The Internet of Things (IoT) is a fundamental shift in our world - but it is not the first shift we've seen of this magnitude. IoT is our fourth industrial revolution. As with all others, it will create winners and losers. One loser may be the hardware model, as software models emerge powerful and sticky - with commoditizing hardware only serving to stretch the reach of software. Under this threat, many hardware companies are seeking software models, and some hardware giants are investing in software startups to get ahead of the wave.
There will also be unintended human consequences of the IoT paradigm shift. It will both solve problems and create new ones... an entrepreneur's dream. Below is one view on the IoT - what it means to entrepreneurs, investors and all of us as human beings.
2. Simple events remind us IoT is everywhere
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I recently experienced a new
“smart elevator”
Push the touch screen, it tells you
which to board. No buttons, no
indicators. You must trust it.
Our life was in it’s hands.
The women next to me and I
looked at each other
“Everything is changing,” she said.
4. First: A quick bit about HPVP and me
Happy to chat more any time4
• Twitter: @guyhturner
• Blog: vcwithme.co
• Mgmt Consultant
• Angel
• Engineer
• Twitter: @hydeparkvp
• Early-stage IT at $0-2M rev rate
• Midwest focus
• $25M fund size
• Seed or Series A, $1-3M rounds
5. Iot is not what we hear about in TechCrunch
… these are only the tips of the iceberg
and only training wheels
8. IoT is an industrial and business play
Source: Intel
Deployment of “things” in the IoT
9. This is not the first industrial revolution
Continued evolution of human:machine:world interaction
1st ~1800 2nd ~1870
Source: Multiple, ECNMAG
“cyber-
physical
production
systems”
town factory
subsistence farm
mass production
quality of life
poverty (sort of)
Steam
Central
gov’t
Telegraph
Electricity
Fossil fuel
3rd ~1975
knowledge worker
factory worker
Silicon
Computer
Internet
4th ~2010
connected devices
people (scary)
Micro/nano
Efficient chips
Big data
10. IoT: a network of unmatched power (again)
Analogy: Telegraph is to train as IoT is to personalization
10
Source: Chandler, Strategy and Structure
- Coordination and planning
- Across many points
- Over long distance
- In (near) real time
- Of multiple independent
machines/people
- To meet human physical
needs at scale
- Affordably
- Coordination and planning
- Across many points
- Over long distance
- In real time
- Of multiple independent
machines/people
- To meet physical human
needs at scale
- Affordably
- On a 1:1 basis
1:1 marketing
1:1 supply chain
1:1 environment
1:1 healthcare
11. As with all revolutions, money to be made
(and heads will roll)
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• Upstarts with agility
• Certain asset owners
o Telecom (bandwidth)
o Raw materials (as for all
revolutions)
• Software models (sticky,
network effects)
• The un-connected/untrained
• Slow adopters
• Large industrial with
antiquated sunk cost in
faster moving sectors
• Hardware models (unless
low cost provider)
12. So what (is the size of the prize)?
12
Source: ICD, Google Finance
$8.9
TRILLION
PER YEAR
by 2020!!!!$0.5B
APPL
Mkt Cap
$0.36B
GOOG
Mkt Cap
7.9% CAGR
14. That’s why three of top 5 IoT VCs are big HW
companies; $1B invested in 201314
Source: CBInsights
Top 5
Intel
True
Qualcomm
Cisco
Kleiner
Intel has always struggled in mobile
Qualcomm an offensive move
Cisco under threat from SDN (software-defined network)
15. 15
… and other HW companies jumping in
$100M fund
Healthcare IoT
$100M fund
Manufacturing IoT
48M GBP fund from UK gov’t
General IoT
Source: TechCrunch
(OK, not a HW
company but
funny)
16. Are hardware models doomed?16
“Make up for margin with volume” only works in a
blue ocean race… the start of a new market
Android announced
First android sold
iPhone high end
iPhone low end
Source: Garmin, aaplinvestors.net
17. … or if you can be the low cost provider
17
“How Lenovo
found treasure
in the PC
industry’s trash”
Source: Businessweek
18. Yet, software pricing power builds with time
18
As a business, how much do you spend today on
SW vs 10 years ago? How about HW?
Source: Salesforce 10-Ks
20. ***Action***
Decision
Insight
HW
SW business models excite VCs
Data
E-commerce, Lead Gen, Advertising
SaaS (ERP, Marketing Automation,
CRM, etc)
SaaS (analytics, monitoring, business
Intelligence)
DaaS, Data Aggregator, Data
Normalizer, Storage
Sell it, wait, sell it again later (maybe)
Leasing/renting… may be a play here
In IoT, these models applied on a per device or
per endpoint transaction basis
21. Watchout startups: structure of some IoT
target verticals favor incumbents
21
Designcycleandlifecycle
Speed of adoption
Big companies have
two major resources
vs startups: Time and
money
(somewhat) better for startups
Favors incumbents
22. Example from HPVP portfolio
22
• Vision: sensor backend-as-a-service
• Huge opportunity to replace installed
base of on-site sensor backends, but
players TOO SLOW to adopt within
startup funding and lifecycle
• Instead, FOR SPEED, working on the
innovative edges of industry – new
active sensor base with big companies
and their existing customers
23. What it means to be “human”
changes in every revolution
23
24. How we have changed
1st ~1800 2nd ~1870
3rd ~1975 4th ~2010
Wants not needs
Peasant to
production
Worker to
thinker ?
25. Scenario 1: utopian network node
25
Human needs/wants
known by external and
internal (implanted)
network of technology
in real time or BEFORE
human sensed
Intellectual/thought
driven society with
technology meeting
physical needs on a 1:1
basis… “Wall-E”…
except prettier?
26. Scenario 2: technology industrial complex
26
Rise of SW network effects and returns of scale
creates outsized wealth and power concentration
Source: Forbes
Do we trust these people not to be evil?
This phenomenon driven
by SW and SW margins
27. Scenario 3: Skynet (of course this would be in here)
27
Technology evolves faster than we do, creating own species of
smart connected devices with autonomy and self-determination
Source: Marseille Museum, Intel
10M years 40 years
Human Brain Evolution Computer Evolution
(via Moore’s Law)
If climate change was an unintended consequence
of human ingenuity, imaging what else is possible!
28. Scenario 4: never alone
28
Always connected
Loss of freedom and
personal sanctity
Psychological mechanism
ill equipped to cope
29. Being human is to have problems,
being an entrepreneur is to solve them
29
IoT will solve problems, and it will
create new ones
Will you solve a problem now with IoT,
or one that IoT creates?