Aug 31, 2015Aileen Lee, the founder of Cowboy Ventures, coined the term "unicorn" to describe an American technology startup company that had achieved a valuation of at least $1 billion. Her research showed that just 39 companies founded since 2003 belong to the "Unicorn Club," which is roughly 0.07 percent of venture-backed consumer and enterprise software startups (see Welcome To The Unicorn Club: Learning From Billion-Dollar Startups).
Despite the astronomically low success rates, venture capitalists continue to look for the next unicorn—or "super unicorn," such as Google or Facebook. It's true, of course, that investing in a company like Facebook at an early stage can deliver enough of a return to compensate for all the bets that went sour. And it's true that hardware companies are more risky for investors because they require more capital upfront. But I think RFID companies now represent a good bet for venture capitalists. Here's why.
With software startups, to hit it big you really need to create a new market segment or platform that captures huge numbers of users. LinkedIn developed an online networking site and captured the lion's share of the market. Facebook, of course, won in the social-media arena. Twitter captured fans of short comments. Airbnb came up with the idea of enabling people to rent out their homes, or rooms in their homes, and Uber allowed them to become part- or full-time taxi drivers.
But there's a reason why there are so few unicorns. It's difficult to create a new market and attract millions of people to use your website or mobile application. In many cases, these unicorns did not fulfill a need, but created a capability that enabled people to do something new, something they never thought about doing. That's a hard trick to keep pulling off. It's much easier to fulfill an existing need. And when I look around, all I see are needs that RFID can fulfill.
Retailers need to improve their inventory accuracy from 65 percent to 95 percent or better, as well as reduce their shrinkage rate. Manufacturers need to track the locations of parts, tools and other assets. IT companies need to track their data-center assets. Construction companies need to manage materials arriving on job sites, as well as keep track of tools. Energy companies need to monitor tools, drill pipes, spare parts for rigs and other items. Companies in each of these sectors, and many others, will need to buy tags, readers and software to turn RFID data into actionable information.
It's obvious that all physical assets, inventory, raw materials, tools and other things need to be tracked and managed. RFID, in all its forms, is a tool that can meet that need. But as companies get a more data-rich view of their operations, they will also want information about the conditions of the facilities they own. Is a building structurally sound? Is there a leak somewhere that could do a lot of damage? Governments will want to know the health of bridges and tunnels they have constructed, so architects will need to design strain and moisture sensors into the structures they develop. And companies will also want information on the conditions of the assets they own, creating a need for all kinds of sensors.
RFID technology can meet these needs, and that's why I see it as the tortoise in the famous children's fable about the tortoise and the hare (you guessed it—the unicorn plays the role of the hare). Adoption of RFID has been slow thus far, and the industry might never produce a startup with a billion-dollar valuation, but there will be a lot of companies that make a lot of money fulfilling these needs. The smart money, as is often the case, is on the tortoise in this race.
Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below. To read more of Mark's opinions, visit the RFID Journal Blog, the Editor's Note archive or RFID Connect.
