RFID Journal LIVE! 2023 will feature end-user companies discussing RFID’s use in various industries, as well as exhibitors offering tagging solutions for multiple applications. To learn more, visit the event’s website.
A study conducted by Avnet Abacus, an electronics distributor, indicates the average amount of capital raised by Internet of Things (IoT) startups in 2022 reached the highest point in more than a decade, despite a 22 percent drop in total funding within the sector and an overall 35 percent decline in venture capital markets. According to the research, IoT companies raising funds in 2022 pulled in $15.9 million on average, up 30 percent from the previous year.
Avnet Abacus analyzed Crunchbase data for companies listed under “Internet of Things” to provide insight regarding the level of investment activity happening within the IoT. “The amount of funding companies receive in any product category gives an indication of how investors view the future for that technology,” explained Dr, Sara Ghaemi, Avnet Abacus’s technical director, in a prepared statement. “Despite venture capital generally cooling off due to current economic conditions, the research reveals investor confidence is higher than ever for the long-term prospects of companies developing products in the IoT.”
The average size of funding round (or deal size) for companies in the Internet of Things sector reached $15.9 million in 2022, the highest point in 19 years. Matching the global trend, American startups in the sector saw the highest average deal size in 19 years at $16.2 million, the study indicates. Meanwhile, European IoT companies drew in their highest average funding round ever, at $16.7 million.
The Industrial IoT also experienced a record year in 2022, according to Avnet Abacus, with the average funding round reaching $16.1 million—more than double the average investment of $7.3 million in 2021, and the highest since 2006. To provide insights on the Industrial IoT, Avnet Abacus analyzed Crunchbase data for companies listed under both “Internet of Things” and “industrial automation.”
Acquisitions of companies in the IoT space worldwide were at their second highest ever in 2022, according to the study, with 116 companies snapped up. This was marginally down from the peak of 117 companies in 2021. In the United States, 48 IoT startups were purchased in 2022, down from an all-time high of 58 in 2021. Europe fared better than in previous years, with 41 acquisitions making 2022 the continent’s highest year ever for IoT exits.
In both 2018 and 2021, five Industrial IoT companies were acquired, while 2022 exceeded that, with seven startups purchased. While the total amount raised by IoT startups globally dropped from $5.6 billion in 2021 to $4.3 billion in 2022, the money invested in early-stage startups was on the rise, Avnet Abacus reports. The investment into early-stage IoT startups—those seeking funds in venture rounds A and B—reached the highest amount on record last year at $2.45 billion, up 12 percent from $2.19 billion the previous year.
The total investment for late-stage IoT ventures was $1.08 billion, down 54 percent from $2.36 billion in 2021, and 36 percent lower than 2020’s figure of $1.70 billion. Angel and seed investors in the IoT also proceeded more cautiously last year, providing funds of $261 million in 2022, compared to $404 million the year prior. When investing in later-stage startups, the study explains, venture capitalists look to make a return in the near future via an exit, when the company is either acquired or floated on the stock exchange. As startups approach later stages, there is an expectation of a large payout, and company valuations increase as the anticipated payday approaches.
In the current economy, however, investors are less optimistic about short-term performance and are reluctant to invest at such high valuations, the study indicates. This has resulted in venture capitalists pulling back from these later-stage investments. Despite a huge decrease in the total amount of VC funds going into IoT companies last year, the majority of the reduction came from late-stage ventures, with the average investment rising for early-stage startups.
“There is strong evidence pointing towards a future where we will have more and more connected devices, communicating wirelessly, and providing timely and relevant insights from these new sources of data,” said Tim Bassford, an IoT specialist at Avnet Abacus, in the prepared statement. “This provides great potential for companies to operate more efficiently and provide new value to customers, and as a result, the IoT will continue to grow.”
Dr Sara Ghaemi, Avnet Abacus’s technical director, added, “For years, it seemed the IoT only existed in the words of market analysts, consultants and commentators, but we’ve now moved well beyond the hype, with significant numbers of companies delivering real business value and venture capitalists putting their money behind them. While the current economy is creating challenges for many startups, investors remain confident in the IoT and are placing larger sums than ever before in early-stage startups who are developing the connected products of the future.”
