Here is our Q3 2018 summary report on the internet of things (IoT) startup sector. The following report includes a sector overview and recent activity.
The internet of things (IoT) sector has experienced rapid developments in recent years. Its applications can be observed in all industries from manufacturing to retail to healthcare. In addition, we’ve analyzed that its funding and exit activity are on generally upward trends.
We will now take a closer look at the different components of the IoT sector and how they make up this startup ecosystem. This blog post will illustrate what the major sector categories are and which categories have the most companies. We will also compare the categories in terms of their funding and maturity.
IoT Home Is the Largest IoT Category
Let’s start off by looking at the Sector Map for the IoT sector. We have classified 2164 IoT startups into 20 categories that have raised $57 billion. The Sector Map highlights the number of companies in each category. It also shows a random sampling of companies in each category.
We see that IoT Home is the largest category with 329 companies. These companies create connected devices focused on residential segment usage. These devices include home security, home automation, and energy management systems. Some example companies are Eero, Leeo, Tado°, and Netatmo.
We have seen what the different categories making up this sector are and the number of companies in each. What about their funding and maturity in relation to one another? Let’s look at our Innovation Quadrant to find out.
The Pioneers Quadrant Has the Most IoT Categories
Our Innovation Quadrant divides the IoT categories into four different quadrants.
We see that the Pioneers quadrant has the most IoT categories with 9. The Pioneer categories are in the earlier stages of funding and maturity. The Disruptors quadrant has 5 categories that have acquired significant financings at a young age. The Established quadrant has 3 categories that have reached maturity with less financing. The Heavyweights quadrant also contains 3 categories. These categories have reached maturity with significant financings.
We’ve analyzed the IoT categories and their relative stages of innovation. Let’s now look at how they stack up against one another in terms of their total funding versus company counts.
IoT Software Platform Startups Have the Most Funding
The graph below shows the total amount of venture funding and company count in each category.
As the above graphic implies, the IoT Software Platforms category leads in total funding with $7.1 billion. The IoT Drones and Robotics category follows in a close second place with $7 billion.
Software Platform companies build backend software systems that provide infrastructure for IoT companies. These systems include wireless communication networks and data analytics platforms. Some example companies in this category are Electric Imp, Relayr, Sigfox, and C3 IoT.
Conclusion: IoT Home and IoT Software Platforms Lead the Sector
The analysis above demonstrates that the IoT Home category leads the sector in total companies. The IoT Software Platforms category leads in total funding. We’ll see how things evolve during the rest of 2018.
Last quarter we observed that internet of things (IoT) investments are increasing over time. This quarter we are performing a deeper analysis on our IoT research platform to examine funding by category. Our analysis reveals two key takeaways:
- The Drones and Robotics category leads the sector in Q2 funding
- The Drones and Robotics category also had the highest funding growth percentage
We’ll explain these takeaway with some graphics and discussions below.
The Drones and Robotics Category Leads IoT in Q2 Funding
To start off, let’s review the amount of funding raised this quarter by each category within IoT.
The above graphic shows that the Drones and Robotics category leads the sector in Q2 funding with $1.3B. Its funding is 3 times higher than that in the next category, Health Care at $0.4B.
So we’ve observed how different IoT categories stack up in their Q2 funding. But how do these categories’ funding growth rates compare with one another? Let’s investigate that in the next section.
Drones and Robotics Funding Grew the Fastest in Q2
The graph below shows the all-time funding for different IoT categories. The quarterly funding and growth rates of these categories are also highlighted.
This graphic indicates that the Drones and Robotics category experienced the largest funding growth in Q2 at 24%. The City and Buildings category follows in second place at 14%.
In addition, Drones and Robotics now has the second-highest all-time funding at $7B. This is slightly behind the sector leader, Software Platforms at just above $7B.
Conclusion: The Drones and Robotics Category Saw Large Growth in Q2
In summary, we have analyzed the IoT funding amounts in different categories. We’ve discovered that the Drones and Robotics category leads in Q2 funding and had the highest growth percentage. It’ll be interesting to see if any other IoT categories will catch up in the rest of 2018.
We’ve previously discovered that exits within the internet of things (IoT) sector are showing strong growth over time. Now armed with the data through June 2018, we’re conducting a mid-year status check on the total IoT exits by year.
After taking a deeper dive on our IoT report and research platform, we observe that if the current trend holds, IoT exit activity in 2018 will be lower than in 2017.
