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.
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).
|9||Ledong Information Technology|
Second on the most-active investors list is Andreessen Horowitz, with investments in companies including Thync, Jawbone, and Magic Leap.
|6||Kleiner Perkins Caufield & Byers|
|8||First Round Capital|
|8||Bessemer Venture Partners|
|8||The Social+Capital Partnership|
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.
|4||First Round Capital|
|4||Bessemer Venture Partners|
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Photo credit: Robert Scoble, https://www.flickr.com/photos/scobleizer/5455106314. Creative Commons license Attribution 2.0 Generic.
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