By Courtney Macavinta

Oct. 1, 2006—When Pfizer contributed to an $8 million Series B investment in SupplyScape this May, the funds represented more than a cash infusion for the developer of anticounterfeiting RFID applications for the pharmaceutical industry. The investment from the Pfizer Strategic Investments Group was another marker of a growing trend. In less than one year, RFID technology firms have gotten a shot in the arm—to the tune of tens of millions of dollars—and not just from the usual suspects known as venture capitalists.

A slew of strategic investors are increasingly placing their bets on RFID companies, hoping to get more than a monetary return on their investment. They are current or future RFID customers that want to have a hand in how RFID solutions are developed and brought to market. They also want to improve their knowledge about the emerging technology, sharpen their business strategies and bolster their bottom line. Along with Pfizer, the list of end users that have invested in RFID includes Dow Chemical, DuPont, Kaiser Permanente and United Parcel Service (UPS).

End-user companies are seeding RFID startups with tens of millions of dollars.

"These [end-user] companies have specific needs [for applications] that will help them gain market share, improve operations or improve their competitive advantage," says Andrew Nathanson, automatic identification and data capture practice director for technology market research firm Venture Development Corp. (VDC). The most recent strategic investments by end users, he says, "have been right on. They are good fits and good models, and both companies will benefit."