Innovation in Internet of Things (IoT) via Startups

An Everest Group Webinar

July 18, 2017

Live Tweeting #EGAnalyst

Introductions

Chirajeet Sengupta
Partner, Information Technology Services
Chirajeet.sengupta@everestgrp.com

Gunjan Gupta
Practice Director, Information Technology
Services
Gunjan.gupta@everestgrp.com

Proprietary & Confidential. 2017, Everest Global, Inc. 2

Context setting

Focus of this webinar

The key challenges faced by enterprises for IoT adoption
The role startups are playing in transforming the IoT ecosystem
The hot investment areas and who are the leading players
How enterprises can work with these startups

Sources for todays webinar

Summary from
research program
Transaction Fact-based research
IT services research + intelligence covering IT services
Public disclosures

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Presentation topics

Fueling
IoT Adoption Innovation:
Q&A
Challenges Focus on
Startups

Key adoption
challenges
IoT adoption across
industries

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IoT is having widespread impact on how we eat, work and
play

Source: Vodafone Moocall, Diageo, Volvo, Disney

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A map of every device connected to the Internet

With 50 billion devices connected by 2020, the world will be a very different place

Source: Shodan

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Manufacturing leads IoT adoption with most innovative use
cases

Manufacturing Utilities Healthcare Retail Travel and

IoT Adoption

transportation

36% 11% 8% 7% 7%
Adoption Challenges

Interoperability Varied and Slow pace of Availability of a IT investments get

issue for legacy complex regional technology 360 degree little focus and low
and non-legacy regulatory adoption and customer view priority
systems environment transformation in across channels High adoption risk
Challenges in Competition from the industry Limitation on due to lack of
maintaining new players Acceptance of investment field-tested
integrity leading to cost digital health capabilities solutions
of production pressures and services by ageing
processes budget cuts population
Low adoption of Availability of
cloud complete and
infrastructure consolidated
information

Source: Everest Group (2017)

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Key adoption challenges for IoT

Complicated Privacy & Interoperability and Affordability and

ecosystem Security standardization talent

Overwhelming options It is the biggest 40-60% of IoTs Lack of availability of

of solutions, platforms, impediment to adoption economic value per year right skillset and costs
and devices due to increase in high is not realized due to associated with IoT
necessitates profile hackings interoperability implementation further
introduction of challenges impact its adoption
technology-agnostic
solutions

Source: Everest Group (2017)

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Which of these are the biggest challenges faced by
startups?

Results
47%

33%

13%

Scaling from prototype to product Raising funds for expansion Business case for modeling

Proprietary & Confidential. 2017, Everest Global, Inc. 9

Presentation topics

Fueling
IoT Adoption Innovation:
Q&A
Challenges Focus on
Startups

Role of startups in
driving innovation
Major investment areas
Key players driving
disruption

Proprietary & Confidential. 2017, Everest Global, Inc. 10

IoT startups are mostly acquired to expand the scope of
services and capabilities across the IoT stack

IoT startup acquisition objective

2013-2016; Number of acquisitions

100% = 50

Acquisitions focused to
71% Acquisitions dedicated to
expand presence across 29% strengthening core capabilities
the IoT stack

Source: Everest Group (2017)

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Innovative applications are key enablers for value realization
in IoT and prime target for acquisition

Solution focus of acquired IoT startups Geographical distribution of acquired IoT startups
2013-2016; Number of acquisitions 2013-2016; Number of acquisitions

100% = 50 100% = 50

APAC
IOT Application Analytics Connectivity
Israel
development solution enablement 6%
9%

Europe 24%
IOT Platform Data
security 62% Americas
solution
Chip/semiconductor
manufacturing

AI/ML others

Note: Others include startups focused on providing services

Source: Everest Group (2017)

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Year 2016 was a tipping point for startup acquisitions

IoT startup acquisitions by category and deal value

Analytics IOT Application solution Data security

Deal size (US$) :
Platform provider Connectivity enabler Semiconductor manufacturers <50 million100 million 500 million 1 billion

2020 Broadcom Wirelesss Iot business

Urban engines
Dojo Labs
Implisit Insights
2015 Plat.One
Solair
Wise.io
2010 Withings Nervana Sensity systems
Maven systems
Founding year

Altair semiconductor Movidius

Opower
2005
Soft machines
Jasper Technologies
2000 Extensys IoT Business
Wyless
Yogitech Telogis Ruckus Wireless
Bit stew Systems
1995 GreenPeak Technologies

Apical Meridium

1990

1985
Oct-15 Dec-15 Jan-16 Mar-16 May-16 Jun-16 Aug-16 Oct-16 Nov-16 Jan-17 Mar-17

Acquisition timeline
Source: Everest Group (2017)

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Key investors in the IoT ecosystem

Key investors IoT portfolio (representative)

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Some IoT startups have now become unicorns or gone public

IoT Unicorns
C3 IoT provides a full stack IoT cloud-based development platform that
US$1.4 billion1 allows the rapid design, development, and deployment of enterprise-scale
big data and IoT applications

Focused on delivering device management solution, ForeScout is also

US$1 billion1
expected to file for an IPO soon

Uptake offers data analytics solutions for IoT use cases across industries
US$2 billion1 with the uniqueness of delivering insights by combining device and
enterprise data

