envisioned to automatically secure and control heating and air conditioning.

All these interconnected devices will help IoT market reach an astounding $7.1 trillion by 2020. This is supported by the fact that, approximately 4.9Bn devices were interconnected in 2015 — up 30% from 2014 — and will reach 25 billion connected objects by 2020, ranging from bracelets to cars.

Why is IoT Attracting Greater Attention from VCs?

Investment in IoT has exploded and big players like Apple and Google are starting to establish a strong footprint in the space. We see established corporates on an acquisition spree, taking over various hardware companies to leverage their existing product portfolio, penetrating deeper in the home and the life of consumers as part of their IoT strategy.

VCs invested approximately $1.6Bn in IoT space, with the number of startups rising sharply from just 13 in 2013 to 189 in 2014. IoT has been seeing interest from traditional VC firms as well as corporate VCs.

This hyper activity stems from the potential IoT contains to create value for consumers and enterprise alike, by enabling them to make smarter decisions centered on improved efficiency. IoT has an impact on all industries- be it healthcare, logistics, manufacturing, energy or even agriculture.

Impact on Enterprises

Through the IoT, businesses can achieve superior process optimization and efficiency by gathering and reporting on data extracted from the business systems. Several enterprises are adding sensors to people, places, products and processes to collect and analyze information for improved decision-making and enhanced transparency.

At present only 37% are industrial consumers of IoT, which is expected to exceed 50% by 2017. IoT will fuel a new wave of automation, eliminate the need for labor jobs, and create plethora of new jobs for data scientists and engineers to maneuver around with all of the data collected by IoT and blend it into useful insights and automated processes.

Impact on Consumers

Although businesses can benefit more from the IoT, consumers can not be discounted. The IoT can help consumers achieve goals by vastly improvising their daily routine via the augmented intelligence of the IoT.

Consumer segment is set to become smarter than it is today with its handheld devices. Imagine smart cars accessing your calendar, giving best route to reach your destination or intimating the other party of the delay. Connected alarm clock that wakes you up and notifies coffee machine to brew coffee for you. Wearables helping track your fitness regime and assisting in better diet plans.

The opportunities are endless arising from the fact that anything that can be connected, will be connected.

Conclusion

We’re entering an age where everything is set to sync, communicate and collaborate with the entire world around us.

With blue chip corporates like IBM, Intel & Qualcomm making huge investments in the industry, startups stand to gain. Such investments not only provided validation but act as a catalyst for greater start-up activity. Opportunities exist for value creation through building next big offering focused on IoT and quick breakthrough innovations helping position themselves for big ticket acquisition, as in the case of Nest by Google.

Internet of Things (IoT) is believed to be the Internet’s Third Wave expected to bring new business and investment opportunities with it.