EMERGING TECH RESEARCH

Internet of
Things (IoT)
H2 2020

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Contents
H2 2020 highlights and updates 3
Credits & contact
Executive summary 4
RESEARCH
Key takeaways 6
Brendan Burke
Industry overview 7 Senior Analyst, Emerging Technology
brendan.burke@pitchbook.com
VC activity 9
research@pitchbook.com
Market map 10
Segment deep dives 12 DATA
Matthew Nacionales
IoT hardware 12
Data Analyst
IoT networking 23
DESIGN
IoT software 32
Megan Woodard and Kelilah King
Industrial IoT 43
Connected buildings 53
Connected services 63
Supplemental materials 74

PitchBook Emerging Tech Report: Internet of Things (IoT) CONFIDENTIAL. NOT FOR REDISTRIBUTION. PG 2
IOT HARDWARE

Sensor systems: Assemblages of sensors and chipsets that empower specific IoT use cases. Figure 6.
Typical IoT device architecture
Connectivity devices

Radio frequency identification (RFID): Tags that absorb electromagnetic energy

to transmit simple, unique codes. RFID tags are common components of near-field
communications. Microcontroller

Network-specific antennae and routers: IoT networks often require specific endpoint-
level routers or antennae. Examples of these include Bluetooth routers and RFID antennae Input/output
Power management Storage
that must be deployed at the local level to detect low-range signals from end devices and peripherals
transmit them to central gateways. This category can also include SIM cards.

Gateways: Transmitters that filter and format data from IoT devices in connection with IoT
networks.

Innovations in these areas require substantial capital investment. Incumbents have an

innovator’s dilemma since fundamental improvements in hardware performance can Transceiver
disrupt the market for their legacy products. As such, startups may have a competitive
advantage as they can more freely experiment with new architectures.

Industry drivers

Cost of sensors, bandwidth, processing, and storage declining precipitously: The cost to Gateway
produce IoT hardware has declined in recent years. We believe sensor costs have declined
by around 50% since 2010. These declines make IoT devices cheaper to build and more
marketable, which enables the “razor and blades” business model common in the industry.

Source: PitchBook

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IOT HARDWARE

Figure 10.
Notable IoT hardware VC deals

I COMPANY CLOSE DATE SUBSEGMENT STAGE DEAL SIZE ($M) LEAD INVESTOR VALUATION STEP-UP

Horizon Robotics December 22, 2020 Chipsets Series C1 $150.0 5Y Capital, Hillhouse Capital Group, Capital Today N/A

Eta Compute December 15, 2020 Chipsets Series C $12.5 Synaptics 1.4x

Morse Micro November 24, 2020 Chipsets Series A $30.3 Right Click Capital, Uniseed, Main Sequence Ventures N/A

Ambiq October 16, 2020 Chipsets Late-stage VC $73.6 Trout Creek Ventures, Shenzhen Capital Group N/A

Everactive September 9, 2020 Sensors & sensor systems Series C $35.4 N/A 1.2x

Source: PitchBook
Figure 11.
Notable IoT hardware VC exits

I COMPANY CLOSE DATE SUBSEGMENT EXIT VALUE ($M) ACQUIRER/INDEX VALUATION STEP-UP EV/TRAILING REVENUE

SOMOS Semiconductor October 15, 2020 Chipsets N/A STMicroelectronics N/A N/A

VeriSilicon August 17, 2020 Chipsets $2,399.1 Shanghai Stock Exchange N/A 13.2x

MEMSensing August 10, 2020 Sensors & sensor systems $357.5 Shanghai Stock Exchange N/A 12.0x

Cambricon
July 20, 2020 Chipsets $3,290.8 Shanghai Stock Exchange 1.5x 59.4x
Technologies

North June 30, 2020 Sensors & sensor systems $180.0 Alphabet N/A N/A

Source: PitchBook

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IOT SOFTWARE
Figure 20. IOT SOFTWARE MARKET SIZE ($B)

$180
Market size
$150 11.5% CAGR

We estimate the IoT software market to reach $120.0 billion in terms of end user
$120
spending in 2021, with much of this spending driven by the monitoring software
$90
provided by industrial automation incumbents. We expect software to slightly decrease
as a share of the total market, growing at a 11.4% CAGR to 2024. This forecast is based $60

on our estimate of 23.1% of IoT spending flowing to software, a share that we expect to
$30
decline over time as more processing shifts onto the devices themselves.
$0
2021 2024
Disruption potential
Source: IDC and PitchBook, IDC, Gartner, Omdia | Geography: Global
We view IoT software as ripe for disruption given the poor quality of existing solutions
on the market. While the IoT software market is heavily crowded, there are no clear
Figure 21. COMMON INDUSTRY KPIS FOR IOT SOFTWARE COMPANIES
market leaders in Gartner’s magic quadrant for IoT platforms, with no vendors being
assigned to the leader quadrant until 2020. Additionally, vendor offerings typically offer
Operational • Integrations with cloud
poor analytics functionality and user experiences. Many platforms offer little control over services
• Speed of IoT deployments
existing devices and they do not have prebuilt playbooks to improve business outcomes,
• Number of channel partners
• Number of modules sold
leaving them underutilized by customers. Startups that deliver business analytics from
• Support for business KPIs
existing control systems integrated with ERP systems and other business applications can • Number of APIs

improve the value proposition of IoT and displace legacy device-management systems. • Number of applications built
Financial
Specifically, we believe there are three core ways that IoT software platforms can be on top of platform
• Revenue mix
disrupted: • Number of networking
protocols supported
• Unbundling universal platforms into vertical-specific applications that are custom-built

