Corporate Investors Participate In A Record Number Of IoT Startup Deals In 2015

Home appliances, medical devices, and smart building materials are just a few of the categories in which the Internet of Things is gaining significant momentum. Funding to IoT startups has more than doubled over the past 6 years. We used CB Insights data to identify top corporate investors in IoT startups, and tracked investments and deals.

Corporate deals and dollars

Over the past 6 years, corporate investors, i.e. corporations and their venture arms, have joined in rounds that funneled $3.2B into the IoT space, across a total of 266 deals. At the current run rate, 2015 will nearly double last year’s dollar total for rounds involving corporates, at 89% year-over-year growth in funding. Deal count is on track to quadruple since 2010.

Quarterly deals and dollars

Diving into the quarterly trends, the first quarter with more than 10 deals was Q2’13, which included notable rounds to Enlighted, which develops energy-saving smart home and building systems ($20M Series C); as well as late-stage rounds to smart pill company Proteus Digital Health ($45M Series F) and smart-glass maker View ($60M Series E). Since that quarter, the count of deals involving corporates has remained in the double digits, ranging from 11 to 28.

This past quarter Q3’15 was the highest in funding through deals involving corporates, thanks in large part to a $150M Series G to View, along with $36M in financing to Sensity Systems, a lighting tech startup.

Corporate financing by stage

Early-stage startups took an increasingly large share of deals involving corporates from 2010 to 2013. Seed/Angel and Series A deal share peaked at 57% in 2013, but began to trend down and slid to 37% in 2015 year-to-date (YTD). Meanwhile, Series B/Series C deal share went from 28% to 41% between 2013 to 2015 YTD.

The dollar share by deal stage skews much more toward the middle and later stages, and varies more. Aside from a lofty year for early-stage deals in 2014, when Seed and Series A accounted for 33% of dollar share, early-stage only accounted for 4% to 16% of annual dollar share.

Middle-stage deals accounted for between 37% and 84% of dollars, and 51% in 2015 YTD. And later stages accounted for 7% to 56% of dollars, and 30% in 2015 through Q3’15.

Most active corporate investors

The top three most active corporate investors are involved in the semiconductor industry or networking technology. With the IoT demanding ever-smaller chips and specialized networking infrastructure, this area clearly offers them strategic value.

• Intel Capital tops our most active corporate list, with investments in roughly 30 IoT companies. This year, Intel invested in the $10M Seed round for Sano Intelligence; along with the $8M Series A for Body Labs, maker of 3D body scanning sensors; among other investments.
• Second most active was Qualcomm Ventures with a recent investment in drone company 3D Robotics, along with a host of other wearable and smart-electricity grid companies.
• GE Ventures / Healthcare was the third most active IoT investor. GE most recently invested in lighting tech startup Sensity Systems as part of a $36M deal in July.

We used CB Insights’ Business Social Graph, which shows how top investors and target companies in any industry are interrelated, to visualize these corporates’ investments.

Most active early-stage corporate investors

Drilling into early-stage deals, we see many familiar names on the most active investor list. Once again, Intel Capital tops the list, followed again by Qualcomm Ventures.

Third most active in early stage IoT investment was the Alexa Fund, Amazon’s new investment arm named for its Alexa product (the cloud-based voice-activated digital assistant powering the Amazon Echo). The $100M fund opened for business at the end of Q2’15 and focuses on voice-controlled hardware and software. So far, its IoT investments have included Rachio, a connected irrigation system and Scout Security, a home security device, among others.

Geography of corporate investments

Unsurprisingly, the IoT startups receiving corporate investments were overwhelmingly based in California. Some lesser known yet well-funded IoT companies based outside of Silicon Valley included Chrono Therapeutics (Massachusetts), Phunware (Texas), Impinj (Washington state), and Zephyr Technology (Maryland).

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