Home Automation Financing and M&A Activity Heats Up

Venture capital and acquisition deal and financing activity to the home automation industry is heating up and is seeing a diverse group of industrial, telecom, technology and private equity players trying to get into this space. With the US energy and security home automation market estimated to top $2.5B within the next 5 years, it’s likely that battles as we recently observed for the likes id8 Group R2 Studios will become more common and may involve players from very different industries battling each other.
To date, we have identified 34 different corporations that have either invested in or acquired companies in the home automation space. These 34 corporations span energy & industrial, technology, private equity and telecom firms as broken down below:

As expected, energy & industrial companies lead the league tables in terms of investments and acquisitions in the home automation space. This includes companies such as Schneider Electric, Honeywell, and Johnson Controls. New York based Home Automation companies include Xanboo, which was acquired by AT&T and EnergyHub, a cloud-hosted software platform for managing home energy use.

However, it is the promise of the connected home and its reliance on software and connectivity that has also brought tech and telecom companies to the table as well.

Home Automation M&A

The home automation space remains relatively nascent, but exit activity has gained a bit of steam with six acquisitions in the past year.  On average, companies that exited have raised $34M in funding and had received their first financing about 4 years prior (46 months) prior to exit.  Between first financing and exit, these companies have raised, on average, 2 rounds of financing.

Of the 17 companies that have exited this space though an M&A since 2010:

• 88% of their acquirers were corporations; the remaining 12% were private equity firms
• 33% of those corporations were Fortune 500 cos (2012)

Analysis of previous funding data for these companies found:

• 47% received no funding prior to exiting
• 88%  of companies who received funding prior to exit were VC backed
• 22% were acquired by the same company that had invested in earlier funding rounds suggesting that corporate venture investments are being used as a way to provide optionality to corporations

Home Automation VC, Angel and Private Equity Financings

2012 proved to be a solid year for funding and deals into the home automation with 16 deals and $192.52M of financing for the year.  In terms of financing, Q3’12 was the biggest quarter in financing within the past five years, driven by a huge private equity deal for Alarm.com, providing home automation by way of interactive security solutions and energy management.

Given the relative newness of this space and potential for integration these smaller start-ups provide, we expect to see more deals, dollars and corporate giants duking it out in the coming months.

For more information on current funding trends within the Home Automation space, visit www.cbinsights.com. For a full list of companies, funding rounds and investors used in this analysis, visit our Data Store.