Are we building a bubble in IoT? Of course we are. And here are five things that really bother me about IoT and that are contributing to over-inflated hopes for this concept.
1. Lists
Over the past 90 days, I have seen no fewer than five lists of the “top” companies in M2M and IoT. Having conducted research on this area for a decade, with projects dating back to the spring of 2006, I’ve talked to most – if not all – of the participants who make up these lists on multiple occasions. Chances are, I’ve conducted in-depth analysis of a company on the list for a project or study. And what I’ve found is that most of these lists have absolutely no foundation in reality. Most of these lists are either created to generate licensing revenue, or as a quid pro quo to their existing client base. On one list, a “big name” company was listed that had been acquired in July 2014 and has been integrated into the acquirer. They cease to exist, but someone thinks they are one of the IoT influencers of tomorrow.
On another list, there is a company that was placed in the top 10 (yes, they were so bold as to actually rank the companies) yet has no revenue. How do I know that they have no revenue? It’s because I spent the last few days in meetings with the company’s executive team. When I talked to the CEO about it, he said “James, we’ll take it, but that’s why we talk to you. Most of these analysts don’t have a clue as to what is really going on. They buy into the hype. But are we going to turn down the free press? Heck no!”
2. “Best-of-Breed” Platforms
At Mobile World Congress in February in Barcelona, there was this “new thing” everyone was talking about – the Internet of Things. It was buzzing at every booth. Everyone had a “platform” and was claiming to be best-of-breed. Even the conference staff got into the mix and gave away the Best Mobile Innovation for IoT award to SIM management and provisioning expert, Jasper. They do a helluva job at allowing someone to activate cellular devices and view their cellular connected “things” through an online management portal, but is this really new? Hasn’t Jasper been doing this for years?
3. Over-Valuations, Under-Valuations, and IPO Worthiness
And on that same topic, I can’t begin to tell you the number of times since the first of the year that I have had someone ask me about Jasper’s potential IPO and valuation. That scares me. It tells me that there is too little information and too much hype about IoT. Jasper has been a fixture in discussions around M2M for several years, and Crunchbase estimates that the company has taken in well over $200 million in venture funding, so the time might be right for a public offering. Rumors abound about a late Q2/early Q3 IPO by Jasper. Any time somebody wants to IPO with a $2 billion valuation and less than $100 million in revenues (my estimate), it brings back memories of the 2000 bubble and frightens me. Jasper isn’t a true SaaS company, yet we believe it is looking for a SaaS valuation.
But Jasper isn’t the only company looking for an exit. Over the past month, I’ve spoken with no fewer than 10 companies searching for the pot of gold at the end of the rainbow. And when I speak with these $5 million and $10 million companies, and they talk about multi-hundred million dollar exits as their goals, I scratch my head.
My talk of overvaluation doesn’t even touch on the acquisitions that have happened over the past few months. I’ve got a blog on it here: http://www.jbrehm.com/blog/2015/2/10/wireless-logic-acquired-by-cvc-capital.
But overvaluation isn’t necessarily the only problem in the industry. Companies that IPO’d years ago but that have terrific brands, strong product offerings, cash in the bank, terrific IPR, and good customer bases have a hard time getting this message across to Wall Street analysts. It seems to me that Wall Street doesn’t look at the R&D and investment that companies like Digi and Numerex are doing, nor are they looking at the valuable existing relationships these companies hold. It seems to me as if Wall Street is just looking for a big EBITDA number and may be penalizing companies for making longterm investments and strategic acquisitions.
And what’s more, both of the companies mentioned have a fair amount of cash on hand and a steady stream of receivables. Shouldn’t this count for something?
4. The P Word
Platforms: I can’t go a day without someone calling me or emailing me for help with their application enablement platform. 2lemetry was acquired last month, and I haven’t found a single person to share insight on the valuation. What’s more, everyone has their own views as to why the acquisition was made. As for me, I believe Amazon will take the code from 2lemetry and create an IoT app builder solution as part of AWS. But even with 2lemetry gone from our active list of platforms, it leaves at least 63 companies on my short list of who have a platform.
Over the next couple of months, we’re going to do an analysis of these platforms, from Ayla to Zoho. So if you want to include your platform in our review, please shoot us an email at [email protected]. We’d love to include you. We’ve got a matrix constructed for evaluation, but if you have some criteria for inclusion, we’d like your feedback on that too.
5. Shortcuts
Everyone is looking for a shortcut. Application enablement platforms are the supposed shortcut for bringing solutions to market. Productization and peg hook solutions are the answer for carriers on getting connections. Consortiums such as OneM2M, the IIC, Thread, the AllSeen Alliance and others are all THE shortcut to a ubiquitous IoT.
What people don’t realize fail to admit, is this is complex stuff. It’s not about connecting things. It’s about getting actionable, contextually relevant information. It’s about moving up the stack, from data to information to knowledge to wisdom.
To do this, companies must create open, flexible, scalable and replicable ecosystems. They must actually collaborate and work together. As an industry, we’ve got to get to a level of transparency and openness that we’ve never seen before. Companies like Panasonic and Tesla are leading the charge down this new open path by providing royalty-free access to intellectual property to spur growth.
Anyway, with poor lists, overvalued companies, too many platforms, and way too much private equity money looking for a home, the market looks like a balloon straining against overinflation. Let’s hope it doesn’t pop all over us.
James Brehm is founder and chief technology evangelist at James Brehm & Associates (www.jbrehm.com).
Edited by
Ken Briodagh
