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IoT Startup State Of The Union 2017
Gaurav Garg
@Wing_VC | www.wing.vc

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2017: The IoT future is here,
but it's not very evenly distributed.

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It's been a busy 12 months for IoT.
acquires For $13.5B

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It's been a busy 12 months for us too.

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We've doubled our data, and expanded our focus
Since last year's IoT Startup State of the Union, we've increased the
database to 3670 IoT deals (Jan 2013 – Dec 2017)

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The industry likes to talk about IoT as a single phenomenon…
INNOVATION
TRIGGER
PEAK OF INFLATED
EXPECTATIONS
TROUGH OF
DISILLUSIONMENT
SLOPE OF
ENLIGHTENMENT
Expectations
PLATEAU OF
PRODUCTIVITY
Time
2013
2014
2015
Last Year, we put IoT here on
Gartner's Hype Index.
2012

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…but the reality is that IoT is much more
nuanced than one single dot.

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At Wing we track 68 different IoT categories, over every quarter
since the beginning of 2013
Drones: Logistics
Drones: Platform
Drones: Security and Safety
Drones: Agriculture
Drones: Inspection and Monitoring
Drones: Hardware
Auto: Fleet Management
Auto: Platform
Auto: Security and Safety
Auto: Autonomous Vehicles
Auto: Security
Auto: Connected Vehicles
Drones: Film and Photography
Auto: Driver Assistance
Infrastructure: Base Software
Infrastructure: Base Hardware
Infrastructure: Data, Analytics, and AI
Infrastructure: Sensing
Infrastructure: Developer and IT Tools
Infrastructure: Connectivity
Infrastructure: Security
Infrastructure: Platform
Infrastructure: Silicon
Home: Platform
Home: Security and Access
Home: Outdoors
Home: Indoor Environment
Home: Family and Pets
Home: Embedded Systems
Home: Platforms and Controls
Home: Health
Home: Appliances
Commercial: Buildings and Cities
Commercial: Utilities
Commercial: Supply Chain and Logistics
Commercial: Healthcare
Commercial: Manufacturing
Commercial: Construction and Infrastructure
Commercial: General
Commercial: Retailing
Commercial: AgricultureRobotics: Health
Robotics: Agriculture
Robotics: Technology Stack
Robotics: Education and Entertainment
Robotics: Retail
Robotics: Heavy Industry
Robotics: Platform
Robotics: Home
Robotics: Logistics and Transportation
Wearables: Sport
Wearables: Beyond Biology
Wearables: General Health
Wearables: Rare Condition
Wearables: Disability
Wearables: Specific Health
Wearables: Enabling Layers
Wearables: Commercial Use
Wearables: Platform
Health: Sport
Health: Surgery
Health: Patient Support
Health: Data and Monitoring
Health: Health Interventions
Health: Healthcare Operations
Health: Disease Treatment
Health: Diagnosis
Health: Platform

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Even with just half of those categories mapped, here's what IoT
progress looks like:
INNOVATION
TRIGGER
PEAK OF INFLATED
EXPECTATIONS
TROUGH OF
DISILLUSIONMENT
SLOPE OF
ENLIGHTENMENT
Expectations
PLATEAU OF
PRODUCTIVITY
Time
2013
2014
2015
2012
Commercial:Construction
andInfrastructure
Commercial:BuildingsandCities
Commercial:Retailing
Commercial:Agriculture
Commercial:SupplyChainandLogistics
Commercial:Utilities
Commercial:Healthcare
Commercial:Manufacturing
Drones:Logistics
Drones:FilmandPhotography
Drones:SecurityandSafety
Drones:Agriculture
Drones:InspectionandMonitoring
Drones:Hardware
Auto:FleetManagement
Auto:Security
Auto:TrafficManagement
Auto:ConnectedVehicles
Auto:AutonomousVehicles
Auto:DriverAssistance
Infrastructure:Sensing
Infrastructure:Connectivity
Infrastructure:Data,Analytics,andAI
Infrastructure:Silicon
Infrastructure:BaseSoftware
Infrastructure:BaseHardware
Infrastructure:DeveloperandITTools

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That's why we believe that the IoT future is
here, but not yet evenly distributed.
It depends on where and how you look.

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The High Level View

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Last year we started by looking at the
earliest possible stage - project inception,
long before funding occurs.
We start there this year too.

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IoT Builders are growing at the earliest stages.
GitHub IoT repo activity is double what it was last year.
Number of repositories
Containing IoT keyword
16,057
32,426
5,774
1,403
309

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Next, we check in on our 'Wingdex' to get a
snapshot of overall activity in both number of
deals and dollars.

