Observations from TiECON East 2014
I attended TiECON East 2014 last month in Cambridge, and had the opportunity to speak on the Internet of Things (IoT) panel. TiECON East bills itself as the largest startup conference on the East Coast, and this year drew a crowd of more than 500 entrepreneurs. The IoT panel was an enjoyable and informative discussion; here are a few takeaways from the panel:
There is serious interest in IoT. You could cite the recent IDC report predicting the IoT market will hit $7.1 trillion by 2020, or you could take a look at TieCON’s IoT panel where, on a Friday afternoon on one of the nicest days Boston had seen in months, the discussion was standing room only.
IoT: What is it, and why now? How do we define IoT? Panelists made comparisons to the M2M (machine to machine) market which has been around for decades, acknowledging that it was an important precursor to IoT and now an integral part of IoT going forward. Our moderator noted that many public M2M companies have rebranded to become IoT companies to help improve their public perceptions and valuations. I mentioned that Ascent invested in an IoT company, Sensitech, almost twenty years ago. So why are we talking about IoT now? It’s because of the rapid evolution of the technology. Sensors and endpoints have gotten much cheaper. Network connectivity is much cheaper, reliable and pervasive, and cloud infrastructure represents an efficient fabric to pull it all together. Now it is all about taking concepts that have been around for decades and finding creative ways to implement them with the superior technologies of today. This approach will make the Internet of Things more ubiquitous and widely adopted.
The hype of IoT is well beyond its reality as far as startups go. From a venture capital perspective, I explained that what’s unusual about an immature market like IoT is that the hype right now doesn’t match the reality. As outlined in our last Ascent Index on IoT, this is driven by the fact that several large publicly traded companies like GE and Cisco have decided to make IoT part of their corporate marketing strategies. This is unusual for an immature market and drives the hype well beyond the reality. The amount of VC investing is small but still significant and is rapidly growing – and currently focused on early stage companies. We are only seeing the very early stages of venture investment in IoT. I think the early focus will be on platforms to enable IoT and also on vertical-specific applications focused on areas such as transportation, green energy and agriculture.
There is no good answer to security and privacy issues yet. While IoT is generating more interest by the day, and the consensus sentiment about the market is optimistic, there are still two big challenges to overcome. We outlined security as one of the impediments to IoT earlier this year and it topped the list of concerns during the panel discussion. Unfortunately right now there is no good answer here. Some of the current platform vendors are closed and proprietary, which can help to keep things secure. However, the market will evolve towards standards and serious security issues will arise. Developing an effective security model for IoT will be critical, but it’s hard to tackle this until the standards come on line. This will be an important area of innovation in the coming years. Privacy was another issue brought up by the audience during the discussion. How can IoT be misused and how will the consumer be protected? Our society hasn’t yet finished this debate with regard to a person’s online activity, but we will need to include IoT privacy in this same debate.