Why now is a great time to invest in IoT

Over four years into our journey as a VC specialising in IoT, Breed Reply has received and assessed deal opportunities from over 1500 IoT innovators and built a growing portfolio of over 20 early-stage and scaling businesses, spanning key vertical and horizontal markets.

With a wealth of experience to draw on, we thought now was a good time to review our learnings so far and share insights into the market drivers that are making our team feel bullish about IoT investment and excited to expand our portfolio further in the months and years ahead.

IoT is still a fairly new market – but one that has huge potential. It is subject to rapid growth and encompasses extremely diverse technologies; from sensors and data, through AI, and machine learning to robotics and drones.  IoT has been labelled as the power behind the 4th Industrial revolution, driving increases in productivity, transforming business models and redefining the way that organisations relate to their customers and suppliers. As such, it is a revolution that is set to be bigger and more pervasive than those that have gone before. So it is little surprise that the world’s biggest and most trusted consultancies including Gartner, McKinsey and PWC are all forecasting that the sector will return $Trillions of revenues per year by 2025.

McKinsey in particular, have done a lot of work to identify which parts of the market are likely to lead the charge in terms of growth. They highlight industrial IoT, Smart Cities and Health and Wellness as the three lead areas.  These predictions are certainly borne out by experience and the way our own portfolio is developing. 

We look for early-stage companies that combine innovative technology propositions with excellent teams, large addressable markets and scalable solutions.  We look for companies who are focused on addressing problems that are absolutely core to corporate buyers.  Based on these criteria, our own portfolio has evolved to encompass the three lead verticals as identified by McKinsey, plus horizontal markets in platforms and cybersecurity. We recognised early on that these horizontals spanned the emerging market need for capabilities in managing and processing data at volume and with adequate protection and risk mitigation to foster trust amongst buyers and users.

As the market becomes more established, we believe that positive conditions are developing to create a perfect environment for IoT investors.  We are witnessing that:

• The cost of technology – especially sensors – is reducing. Whilst the quality and performance of devices is getting better
• The connectivity IoT relies upon is good and getting better, particularly with the advent of 5G
• AI technology and Machine Learning are improving rapidly – which will enable organisations to truly leverage the wealth of data generated by IoT
• Corporates are now beginning to adopt IoT solutions at scale, with increasing confidence in ROI from their technology investments
• The ecosystem to support IoT innovators through start-up and early-stage growth is also improving, with incubators and accelerators on the up and with government grants becoming available as well as a growing appetite for VC investment
• Finally, we can see that all of these factors are beginning to drive significant M&A activity in the sector with building valuations and returns at exit

All of these indicators bode well for IoT and for the innovators, investors and adopters who are connecting to make the IoT revolution a reality.

We can see evidence of these factors at play within our own portfolio. For example, we have Senseye, a company providing predictive maintenance solutions for heavy industry securing contracts from the likes of Nissan. They are succeeding because their technology tackles one of the core challenges of manufacturing industry quickly and safely – namely, the intelligence to control, predict and avert production problems and the associated downtime and cost they cause. 

Tag Sensors is another of our portfolio companies, providing cold-chain monitoring solutions delivered via affordable RFID labelling to major players in the food and pharmaceutical industries. Their product is proving popular because they give blue-chip companies visibility into their supply chains in ways that support product reliability and end-customer confidence whilst also being affordable and easy to manage.

And finally, a number of our portfolio companies play in the cybersecurity arena.  One such company, RazorSecure has developed a solution specifically for the needs of transport providers. Security vulnerabilities exist in the most unlikely places throughout all transports networks. They are characterised by weakness. Attacks on 'non-critical' networks, such as passenger wifi may seem inconvenient but they can be a path to much greater access for the hacker.

By clearly serving a central requirement of the transport sector and by delivering focused and scalable solutions this business is growing from strength to strength.

For details on our other portfolio companies, please click here.

We are always on the lookout for more IoT innovators seeking investment and support to grow and scale their businesses.  If that sounds like you, get in touch.