Demystifying IoT Startups
I do not want to open a debate with this article about the definition of startup or about when a startup should stop being called that to be nothing more and nothing less than a company. My most radical opinion is that after 3 years it stops being a startup. Although sometimes I am more flexible and add another 5 more years as I explain later.
Over the last 20 years I have worked in, spoken with, advised and evaluated dozens of startups. Without going any further, I believed that I was founding a startup with OIES Consulting, although I quickly understood that my business was more about survival than speculation.
The world of startups has been fashionable for twenty years. Thousands of young people have embarked on this entrepreneurial adventure seduced by the success of the new millionaires, persuaded by the epic of entrepreneurship, dazzled by the glamorous show of financing rounds without caring to know that only one in ten startups manages to reach three years of life.
This model imported from Silicon Valley, is now being used by politicians who, lacking ideas and projects to create a productive and sustainable model that respond to the challenges of this century, are guilty of fuelling this farce. Have you noticed how politicians want to associate their image with young entrepreneurs? A shame.
It is in times of crisis like the one we are experiencing with COVID 19, when the rise of the entrepreneurial discourse increases. In the face of disastrous unemployment data and the lack of certainty about the future, new technologies such as the Internet of Things (IoT) or Artificial Intelligence (AI) feed new illusions for young and not so young entrepreneurs who dream of achieving a quick success. Unfortunately, some "fake startups" only look for Governments investment or subsidized projects that feed the team a couple of years.
IoT startups and now AI or Blockchain startups have been becoming a claim for event organizers, accelerators or large companies. As if it were going to one circus or another based on its lions, elephants, clowns or tightrope walkers, now we go to physical or virtual events based not only on the Keynote speakers but also on the startups and entrepreneurs who make their elevator pitch and they overwhelm us with their stories.
This is not an article against IoT startups. I don't want to tear down any of IoT startups in which I have seen things that I have not liked very much. But, I ‘m not going to praise them.
I confess that I have thought many times to join one of these startups, but when the opportunity has arisen, perhaps due to my financial situation and my way of thinking, I have flatly refused to suffer their low salaries, sometimes their bad managers, and they have not convinced me either with an emotional salary, much less offering me ridiculous proposals to get them business by sales commissions.
Over the years I have believed less in the startup model imported from Silicon Valley as a generator of wealth and work. It is possible that the pandemic due to COVID 19 will reveal the perverse part of this model.
The creation of IoT Startups (3 years)
I have witnessed the birth of many pure IoT startups and other reconverted ones of the Machine to Machine (M2M) world in the heat of the optimistic predictions of the beginning of the decade.
Like any other startup, IoT Startups typically begin by a founder (solo-founder) or co-founders who have a way to solve a problem. But let's face it, when a market is hot like the IoT was in 2013, startups are created even with no problems to solve. Startups of all kinds were created: hardware, connectivity, smart home, Smart cities, wearables, etc. I counted up to 700 IoT platform startups.
In 2013, Matt Turck said in “Making Sense Of The Internet Of Things” :”the space looks like a boisterous hodgepodge of smart hobbyists, new startups and large corporations that are eager to be a part of what could be a huge market, and all sorts of enabling products and technologies, some of which, including crowdfunding and 3D printing, are themselves far from established”.
Just look at the graph (below) to remember with enthusiasm the birth of some promising startups such as Thingworks, Axeda, Electric In, Fitbit, Peeble, Sigfox, Xively, Nomi, Revolv, IFTT, Jasper, etc. . It was the great year of births Consumer IoT (CIoT) startups.
The biggest hit was caused by Google when it bought Nest (the ones with the connected thermostat) for $ 3.2 USD billions. I suppose its founders Tony Fadell and Matt Rogers who left Apple to hit the big pitchof startups are still laughing.
From 2014 to 2018, numerous IoT startups continued to appear all over the world. Event organizers used them as a claim, and large technology and industrial firms filled their stands with several of these start-ups to give themselves visibility in a very hot market. Many founders and investors knew that they had to seize the moment to sell and boy did they do well, especially the IoT startups that received awards and recognitions.
Development of IoT startups (<= 5 years)
Sometimes it is not enough to have a good product, or a good team, or even having raised money in a couple of rounds of financing for a startup to be able to endure the 5 years of the development phase.
From 2014 to 2019 I have carefully followed many lists of Top IoT startups because a priori I assumed that they would be the main candidates to go through the desert crossing that the development phase supposes. I have also followed IoT startups that have received an award and of course special focus on those that got new references and grew at a faster rate than the IoT market.
The company IoT Analytics screened 1,018 IoT startups in 2019. All of them do offer promising technology but for this research firm there were 10 that stand out according to the above (listed in alphabetical order)
Here you have some links in case you want to make your own list.
- The Top 20 IoT Startups To Watch In 2020 by Chris Columbus (Forbes)
- Top 25 IoT Startups To Watch In 2019 by Chris Columbus (Forbes)
- TOP 10 IOT STARTUPS TO WATCH (2019) ( you can laugh when you see which are in the list)
- 10 Hot IoT Startups to Watch – 20 Finalists (2018)
But after so much monitoring I do not dare to be sure if any of them will become a Unicorn as I wrote in (“The potential Unicorns in IoT – Will they resist against the Industry Giants?”). I agree with this post “Not everyone grows up to be a unicorn”.
If you ask me if the effort made to analyze so many IoT startups has been worth it, the answer on an economic level is a resounding NO. But I have enjoyed and learned a lot talking with them.
The death of IoT Startups
The death of start-ups does not mean their disappearance in all cases.
Death can be sweet when the dream of its founders or investors is fulfilled: To be bought by a technological or industrial giant. Some examples in “Google the White Knight of Xively”.
Death may be the consequence of the metamorphosis that transforms the IoT startup into a normal company of those that generate real value because they have managed to industrially produce something that solves a problem. The founders must not take this death as a failure. On the contrary, they have managed to consolidate a team around a vision and have satisfied customers. It is your company. Feel proud of it. You have not retired at 30 but you continue working on what you like.
The most painful death is undoubtedly the one that entails closing the company, laying off employees and paying debts. Yes, there have also been a few of these.
If you have reached this phase through the painful path, learn from your mistakes and successes and keep trying only if you have that entrepreneurial vocation.
If you have reached this phase due to a metamorphosis from a start up to a technology company or from another sector, congratulations. You have an entrepreneurial profile that is as important or more than the startup profile.
The world of IoT startups is neither as pretty nor as fun as it might seem at first glance. Many entrepreneurs have relied on the optimistic predictions that we were bombarded with for several years. But given the late adoption of these technologies, they have had to reinvent themselves, suffer and even be forced to close.
I believed for some time that startups could democratize the IoT, but with few exceptions, the IoT is so complex that despite the fact that startups have been only a claim of many ecosystems, their impact has been little when it comes to the widespread adoption of solutions scalable.
IoT startups that only seek quick success and the sale of their companies in a period of 3 to 5 years are a burden for a society that IMHO should distribute wealth in a more equal way.
We need startups, but we need more companies. We need innovative startups entrepreneurs, but we need more business owners. I am not dazzled by startups like before. I value more the resilience of companies that have spent years reinventing themselves and generating wealth and quality work.
I suggest you do an exercise: select your top 10 IoT startups and follow them for a few years. Set up a warning and in 3 years and review what has happened with them.