The Startup Funding in India for IoT Startups

 

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Internet of Things startup phenomenon is more Global than we think! Source: Venture Intelligence

The World of IoT

Internet of Things (IoT) unequivocally leads on hype and will continue to as every looks to leverage IoT to improve efficiency and , discover new models that shift more towards opex and explore innovative revenue streams. Companies big and small are in the fray. At last count, there were over 3,000 IoT startups globally as reported on angel.co. These are spread across the globe (see the map above) with no seeming concentration in any geography, unlike technologies emerging primarily from Silicon Valley in the past. A whopping sum of $12.5B has been invested in IoT startups globally in the last 5 years. In 2016 alone, over 636 cumulative IoT deals received investments of over $4B with 59 exits, according to CB Insights (more on these exits in later post). VCs, corporate funds, Chinese EMS majors, crowdfunding and traditional non- corporates have joined the IoT investor bandwagon.

 

IoT in India

Globally, India is the third largest startup ecosystem with near 500+ IoT startups. Near one-third of these startups were launched in 2016 alone but mortality rate is high.

Funding of IoT startups in India is relatively new with a few receiving seed and angel rounds in 2013 and 2014 while most startups are bootstrapped. In the last two years, incubators and accelerators have upped investments with institutional investors joining the fray. Altizon (IoT ), Ideaforge (India’s first drone startup), GreyOrange (warehouse automation), Savari Networks (V2X) and SecureNS (video analytics based ) attracted institutional investment in 2016. Major investor traction was in IoT enabled SaaS platform companies in transportation and logistics sector addressing market inefficiencies – Nimble, RoamBee, TrakNTell, Loginext, Blackbuck and Rivigo were funded.

IoT investment is happening across sectors. Cardiac Design Labs and Tricog got funded last year in diagnostic ECG addressing the alarming rise of cardiac patients in India and the lack of specialists. Hero Motorcycle’s capital infusion in Ather Energy, Accel and Nandan Nilekani’s funding of robotics startup Systemantics, IoT analytics platform provider Petasense and IQLect, sound based encryted money transfer by ToneTag and IIT Chennai incubated speech technology startup Uniphore were in the funding news. RayIoT, Pycno and Diabeto were selected by HAX, the world’s largest accelerator.

 

IoT outlook in India for 2017

Indian IoT startups are maturing with significant learning on technology, pilot deployments, pricing models and channel strategy. Startups have pivoted, focused on customer traction and IP creation. Recently, AI based medical imaging platform Sigtuple got funded by Accel Ventures and Oil & Gas Analytics platform startup Flutura raised funding from Vertex Ventures. Hyper-spectral imaging (Spectral Insights) and vision analytics platform (Hyperverge) are set to launch. The core technologies funded in US and Europe like brain controlled HMI, smart pills and IoT still seem farfetched in India but we are closer in the IoT applications space in richness and diversity. For a more detailed post of IoT startups in India, please view my previous post.

The IoT market in India is still at its infancy with transportation and logistics in the lead. Expect industrial and startups to scale post their extended pilots. Smart city pilots would start, smart homes would remain a niche, while consumer and retail would accelerate. Smart surveillance, solar farm monitoring and building energy management would see the most traction while smart grid is still few years out and the business model with small farm parcels would continue to hinder agriculture in India.

 

Investment Outlook

More investors in India would look at IoT this year going beyond the current what-is-hot (or not-so-hot) funding trends. With the sheer focus on returns, investors would be looking for startups creating core differentiating IP or scaling up fast with revenue traction in verticals that adopt early. Channel strategy to scale and ways and means to play globally would be key parameters judged.

Globally, IoT investment might take a breather after hectic activity in last few years. Over-funded categories like platforms, wearables, smarthomes, robotics and drones have way too many me-toos. Platform companies are way too many now (last count of 360+), but this category also saw the most number of acquisitions. The traditional IoT platform startups are morphing to more vertical application platforms or expanding horizontally to include analytics and AI. Similar startups with identical solutions are getting funded across various geographies by different regional investors in their local markets. Core technology investments and acquisitions will continue, but investors would now start to look for winners to follow-on fund the startups primarily in the IoT vertical applications space. Number of acquisitions is still small compared to the investment activity seen in the last few years, but expected to pick up this year. The investor and acquirer pool is pretty large as traditional non-technology companies are now active shoppers, not just sitting on the sidelines for the tech company to take over.

 

[About the author: Somshubhro (Som) Pal Choudhury is an IoT Advisor & Consultant, developing an IoT investment thesis for CIIE-IIM Ahmedabad/Infuse Ventures for Bharat Fund. He is the former Managing Director of a $3.5B MNC, Analog Devices, in India. Som is a Charter Member of TiE Bangalore and is working with the TiE-IESA IoT Forum to build up the IoT ecosystem in India. He is also the co-chair of IoTNext. He can be followed on twitter at @sompalchoudhury]

(Originally published on LinkedIn Pulse. To go to the original article click here.)

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