2018 Mid-Year IoT Exit Activity Lower Than 2017 But Higher Than 2016
Let’s take a closer look at the number of IoT exit events by year.
The above graphic shows 26 exits in the first half of 2018. This is 43% of the 2017 total. Comparing Q1-Q2 exits only, 2018 is down slightly from 2017 but running ahead of 2016.
For the past three years, Q3 and Q4 accounted for 57% of total exit events on average. If that trend holds, 2018 will have around 60 exit events. That would be lower than the number of exits in 2017 but higher than that in 2016.
Conclusion: 2018 Trending To Be The Second Highest Year For IoT Exit Activity
In summary, we have performed a mid-year status check on IoT total exits by year. We predict that the sector’s exit activity in 2018 will be lower than 2017 but higher than 2016. It’ll be interesting to see if the IoT exit activity by the end of 2018 turns out to align with our prediction.
Our sector maps are snapshots of emerging technology sectors. They show what the different categories in a sector are and how many startups are within each category. They also present a small sampling of the current startups that are innovating in each category.
Last week, we kicked off our sector map update with Part 1. You can read that blog post here.
This post is the second of a two-part series. Below you will find sector maps for Artificial Intelligence, Internet of Things, Marketing Technology, Real Estate Technology, Retail Technology, Security Technology, Transportation Technology, and Virtual Reality.
Artificial Intelligence: 13 categories, 2161 companies, $32B in funding
Internet of Things: 20 categories, 2151 companies, $52B in funding
Marketing Technology: 15 categories, 1771 companies, $33B in funding
Real Estate Technology: 12 categories, 1649 companies, $48B in funding
Retail Technology: 21 categories, 1746 companies, $59B in funding
Security Technology: 14 categories, 1063 companies, $25B in funding
Transportation Technology: 17 categories, 1238 companies, $117B in funding
Virtual Reality: 13 categories, 750 companies, $10B in funding
The internet of things (IoT) sector has seen vibrant funding and exit activity over the past few years. How have its funding trends evolved over time? On our internet of things research platform, we have analyzed the data through 2017 and can conclude that the investments in IoT have become more substantial over time.
We have come to this conclusion from the following three takeaways:
- Funding amounts are seeing robust growth at the annual level
- Funding events are seeing a decline in recent years
- Average funding per deal amounts are growing
We will illustrate these takeaways with a series of graphics to show the trend of IoT investments over time.
IoT Funding Amounts Seeing Robust Growth Annually
We will start off by examining the IoT funding trends over the years stacked by quarters.
This graph illustrates that IoT funding saw explosive growth at the annual level. Specifically, the CAGR in funding amounts from 2012 to 2017 is 45%. In addition, the funding in 2017 was 166% of that in 2016.
We have seen that IoT funding is showing strong growth, but what about the total number of deals?
IoT Funding Events Declining in Recent Years
The following graph shows us the annual number of IoT startup funding deals, stacked by quarters.
The above graphic illustrates that the number of IoT funding events saw a healthy upward trend till 2015 and declined thereafter. In fact, the CAGR in funding events from 2012 to 2017 is only 15% due to the quick rise and subsequent fall. In addition, the number of funding events in 2017 was 76% of that in 2016.
We have seen that IoT funding amounts are increasing significantly but its funding events are seeing a decline. Let’s see if the trend in average deal size reinforces this.
Average IoT Funding Deal Size Demonstrating Overall Growth
The following graph shows the average funding per IoT deal over different quarters from 2011 to 2017, as well as the trendline.
This graphic does indicate that the average IoT funding per deal has experienced steady growth over the past few years. The trendline shows that from Q3 2011 to Q4 2017 the average deal size has grown by approximately 500%. This stable upward trend in average deal size demonstrates that the investments in the internet of things have indeed become weightier over time.
Conclusion: Investments in the Internet of Things Are Becoming More Substantial
In summary, we have seen from the above graphics that IoT funding amounts experienced strong growth at the annual level, yet its event counts have seen a decline in recent years. Moreover, the average funding per deal has been growing consistently over time. These takeaways lead us to conclude that the investment rounds in IoT have become more substantial–in that the bets have become fewer in frequency but larger in amount. It’ll be interesting to see if this trend continues in 2018.
What are your thoughts on this? Let us know in the comments section below.