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The 'Wingdex' shows sharp increase in dollars invested
*We add a small factor to the most recent year to account for straggler data yet to be captured. This is present in all analysis in the study.
DEALS
DOLLARS

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A sharp rise in dollars, but a smooth, gradual
increase in deals.
Why is that?

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All levels of deal activity saw a healthy increase…
$20M+
$2-20M
$0-2M
#IOTSTATEOFTHEUNION

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…but later stage IoT funding continued to rise,
fueling the sharp increase in dollars in our 'Wingdex'
$280M $325M
$1B$100M
$78M $50M
NOTABLE
DEALS
Deals where $20M+
was raised

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IoT companies are scaling overall.
Some of them are breaking out.
Where is the activity focused?
What has changed in the past 12 months?

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SILICON
BASE HARDWARE BASE SOFTWARE
DATA, ANALYTICS,
AND AI
SENSING CONNECTIVITY
DEVELOPER AND
IT TOOLS
SECURITY PLATFORM
MAPPING AND
SURVEYING
PLATFORM
AGRICULTURE
FILM AND
PHOTOGRAPHY
CONSUMER
LOGISTICS
HARDWARE
MANUFACTURER
INSPECTION AND
MONITORING
SECURITY
AND SAFETY
PLATFORM
ENABLING LAYERS
COMMERCIAL USE
DISABILITY
RARE CONDITION
SPECIFIC HEALTH
GENERAL HEALTH
SPORT
BEYOND BIOLOGY
AGRICULTURE
GENERAL
RETAILING
MANUFACTURING
HEALTHCARE
CONSTRUCTION AND
INFRASTRUCTURE
SUPPLY CHAIN
AND LOGISTICS
BUILDINGS
AND CITIES
UTILITIES
APPLIACNCES
PLATFORM
CONTROLS
HEALTH
FAMILY
AND PETS
INDOOR
ENVIRONMENT
EMBEDDED
SYSTEMS
OUTDOORS
SECURITY AND
ACCESS
SPORT
PLATFORM
DISEASE
TREATMENT
DIAGNOSIS
HEALTH
INTERVENTIONS
DATA AND
MONITORING
HEALTHCARE
OPERATIONS
SURGERY
PATIENT SUPPORT
LOGISTICS AND
TRANSPORTATION
PLATFORM
TECHNOLOGY STACK
HOME
RETAIL
EDUCATION AND
ENTERTAINMENT
HEAVY
INDUSTRY
HEALTH
AGRICULTURE
PLATFORM
SAFETY
FLEET
MANAGEMENT
SECURITY
DRIVER
ASSISTANCE
CONNECTED
VEHICLES
AUTONOMOUS
VEHICLES
Our view of the world of IoT…
INFRASTRUCTURE
WEARABLES HOME DRONES COMMERCIAL HEALTH ROBOTICS AUTO

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Here's what changed from last year,
across our categories…

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What was being built to last year (total deals)...
New

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... And here's the new activity since our last State of the Union
New

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Here's how the dollars invested changed
from last year, across our categories….

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Here's what was being invested to last year (total dollars)...

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...And here's the new investing activity
New

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Commercial continues to be strong.
Infrastructure doubled.
Auto/Transport is in vogue.

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We found our first overall surprise when we
looked at how IoT categories have changed
over the past 5 years.

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Consumer IoT has swooned:
Wearables, Drones, and Home are actually declining
WEARABLES
HOME
DRONES

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And Commercial IoT is rising…
with Industrial / Enterprise breaking out.
INDUSTRIAL / ENTERPRISE
INFRASTRUCTURE
HEALTH
ROBOTICS
AUTO / TRANSPORT

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The shift from consumer IoT to commercial is
reminiscent of the early PC industry,
where hobbyist, toy, and consumer activity
was followed by business applications.

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Each year, we dive into a few key areas.
This year, we'll touch on
Commercial IoT
Infrastructure
Security
But, we start with Autos…

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…Because it’s clearly in vogue this year.
It lapped other categories in average deal size,
with strong investor interest.

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Auto is almost 3 times other categories in average deal size.

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The Race to Dominate
Next-Gen Transportation

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Automotive is the tip of the IoT spear.
The market is huge, the need is obvious, the
policy is complex, and the technology is difficult.
So the strategic battles are fierce.

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Money is following hard technical challenges.

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Connected and autonomous vehicles are attracting attention
AUTONOMOUS VEHICLES
CONNECTED VEHICLES

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Behind those lines, one battle being waged is
for global leadership in Autonomous vehicles.