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INDUSTRIAL IOT

Business model changing in ways that may support increased M&A by industrial automation incumbents.
Manufacturing & supply chain, the largest category of IoT in terms of end-user spending,
• Gross margins on the sale of each hardware unit is positioned for a high-growth year in 2021. In Q4 2020, ABB acquired hygienic robotics

• Machine-as-a-Service: recurring revenues based on machine uptime startup Codian Robotics, demonstrating gaps exist in industrial automation portfolios and
signaling the potential for increased exit activity in 2021.
• SaaS recurring revenues for platform sales from monthly or annual contracts

VC activity

Industrial IoT had a breakout year in VC funding, raising over $2 billion for the first time,
according to our data. VC funding remained robust throughout the COVID-19 pandemic,
reflecting the needs of startups to meet urgent customer demands to adapt to digital
operations. While H2 saw only two industrial IoT mega-deals, some startups’ valuations
continued to grow. Predictive maintenance startup Augury raised a $55.0 million Series
D, achieving a 1.6x valuation step-up. Mining platform vendor Intellisense.io raised its
valuation 2.7x in its second institutional round of the year. We believe few companies are
achieving scale during the pandemic, but some appear to be establishing product-market
fit, creating opportunities for M&A.

We recorded only two industrial IoT exits in 2020 and note industrial automation
incumbents have been inactive in M&A. IIoT incumbents include General Electric
(NYSE: GE), Siemens (ETR: SIE), Robert Bosch, ABB Group (NYSE: ABB), and National
Instruments (NASDAQ: NATI) based on their IoT revenue and mindshare in the industry.
Despite partaking in broader M&A activity, none of these incumbents have made
pure-play acquisitions in IoT since 2018. However, market conditions appear to be

PitchBook Emerging Tech Report: Internet of Things (IoT) CONFIDENTIAL. NOT FOR REDISTRIBUTION. PG 46
CONNECTED BUILDINGS

Figure 35.
Connected buildings VC landscape ($M)

$500 Kinestral
Late VC ($87M)

$450 Ring
Series E ($160M)

Kinestral
$400 Series D ($100M)

$350

Tuya Smart
Series C ($200M) Latch
$300 Latch Late VC ($30M)
Series B ($126M)
Total raised

Kinestral
$250 Series C2 ($80M)

$200

$150

$100

$50

$0
January 1, 2017 January 1, 2018 January 1, 2019 January 1, 2020 December 31, 2020
Connected commercial real estate Smart home Smart retail

Source: PitchBook
Note: The left axis indicates total VC raised as of deal date. Bubbles indicate amount raised.

