FEATURES - Boardroom Report
January 21, 2015

Contemplating Consolidation

The consolidation continues. Axeda becomes part of PTC’s previously acquired Thingworx. Orbcomm buys Skywave. Raco Wireless is being combined with Kore by ABRY partners. All of this indicates companies are finding that growth is easier when the services are fuller.

And yet with all the activities going on there is no shortage of new entrants, teams regathered into new companies, and the global companies learning to maximize their abilities to deliver

to their clients.

According to CB Insights there are 141 venture companies looking at the Internet of Things. That’s a good starting point, but not a complete picture.

The interesting thing to notice is that different companies see their rationale for investments in very different ways. At a deep level, Cisco invests in packet producers, Google in mining information, Intel in chip deployers, and Oracle in business intelligence. Now in reality almost all of those distinctions for IoT are arbitrary. It will be rare for a company to not do all of those things, unless the specialization has an immediate impact.

Now the ways of venture capital these days are very much the software rules model. A friend talking to me about a venture I am trying to get off the ground told me to get the development right and avoid customers for at least a year. That is typical of many freemium models, but I am not sure it belongs in the IoT marketplace – at least not without a clear exit to a specific player. 

I have tremendous respect for the companies that have merged, but perhaps they are merging because the investment community is using the wrong analytics.  

While crowdfunding sounds great, often groupthink puts us down bad paths. Looking at new entrants based on the growth percentages is fine, but if it’s applied to existing players the size of the denominator makes growth less relevant and revenue more important.

However, venture money often wants the benefit of churn, and it maybe that the eat-or-be-eaten view has driven some M&A.

On the other hand, some companies are confident enough in their growth that they can venture into the deep waters of long-term risk.

Intel Capital’s portfolio has that crystal ball far-seeking look to it – wearables and IOT strategies that include navigation and displays based on your retina and gene manufacturing labs.

Clearly these are looking at big problems, but often these represent big gaps in return on the investment. Candidly, I am not sure how these opportunities get evaluated in comparison to the strategies I am used to hearing. You have to be strong on vision, trust, and capital to keep these kind of investments moving.  Every deck I have ever pitched has to have a three year ROI strategy.

The trends in the boardroom are filled with alternate paths, and a trend line is hard to create when looking at where all the monies seem to be headed. However, if you are not a new entrant your end of the pool may be very different than what the big venture funds are looking for at this point.

Edited by Maurice Nagle

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