Funding To Wearables Startups Dipping Toward A 5-Year Low

The wearable computing industry has seen important activity this year on the public markets side. In March, Apple’s smartwatch was released, with some estimates pegging the device’s sales at 20% of all wearables units sold globally in Q2’15. In June, fitness band maker Fitbit went public at a valuation of $4.1B. 

Despite these high-profile events, the funding climate for still-private companies in the wearable computing space has cooled off. Dollars invested in wearable technologies in 2015 are on track to hit $276M at the current run-rate, a drop of 72% compared to 2014’s total, according to CB Insights data, and the lowest annual funding total since 2010. 

Meanwhile, deals are likely to finish the year at close to 50, down ~15% from 2014 numbers.

Last year’s record-breaking wearables funding was driven largely by the $542M Series B raised by Magic Leap, Florida-based developer of head-mounted augmented reality displays.

Overall, 2015 saw more modest rounds, the largest being Avegant‘s Series B round for $24M, followed by Doppler Labs raising $17M.

 

Quarterly deals and dollars

Looking at the quarterly trends, there’s a clear uptick in deals from early 2013 onward. Beginning in Q2’13, deals have ranged between 9 and 19 a quarter, while the range in the previous 12 quarters was between 0 and 7 deals.

The peak quarter for funding was Q4’14, with $685M in investment, but that was largely driven by Magic Leap’s  $542M Series B, mentioned above.

Eliminating Magic Leap’s mega-round ($542M in Q4’14) from the quarterly total, Q4’14 slips to the second-highest quarter for wearables funding, at $143M. The top quarter was Q4’12, the bulk of which came from a deal to GoPro, which exited later that year at a valuation of $3.1B.

The quarterly dollar funding trend is slightly down compared to the quarterly totals in late 2013 and 2014, indicating that deals — while more frequent than a few years ago — are not necessarily larger. 

Financing trends by stage

Deals share in wearable tech is trending towards the early stages. Seed and angel investments currently account for 55% of deals, up from 29% back in 2011.

When looking at dollar share, mid-stage deals account for most dollars. From 2012 onward, mid-stage rounds (Series B and C) represented between 50% and 80% of all dollars going to wearable startups annually. Mid-stage deals made up 55% of the dollars invested in 2015 year-to-date. Late-stage deals, Series D and Series E, have fallen off the map.

Most well-funded companies

Jawbone, at $614M raised, is the most well-funded private wearables company (Jawbone took on $300M in debt financing in April 2015).

Aside from the established giants, there are other lesser-known, well-funded companies including Polyera, Razer, and Misfit Wearables. Here’s the full list:  

Active investors

Intel Capital is the most active wearables investor with investments in startups like Avegant and Thalmic Labs. 

Second on the most-active investors list is Andreessen Horowitz, with investments in companies including Thync, Jawbone, and Magic Leap.

Active early-stage investors

Most active in early-stage deals is once again Intel Capital, followed by Rock Health, an early-stage fund with a focus on digital health and investments in Sano Intelligence and Caeden. Next, Khosla Ventures was third-most active, with investments including Narrative‘s wearable cameras and voice-enabled wearable startup Theatro.

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Photo credit: Robert Scoble, https://www.flickr.com/photos/scobleizer/5455106314. Creative Commons license Attribution 2.0 Generic.