Late last month, we closed out another provocative and thought-provoking edition of our Venture Forum. As always, we gathered leading executives from startups, venture capital firms and our corporate peers, this time to discuss the current state and future of the Internet of Things (IoT). We choose IoT because it is one of the most hyped, yet promising, concepts that touches virtually every industry. Case in point, Harbor Research recently cited IoT as a $1 trillion dollar opportunity by 2020. Further, based on our PitchBook query, 2014 was the year for IoT venture investing, hauling in ~$1.8 billion in VC funding, almost triple 2013’s level.
In the wake of all the projections, data and headlines, this Venture Forum provided us with a clearer understanding of the catalysis and drivers for IoT, as well as a window into some of the most innovative and disruptive technologies on the horizon. Below are some of the takeaways from the day:
Data is vast and furious, but worth nothing if it doesn’t drive productive solutions: Moderating our IoT Venture Forum was Shelly Palmer, managing director at Landmark Ventures. He opened up the day saying that information is and will always increase as things that can be connected will be connected. He punctuated that statement by defining data science as turning information into action. IDC claims there will be 40 zettabytes (40 trillion gigabytes) of data collected by 2020, up from 2.8 in 2012. That’s a lot of data. Those that can turn that vast data into information will reap the lion’s share of value. In terms of dollars, ABI sees IoT Data revenue reaching close to $23B by 2020, of which ~63% is related to core data analysis and professional services, with the remaining 37% comprised of data storage, integration and presentation. We know we must embark on a journey towards prescriptive analytics, yet we still live in a world where our fitness bands only tell us how many steps it takes to walk from our desk to the cafe, not what we should order and why. Along similar lines, a member of our Smart Agriculture panel said, “farmers don’t care about sensors or the data they collect, they only care about insights and solutions that can increase their crop yield.” While it is novel to see the breadth and depth of data that today’s sensors can collect, the utility of that data quickly diminishes if it can’t be seamlessly converted into action.
Startups are developing ways to disrupt carriers’ connectivity play: During our startup fast pitch session we heard from a company that is building a decentralized mesh IoT network that can reach up to 9 miles without the use of WiFi or cellular data, supporting up to 5,000 devices per network. Not only will this displace carriers from providing connectivity to IoT devices, the company will also leverage Blockchain for naming and transactions, Telehash for secure device-to-device communications, and BitTorrent for firmware updates, further decentralizing operations from intermediaries. Another startup focused on data services pushes analytics to the edge, allowing them to only have to transmit 1MB of data for every 10MB collected. While it is easy to see how these networks could be possible extensions to carrier networks, it was also agreed upon that connectivity is at the bottom of the IoT opportunity chain and that one needs to play above the pipe in order to succeed.
The best computer in your car is your iPhone 6: Throughout the day, a fair share of attention revolved around the car. The most interesting comment I heard came during our Transportation and Telematics panel. One of the many startup founders in attendance noted that the iPhone 6 has significantly more processing power than a car’s head unit. He then declared that car companies need to stop trying to be tech companies and should move processing tasks to the smartphone. Imagine then, your smartphone interfacing directly with your car’s critical systems to act as its “eyes and ears,” by combining cloud intelligence with locally sensed information to power ever increasing levels of autonomy. For example, say you pick up a nail in your tire and the car senses the declining air pressure. In that scenario, your smartphone would take that information to locate service centers within your proximity, and based on hours of operation guide you to the nearest one that is open.
Adding to the conversation, another founder chimed in that a car’s development cycle is typically 4 years. Therefore, if you happen to buy late into a model’s lifecycle you could potentially be buying technology that is 8 years old, whereas smartphone cycles are significantly shorter. This is even more troublesome when you think about the fact that the only auto manufacturer today that can push software updates to the car is Tesla. While none of these facts are novel, hearing it packaged together in this context was illuminating.
Consumer adoption - interoperability vs. compatibility debate: Our Connected Home & Life panel started swiftly down the path of discussing the need for standardization in order to drive adoption, underpinned by the notion that consumer IoT significantly lags behind in usability. On one side of the argument, some identified value proposition as the problem, relegating interoperability as a non-issue at least for today. On the other side, they believe the removal of platform friction could be the value proposition. The panel concluded with two very interesting comments. The first was, “no consumer ever walked into Home Depot asking for a platform.” The second was, “IoT shouldn’t require users to change behavior, and we need to stop asking them to do so.”
Disney’s MagicBand is one of the best illustrations for the potential of wearables: If you have recently taken a trip to Disney World, you may have used their MagicBand to help navigate your way through the entire vacation experience. The MagicBand, which was mentioned several times by speakers throughout the Venture Forum, allows you to enter the park, open your hotel door, pay for food and merchandise, as well as give you FastPass access to all experiences. Discussion about the MagicBand brought to light the potential of wearables, in particular smart watches. Linked here is a funny video about the MagicBand.
We hope you enjoyed reading some of the tidbits from our most recent Venture Forum. The Internet of Things obviously draws a lot of attention, but for good reason, as its potential economic impact is hard to ignore.
In closing, we would like to give a special thanks to Shelly Palmer and the rest of the Landmark Ventures team for helping us produce another successful edition of the Verizon Venture Forum.