IoT IPOs

Impinj provides sensor solutions based on RFID technology and has a

US$320 million2
large customer base and filed for an IPO in 2016

Fitbit has been among of the most successful consumer IoT-based

US$4.1 billion2
startups and filed an IPO in 2015 for US$358 million

Veritone Inc, a video and audio data analytics firm, filed for an IPO in
Veritone NA
March of 2017
1 Existing market capital
2 Valuation at the time of IPO
Source: Everest Group (2017)

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Technology majors and service providers are making rapid
investment in IoT Startups

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We did a comprehensive analysis of IoT startups focusing on
four key areas

Connectivity
Platform providers enablers

Major focus
areas

Security Analytics solution

solution providers providers

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Key challenges with IoT Platforms

..purchasing 10-20 different services from 10-20 different vendors using 10-20 different
apps with 10-20 different user interfaces. If thats the way IoT goes, it will be a long
tough slog to Nirvana. (Bob Harden, Principal, The Harden Group)

Interoperability Narrow points solutions Multiple platforms Handle data streams

IoT platforms should Enterprise grade IoT IoT industry is filled with IoT platforms need to
easily integrate with the system need to support multiple platforms which have advanced
complex ecosystem and diverse use cases and makes it difficult for capabilities to handle
provide compatibility with should not focus on a enterprises to adopt one vast amount of data from
diverse network, data specific industry with most capabilities multiple sources
sources and protocols

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Key challenges with IoT Security

The largest DDoS attack ever was launched using an IoT botnet (Mirai). This led to
huge portions of the internet going down, including companies like Twitter, the
Guardian, Netflix, Reddit and CNN.

Device identity Secure communication Secure gateway Network visibility

It is difficult to ensure Hackers can intercept Securing gateways is Organizations struggle to

authenticity of each communications between very important as they get complete visibility of
device with thousands of IoT devices and alter can act as a weak link in their IoT network, making
connected devices in an transmitted messages. IoT communication. it easier for hackers to
organizations IoT place rogue devices in
network. the network

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Key challenges with IoT Analytics

The IoT will generate an enormous, truly unprecedented amount of precise information
about buyers and their needs. Its a marketers dream come true. (Jon Gettinger, SVP
Marketing, Aria Systems)

Integration with
Underutilized data Detect anomalies Root cause analysis
enterprise data
Even after significant Understanding the data With so many data IoT data is currently
investments in IoT norms and predicting sources in an being used to predict
infrastructure, a large anomalies in real-time organization, the key downtime and not to
chunk of sensor data is from the vast amount of issue is integrating develop advanced
unutilized IoT data is a challenge various data sources into algorithms to identify
a single platform cause for downtime

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Key challenges with IoT Connectivity

The Internet of Things is not a concept; it is a network, the true technology-enabled

Network of all networks. (Edewede Oriwoh)

Network security Network optimization Legacy infrastructure Low latency

Security in data transfer High cost of cellular Legacy network Low latency for mission-
has been a major networks can seldom infrastructure requires critical applications is not
hindrance in IoT adoption satisfy the need for massive upgrades and met with the traditional
and recent DDoS attacks sharing large volume of investments to cater to networks, which are in
further intensify the smaller sized packets IoT connectivity urgent need for
concerns expectations innovation

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We identified 40 startups as high potentials startups
addressing the primary challenges of IoT adoption

Key IoT startups

Platform providers Connectivity enablers Analytics solution providers Security solution providers

Source: Everest Group (2017)

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Hot IoT startups | Leaderboard

Platform providers Connectivity enablers

1 2

Top 20 IOT
trailblazers

4 3

Security solutions providers Analytics solution providers

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In your opinion, which of the following approaches will be
adopted by enterprises to work with startups over the next
12-24 months?

Results
42%

23%
19%

8%

Investing in start ups Working together to Joint GTM strategy Acquiring start ups
create new solutions

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Engaging with the start-up world

This is a portfolio play but you have to start somewhere

Effective tiering is essential for strategy execution

Requires specialist organizational capability to manage the ecosystem

The cultural conundrum

Understand the risks technical, financial, IP, security and compliance, talent

Proprietary & Confidential. 2017, Everest Global, Inc. 25

Presentation topics

Fueling
IoT Adoption Innovation:
Q&A
Challenges Focus on
Startups

Proprietary & Confidential. 2017, Everest Global, Inc. 26

Have a question?

To ask a question during the Q&A session

Click the question mark (Q&A) button located

on right side of your screen. This opens Q&A

Be sure to keep the default set to send to All

Panelists

Type your question in the box at the bottom of

the Q&A box and click the send button

Attendees will receive an email with instructions for downloading todays

presentation
For advice or research, please contact:
Chirajeet Sengupta: chirajeet.sengupta@everestgrp.com
Gunjan Gupta: gunjan.gupta@everestgrp.com

Proprietary & Confidential. 2017, Everest Global, Inc. 27

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Internet of Things Services PEAK Matrix Assessment and Market Trends

IoT: Bigger than the Hype

Internet of Things (IoT) in Medical Devices

Top 20 IoT Trailblazers: Startups Crossing the Chasm

Proprietary & Confidential. 2017, Everest Global, Inc. 28

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