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Chinese investors have driven 4 mega-deals, totaling $3.2B
DealSize($M)

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The numbers are impressive, even without those Chinese deals
Impact of just 4
large Chinese deals
Rest of all
Auto deals

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That hints at a second battle playing out,
between the old guard and new technology
challengers.

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The backdrop: a battle to reinvent the car industry,
between incumbents and challengers

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A third battle is the future of
transportation itself.

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What will the future of transportation look like?
vs.

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And to wrap up on Auto/Transport, a view of the landscape
AUTONOMOUS VEHICLES CONNECTED VEHICLES DRIVER ASSISTANCE
FLEET MANAGEMENT
TRAFFIC
MANAGEMENT
SECURITY

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The New (Connected) Industrial Revolution

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Earlier we saw that Industrial/Enterprise is
breaking away.

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The Rise of Industrial/Enterprise
INDUSTRIAL / ENTERPRISE
INFRASTRUCTURE
HEALTH
ROBOTICS
AUTO / TRANSPORT

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Within that, there's substance over hype.

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Industrial/Enterprise activity is balanced across categories
#IOTSTATEOFTHEUNION

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But there's a key hidden trend:
a clear shift to heavy industrial applications.

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The move from carpet to linoleum, concrete, and dirt
COMMERCIAL
Retail
Buildings and Cities
Healthcare
INDUSTRIAL
Manufacturing
Supply Chain and Logistics
Agriculture
Utilities
Construction

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The Surging Commercial IoT Landscape:
HEALTHCARE
MANUFACTURING
BUILDINGS AND CITIES
UTILITIESSUPPLY CHAIN + LOGISITCS
GENERALAGRICULTURE
RETAILING
CONSTRUCTION +
INFRASTRUCTURE

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Infrastructure:
Surprises as we build out the IoT stack.

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has already been invested in
IoT startups in the last 5 years...
$28B

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…and real applications have been built at the top of the stack

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Yet there's still a lot of activity in basic infrastructure areas.
For example, Sensing and Connectivity.
SENSING
CONNECTIVITY

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If real applications are already gaining traction,
why are we still building basic infrastructure?

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Deal activity in base IoT infrastructure tech is decreasing…
Base Technology IoT Connectivity Platform
IoT Connectivity
#IOTSTATEOFTHEUNION

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…but we are seeing a rise in areas of frontier technology –
extending IoT's reach geographically and into new industries.
Long range mesh
networks
Fog computing
for IIoT
Base Technology
Frontier Technology
(and Vertical Applications)
IoT Connectivity Platform
IoT Connectivity
#IOTSTATEOFTHEUNION

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We're moving past using technology
developed for other tech waves like mobile,
and developing true IoT-specific infrastructure.
Sensing and Connectivity are early examples.

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Current Infrastructure landscape:
SENSING
CONNECTIVITY
BASE SOFTWARE
DATA, ANALYTICS, AND AI
BASE HARDWARE
SILICON
SECURITY
DEV AND IT TOOLS

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Insecurity

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The IoT Security gap is still significant.

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As before, we start with Autos,
where the need is most obvious.

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Hacked vehicles can kill, undermining what
we take for granted.

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Yet there's little activity in security for autonomous vehicles
This gap is
a problem.
AUTONOMOUS VEHICLES
SECURITY

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As we zoom out, we see a similar gap persists
in overall IoT security.

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General Security deals still vastly outpace IoT security deals…
Home Interfaces
Wearable Health
Data/Analytics
AI
Platforms
Construction and Infrastructure
Agriculture
Manufacturing
Building Management
Retail Technology
Energy and Utilities
Supply Chain
Logistics
Inspection and Monitoring
Mapping and Surveying
Drone Hardware
Drone Fleet Management
Anti-Drone Technology
Embedded Home Systems
Home Indoor Environment
Wearable Quantified Self
Home – Outdoors
Family, Kids, and Pet Technology
Appliances
Robotics
Autonomous Vehicles
Driver Assistance
Fleet Management
Connected Vehicles
Traffic Management
Connected Cities
General Security
2759 Deals
IoT Security
77 Deals
Global Deal Data Set, 2013-17 IoT Data Set, 2013-17

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…while the scale and scope of threats continues to expand
Devil's Ivy
Stuxnet
Mirai
Brickerbot
BlueBorne
Krack
Botnet
Man-In-The-Middle
Denial of Service
Cameras
DVRs
Printers
WiFi
HVAC
Smart TVs
Routers
SCADA
Connected Cars
Medical Devices
Zombie Army

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Still, there's about a 50% increase in IoT
Security deals since last year.
Where is this activity focused?