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CONNECTED SERVICES
Opportunities
High demand for car computing and connectivity: Vehicle-to-vehicle connectivity (V2V)
will soon allow cars on the road to transmit position, speed, and braking data to surrounding
cars. This system of vehicle sensors and dedicated radio communication devices will help
prevent accidents by alerting other cars of emergency braking situations, blind spots, or
crossing into oncoming traffic. Further, vehicle-to-infrastructure (V2X) connectivity can
improve traffic management by communicating with municipal antennas along roadways
through a protocol called dedicated short-range communications (DSRC). A 2018 study
by the University of Michigan's Transportation Research Institute found that as many as 8.1
million crashes and 44,000 deaths could be prevented if V2X technology was deployed
today. One potential solution might be to install dual-mode equipment capable of discerning
13
safety messages sent via DSRC or cellular methods. Given these significant benefits to
driver and rider safety, demand for these technologies could increase greatly in the near to
mid-term. It is expected that over 60% of new vehicles will have V2V capabilities by 2023.14
This category should benefit from a bounceback in passenger vehicle sales in an economic
recovery scenario.
Smart cities: Technologies highlighted in municipal RFPs include visual surveillance,
advanced public transit, smart outdoor lighting, intelligent traffic management, and
connected back office. Smart city spending amounted to $95.8 billion in 2019, according
to IDC, led by Singapore, New York City, London, and Tokyo.156 We believe this estimate
13: “The Cost in Fatalities, Injuries and Crashes Associated With Waiting to Deploy Vehicle-to-Vehicle Communication,” University of
Michigan Transportation Research Institute, James R. Sayer, Carol A. C. Flannigan and Andrew J. Leslie, March 1, 2018.
14: “60% of New Vehicle Sales in US to be V2V Capable by 2023,” Juniper Research, December 11, 2018.
15: “Worldwide Internet of Things Spending Guide,” IDC, Andrea Siviero et al., 2020.
PitchBook Emerging Tech Report: Internet of Things (IoT)
includes a range of non-IoT devices but demonstrates the scale of the opportunity. This
represents an opportunity for LPWAN startups. According to ABI Research, there will be
approximately 1.3 billion WAN-based smart city connections by 2024, almost half of which
are expected to be LPWAN.16
Bedside telemetry: Increased networking and connectivity of patient monitors now
allows for remote monitoring of patients by clinicians hundreds of miles away via
telemedicine. Heart sensors used in Electronic ICU (eICU) programs have delivered
significant improvements in mortality rate. The need for this technology is heightened due
to COVID-19. Caregivers must administer multiple ECGs per day in the absence of bedside
telemetry. While cardiac telemetry is 50 years old, wireless solutions can improve patient
comfort and flexibility. Dublin-based Fire1 is enabling a remote monitoring solution that
addresses heart failure and has raised a Series C from leading global investors including
medical device giant Medtronic.
Senior care: The senior population in the US is increasing, and the shortage of caretakers
could be addressed with technology. Half of senior citizens have broadband connections
in their homes, and insurance companies are incentivizing the use of connected healthcare
technology, such as IoT sensors that can detect deviations from baseline activity levels.
This can reduce senior living costs as well as the need for routine checks from caretakers
and senior living staff. UK startup Karantis 360 partnered with IBM Watson to bring AI-
powered IoT to senior care. Nectarine also offers an AI-powered wristband to enable
proactive caretaking. K4Connect and Birdie have developed holistic connected platform
16: “Smart City Cyber Security,” ABI Research, 2019.
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SUPPLEMENTAL MATERIALS

Select company analysis Samsara’s reported financial metrics

REVENUE GROWTH (TTM) NUMBER OF CUSTOMERS

Q1 2021 80% 20,000

Business overview

Samsara provides an Industrial IoT platform that combines hardware, software, and cloud
computing designed to bring real-time visibility, analytics, and AI to industrial operations. The
company's suite of solutions includes vehicle telematics, driver safety, mobile workflow and Q2 2018 250% N/A
compliance, asset tracking, and industrial process controls that can be managed from a single
platform.

Although its core business is fleet management, the company has developed a differentiated
machine vision product called the VS2 Vision System that detects abnormalities in industrial Q4 2018 250% 5,000

processes and communicates alerts directly to a central dashboard. VS2 can work across a
host of use cases, although it is focused on commercial vehicle dash cams, and its intuitive no-
code configuration platform creates a superior user experience relative to other models on the
market. Q3 2019 200% 10,000

COVID-19 has changed the course of the business. In May, Samsara laid off 300 employees
along with its $700.0 million Series F. The Series F includes a $400.0 million extension that Source: Company press release

lowered the valuation of the initial round announced in September 2019. The company’s 18

machine vision cameras are being used to ensure worker health and safety, a slight change
from the previous primary use cases. The company may be challenged to grow into its high
valuation with increased budgetary pressure from enterprise customers.
18: "Samsara, a $5.4 Billion IoT Startup That Laid off 300 Employees and Raised a Down Round in May, Is Betting Its Business on Customers
in 'Industries That Are Ramping Up to Support the Economy,'” Business Insider, Rosalie Chan, August 11, 2020.

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SUPPLEMENTAL MATERIALS

Figure 47. Figure 48.

IoT VC deals ($) by region IoT VC deals (#) by region
$12 1,400

North America North America

Europe Europe
1,200
$10 Asia Asia
Middle East Middle East
Africa Africa
Oceania 1,000 Oceania
$8 Rest of world Rest of world

800

$6

600

$4

400

$2
200

$0 0
2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020
Source: PitchBook | Geography: Global | *As of December 31, 2020 Source: PitchBook | Geography: Global | *As of December 31, 2020

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SUPPLEMENTAL MATERIALS

Figure 53. Figure 54.

IoT VC exit activity Top IoT VC exits by size
61
59
I COMPANY NAME CLOSE DATE EXIT SIZE ($M)

54
C3.ai December 9, 2020 $3,374.6
50
48 Cambricon Technologies July 20, 2020 $3,290.8

Nest Labs February 7, 2014 $3,200.0

34
VeriSilicon August 17, 2020 $2,399.1

Ring April 12, 2018 $1,500.0

Cisco Jasper March 22, 2016 $1,400.0

Cradlepoint November 2, 2020 $1,100.0

Armis (California) February 7, 2020 $1,100.0

$1.5 $2.4 $2.8 $3.0 $2.4 $14.0

Treasure Data August 2, 2018 $600.0

2015 2016 2017 2018 2019 2020

Exit value ($B) Exit count Dropcam June 20, 2014 $555.0

Source: PitchBook | Geography: Global | *As of December 31, 2020

Source: PitchBook
Note: Excludes Uber IPO

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