From wearable sensors to home automation products, companies inhabiting the growing market known as the Internet of Things (IoT) are quickly capturing the attention of venture capital investors. And perhaps the most buzzed-about sub-industry within IoT is the Quantified Self movement, which consists of companies providing technologies for tracking one’s fitness, stress, sleep and other consumer health areas.
The rise of the quantified self has been bolstered in part by Kickstarter, Indiegogo and other crowdfunding platforms which have emerged as the initial funding source for many IoT providers to test interest in their products and cover manufacturing costs. FirstMark Capital investor Amish Jani recently suggested on Twitter that crowdfunding has provided a new “capital efficient, customer financed model” for IoT related hardware projects.
Now that hardware has a capital efficient, customer financed model w limited inventory, expect investment to roar back. #IoT
— Amish Jani (@amishjani) November 17, 2013
Fred Wilson of Union Square Ventures had a seemingly slightly different take, suggesting earlier this week that because “entrepreneurs are finding ways to do things with software and a smartphone that used to require dedicated hardware,” investments in hardware-based business (may become) less necessary…which would be a good thing.” Zander Pease of Union Square Ventures also provides some insight into their thesis/thoughts on the space here.
The reality is that venture investment into both hardware and software for the quantified self is already well underway. In the last year, quantified self startups raised $318M across 43 deals including a number of former crowd-funded startups such as Charles River Ventures-backed Pebble Technology and LUMO BodyTech, backed by Innovation Endeavors and Madrona Venture Partners. On a year-over-year basis, funding to quantified self startups has jumped 165% while YoY deal activity has accelerated over 40%.
The spike in Q3’13 funding was attributed to several large fundings to quantified self companies including FitBit and WiThings. IPO Pipeline candidate Jawbone also raised over $100M in a mix of debt and equity from investors including Andreessen Horowitz, Kleiner Perkins and Sequoia Capital. As shown in the chart below, average and median deal size in the quantified self space has trended at or below $5M prior to last quarter’s jump in sizable deals.
While there have been several notable late-stage deals as noted above, 3 of every 4 deal in the quantified self space over the past two years were at the early-stage (Seed/Series A). Among the startups to recently receive early-stage funding are wearable baby monitor Sproutling and sensor-enabled apparel maker OMSignal.
