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Follow the (IIoT) Money

July 27, 2015

Do venture capitalists think the Industrial Internet is due for what Gartner so aptly calls a “trough of disillusionment”?

Gartner, the analyst firm that has done much to create and sustain the hype around new technologies has also, ironically, tried to distance itself from the phenomenon by defining the process through a branded methodology called the “hype cycle.”  My favorite part of the hype cycle is the “trough of disillusionment” which follows the initial excitement around a new innovation.

Jaded observers might be looking for a similar trough in the hype that has inevitably cropped up around the IIoT – but they may be disappointed.  Built as it is on a solid foundation of existing industrial practices, IIoT seems far less likely to disappoint than some other “cycles.”  More to the point, investors are taking it seriously.

Although many major venture funding indices such as the PricewaterhouseCoopers Moneytree do not yet break out IoT or IIoT as a separate category, CB Insights, a New York-based analyst firm, recently provided an overview of investments in the field. Interestingly, according to their reporting, it isn’t so much venture funds that are betting on IoT but established firms. For example, CB reports that Intel Capital, Qualcomm Ventures and Cisco Investments  were among the top venture investors in IoT. Comparatively speaking, according to CB, traditional VCs have only invested sporadically.

CB also points to another significant investment in the recent past, Google’s $3.2 billion acquisition of smart thermostat startup Nest Labs.  This was significant not only as a sign of the growing values attached to IoT companies but as an acquisition that will fuel the VC cycle. Nest’s early backers, such as Kleiner Perkins Caufield & Byers will be assured that IoT investments can pay off for them, perhaps encouraging further investments in promising startups.

According to CB, in addition to investing in Nest, Kleiner Perkins, has also built a modest portfolio of IoT-related companies, including iControl Networks, a home automation company.

There are quite a few other recent examples of money flowing. For instance, The British Innovation Gateway (BIG), a Cisco-led, UK-wide program that supports technology startups includes a “CREATE IoE Innovation Centre” – IoE being Cisco-speak for IoT.

According to an announcement made by the company earlier this summer, “The commitment of $150 million for Internet of Everything UK start-ups and venture capital equity investments will focus on key priorities for Cisco and the UK. These include applications of Internet of Everything (IoE) technologies across the financial technologies, retail, and healthcare industries, and smart city development.” In addition, corporate investments will also accelerate innovation in cybersecurity solutions.

Then, there’s IBM, which stated in March that it was earmarking $3 billion over four years to set up a new Internet of Things (IoT) unit and to fund a cloud-based open platform to support IoT solutions.

And, speaking of open platforms, Wipro, the multinational IT Consulting and System Integration services company headquartered in Bangalore, India announced last year that it would make significant investments in Open Source technologies, methodologies and services with particular reference to the Internet of Things (IoT). Furthermore, Wipro also invested in Axeda Corporation, a Massachusetts-based developer of solutions that securely connect machines and sensors to the cloud, just prior to that company’s acquisition by PTC.

So, if you are a betting person – or an investor – it certainly looks like there is a lot of financial action in the IIot and IoT worlds.

Alan R. Earls is a Boston-based writer focused on technology, business, and manufacturing — a field where he spent the earliest part of his career. He has written for publications and websites as diverse as The Boston GlobeComputerworld and Modern Infrastructure as well as Industry, The Manufacturer, and Today's Machining World.