When Internet of Things and FinTech Collide — Part III: Venture Investment
As most people would come to expect from the financial sector, the amount of funding related to certain trends should be equal to the number of companies active in that market. This is another correlation between FinTech and Internet of Things that is not applicable in this new era of funding, as some areas receive less funding despite more companies actively developing solutions in the space.
Venture Investment in IoT So Far
In the previous article, we mentioned how there are a lot of different segments related to the development of Internet of Things. Ranging from home automation to healthcare and smart cities to self-driving cars, IoT is omnipresent in any sector one can think of. The same can be said for the FinTech sector, as making payments and transfers of value more scalable is priority number one.
Even though most of the funding is dedicated to creating convenient user interfaces, there are very few companies active in this space. That is to say, the number of companies, compared to the amount of money coming in from VC’s, is not striking an even balance by any means. That doesn’t have to be a bad thing per se, but it goes to show more competition in this segment wouldn’t hurt, as there is plenty of funding to go around.
City and Infrastructure is another Internet of Things segment where the correlation between companies and funding is at a peak point. In saying so, we mean there is a lot of funding for this sector based on the number of companies focusing their IoT focus on this segment. These companies are given a lot of room to work with, but a wider pool of players could bring in even more venture investment.
Some segments are not doing so well at all, even though the Internet of Things is an appealing initiative. Fitness, agriculture, retail, and even enterprise all have far more companies compared to the amount of venture investment coming in. This creates a very fierce competition, but also indicates none of the startups have cracked the code to attracting a lot of investment just yet. In fact, some of these IoT startups will probably not be around for much longer.
Surprisingly enough, the automobile industry is at a break-even point between funding and number of companies. Such a chart indicates all of the companies in this Internet of Things market have money to work with, but there is little to no room for error. Stiff competition by established brand, such as Google and Tesla, is making it difficult for new startups to gain any traction in this segment, though.
Last but not least, the segments of home automation, healthcare and lifestyle & entertainment are close to their break-even point as well. While it is positive to see so many sub-branches regarding Internet of Things development, something has to give very soon. Close to 140 IoT startups are competing in the home automation segment and each of which is trying to get their share of the US$1.3bn venture investment fund.
FinTech To Lend A Helping Hand To Struggling IoT Segments?
There is no reason to panic yet for the Internet of Things industry, as there is plenty of venture investment to go around for the time being. However, the struggling startups could use a helping hand from the FinTech sector as some of these ideas could get a beneficial boost from alternative payment methods and structures.
Especially the agriculture sector, where payments can make the difference between success and failure for farmers, can benefit from FinTech solutions. Considering how the agriculture industry is struggling for money all over the world, anything that can help reduce costs or fees would be very valuable. As more and more devices can communicate with one another, payments become easier to complete between parties, and waiting periods for funds to clear will be removed.
Retail is another industry directly affected by the evolution of financial technologies and is also an interesting market for the IoT initiative. Without proper and convenient payment methods between connected devices, this segment will struggle to achieve any real type of innovation in the next few years.
A lot of the success of both FinTech and Internet of Things startups depends on where they are located, and what kind of reach their services and products have right now. In tomorrow’s article, we will take a closer look at where most of the efforts are taking place, and how the IoT landscape is shaping up.
What are your thoughts on the venture investment in Internet of Things so far? Which segment will see a healthy boost come 2016? Let us know your predictions in the comments below!
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Originally published at Fintechist.