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Securing The IoT Stack
• Data at rest/in transit security
• Loss prevention
• Privacy
• Secure APIs
• Encrypted Protocols/data
• Application firewalls
• Secure multi-tenancy
• Discovery/inventory of devices
• Authentication/authorization
• Anomaly detection
• Malware detection
• Remediation enforcement
• Secure boot
• Hardened OS
• Strong password/no default config.
• No open protocols
• Patch management support
DATA PROVENANCE
CLOUD AND APPLICATION SECURITY
GATEWAY AND NETWORK SECURITY
DEVICE LEVEL SECURITY17%
60%
20%
3%
PROPORTION OF IOT
SECURITY DEALS
(by $ Invested)
AREA OF PROTECTION

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Most attention is at the Gateway and Network
Security layer.
In a world of varied IoT endpoints, this is where
security actions can have immediate efficacy.
It draws on a pre-IoT history of network security
solutions.

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Game of (IoT)hrones

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As IoT develops, we monitor acquisition activity.

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Acquisition activity and large deals are higher than ever
Source: Pitchbook
Deals Over
$200M

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Why is overall acquisition activity on the rise?
There are four camps of large players,
all vying for territory.

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IoT’s Game of Thrones
CONGLOMERATES
INCUMBENTS
SILICON VALLEY
SEMICONDUCTORS

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These players are all fortifying their armies by
buying technology and teams.

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The kingdoms and their startup armies
SEMICONDUCTORS
CONGLOMERATES
INCUMBENTS
SILICON VALLEY

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A Sneak Peak Into Our World:
Who Are the Entrepreneurs in IoT?

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We've been building a data set of almost 2000
IoT Founders, to learn more about the people
building this new technology frontier.
Here's a few things we're discovering…

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They're much more educated than the general population
Partial or full Bachelors
No Post-Secondary or Unknown
Partial or full Masters
Partial or full PhD
11%
35%
40%
14%

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A few schools lead the pack in educating IoT entrepreneurs
American Schools
1) Stanford
2) MIT
3) Berkeley
4) CMU
5) USC
6) U Texas
7) Penn
8) Columbia
9) Harvard
10) Michigan
2
4
7
81
3
5
6
10
9

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IoT Entrepreneurs have significant experience.
But it varies dramatically by specialty.

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We'll share more about these talented IoT
entrepreneurs soon.

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The View Forward

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We're in the midst of a shift to
IoT = IT x 10
…where IoT drives 10X increases in
compute, data, and traffic.

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Autos have captured public imagination,
but are just the beginning….

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Overall, the impact can be massive
0 1 2 3 4 5 6
Factories
Cities
Health
Retail
Outside
Work Sites
Vehicles
Homes
Offices
Low Estimate High Estimate
Total $4 - $11 trillion
Size in 2025, $Billion
Source: McKinsey Global Institute
1,200-3,700
200-1,600
400-1,200
600-900
200-900
200-700
200-300
100-200
900-1,700

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We’ve seen excitement in the area for years,
often with unrealistic expectations of how fast
it will happen.

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But IoT is moving towards its promise –
area by area, product by product, entrepreneur by entrepreneur.
INNOVATION
TRIGGER
PEAK OF INFLATED
EXPECTATIONS
TROUGH OF
DISILLUSIONMENT
SLOPE OF
ENLIGHTENMENT
Expectations
PLATEAU OF
PRODUCTIVITY
Time
2013
2014
2015
2012
Commercial:Construction
andInfrastructure
Commercial:BuildingsandCities
Commercial:Retailing
Commercial:Agriculture
Commercial:SupplyChainandLogistics
Commercial:Utilities
Commercial:Healthcare
Commercial:Manufacturing
Drones:Logistics
Drones:FilmandPhotography
Drones:SecurityandSafety
Drones:Agriculture
Drones:InspectionandMonitoring
Drones:Hardware
Auto:FleetManagement
Auto:Security
Auto:TrafficManagement
Auto:ConnectedVehicles
Auto:AutonomousVehicles
Auto:DriverAssistance
Infrastructure:Sensing
Infrastructure:Connectivity
Infrastructure:Data,Analytics,andAI
Infrastructure:Silicon
Infrastructure:BaseSoftware
Infrastructure:BaseHardware
Infrastructure:DeveloperandITTools

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As IoT moves forward, we'll continue to track
it, to share what's being done, and what still
needs work.
See you next year.

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