Three Impediments to the Internet of Things

Thursday Feb 6, 2014 by Walter Dick - General Partner, Ascent Venture Partners

The technology for the Internet of Things (IoT) falls into four broad categories: sensors, software, platforms, and networks and connections.  Most of the technology is at a point where the IoT can and will grow at a fairly aggressive rate.  However, there are at least three impediments that will hinder growth in the IoT, and in some cases may create significant issues:

1. Networks aren’t up to par. The networks that exist are really not suited for IoT. While disparate data streams can be merged and analyzed, the existing data coming from sensors is generally on an intermittent basis, and may come from some distance. So use in real-time may be best suited in process optimization for industrial applications where the refresh rates and data rates may be more suitable and there are fewer trust issues.   Also, existing Internet connections provide for transactions, not negotiation.

2. Security needs to improve. Authentication, trust and personal privacy will all be significant issues, as consumers fret that their information or behavior is not used appropriately.

3. Batteries need innovating. While battery technology is fairly mature and the cost of sensors and RFiD and communications continues to decline, batteries will require re-thinking with respect to the sensor application to match battery life at a reasonable cost.  Also, none of the systems has been in existence long enough to prevent stupid things from happening – e.g. industrial robots inadvertently injuring or killing a human because they have not been instructed what not to do.

So, where are the opportunities?  The IoT is expected to enhance the consumer’s experience with the vendor, and multiple industry segments will be targets for disruptive product and service offerings, as distance and capital barriers may not be the stalwarts to competition that they once were.  The relationship among ownership, access, control and cost for many objects are up for disruptive adjustment.  The majority of consumers are willing, able and currently spending premiums for superior service on similar goods, which increased from 57% of those surveyed in 2010 to 75% in 2012, according to a presentation by Peter Coffee, the VP of Strategic Research at salesforce.com.  Lastly, connected products can elevate service from damage control to proactive customer care.

For Ascent, the sensor, software and platforms areas are of interest, and we have already seen several sensor-based opportunities, along with software apps that are appealing.  Also, don’t forget that smartphones have a significant amount of processing capacity, and we have seen two interesting opportunities that use a sensor, along with a smartphone, to process the data coming from the sensor and provide a service.  The first of those provided eyeglass prescriptive services, and the second provided a hearing aid that uses the smartphone as a background noise cancellation device.  Eyeglasses and hearing aids are both industry market segments that are sizable and over-ripe for disruption.  The combined use of smartphones and sensors may be a potentially powerful, disruptive combination.

Security has been a proven investment theme for Ascent, and security for internet connected devices is going to be an issue, as many of the home-related devices suffer from little, or no security guards or authentication.  On a larger scale, denial of access to networks of sensors and remotely-controlled objects is also thought to be a risk for criminals and mischief makers to exploit.  However, General Electric estimated that companies using existing technology in IoT networks, in the vertical segments of energy, power, health care, aviation and rail could generate 1% of operational efficiency, which would result in $250 billion of incremental savings.  While 1% is a rounding error, the $250 billion got my attention, and I wondered how many startups might be able and willing to share in a successful company that generates a fraction of that amount?

Walter Dick is a General Partner with Ascent Venture Partners.  You can find this post, as well as additional content on Ascent Venture Partners' blog located here

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