The global enthusiasm surrounding the ecosystem known as the ‘Internet of Things’ (IoT) has positioned data as one of the most valuable assets that a company can own and monetize. According to IDC, the worldwide market for IoT applications (intelligent and embedded systems, connectivity and security services, infrastructure services and platforms) reached $1.9 trillion last year, and is expected to more than triple to $7.1 trillion by 2020.
The valuation of technologies in the emerging IoT ecosystem will largely depend on the revenue models around data monetization through control of he IoT data value chain. It is becoming clear that controlling the data value chain from the point of data collection to the point of data analytics is key to unlocking these value creation opportunities. Hence, companies proceed through acquisitions to get better control over the value chain. Google’s $3.2 billion acquisition of Nest Labs, followed by the recently announced $555 million acquisition of Dropcam, granted Google access to home data collection endpoints through Nest’s growing inventory of home automation devices and Dropcam’s home security cameras.
There are several areas where IoT data analytics can increase original equipment manufacturer (OEM) profitability and create new revenue opportunities, including longer asset uptime, enhanced customer experience and reduction in maintenance and service costs. As seen from GE’s launch of its Industrial Internet platforms in 2012 to airlines, energy companies, hospitals and other industry segments, there are some interesting opportunities related to the value creation associated with data in the IoT ecosystem. These opportunities exist not only in the industrial space, but also in consumer-facing IoT applications such as home automation and wearables, as well as in industries such as agriculture.
Putting privacy and security concerns aside, data represents the promise of new economic benefits that are only possible when big data is leveraged in big ways.
To read the full blog, published on IAM Magazine, click here.
The Singularity University in Silicon Valley has an ambitious mission when it comes to educating its international, diversified student base: the 10^9 challenge, which involves developing ideas that improve the lives of at least one billion people over the next 10 years. In the eyes of visionary founders Ray Kurzweil and Peter Diamandis, these large-scale, ambitious ideas on the critical path to solving world problems should be top of mind for innovators worldwide. Looking at patents through the ‘Singularity’ lens, it quickly becomes clear that high patent value does not always correlate to the magnitude of the underlying innovation. On the contrary, many valuable patents today derive their value from the size of the product market employing the underlying invention, which might be a very small and marginal feature whose value can be traced back to a few words in the patent claims. That type of analysis is focused on ‘enforcement valuation’ based on the breadth and coverage of the claim language, as opposed to the magnitude of the problem that the invention is addressing. The questions then become whether patents are valued the right way and whether there is a better way to measure the value of patents that would reflect the impact of the underlying innovation on people and markets. Continue reading
If you back a Kickstarter crowdfunding project by a company that ends up selling to Facebook for $2 billion, do you deserve to get a return on your campaign donation? This is the q
uestion raised by some of the backers of the September 2012 crowdfunding campaign of the Oculus Rift virtual reality headset, which successfully raised $2.4
million on Kickstarter, a rewards-based crowdfunding platform.
Rewards platforms are not considered equity investment portals. Instead, they offer ways for companies and projects to find supporters who make a monetary contribution (donation) in return for a set of rewards – ranging from merchandise such as a t-shirt all the way to pre-ordering the actual product itself. One Forbes analyst calculated that a campaign backer who put $300 into Oculus as an equity investment could have made a return of $20,000 when Facebook bought Oculus 18 months later for $2 billion. However compelling, this argument is largely flawed, as a rewards-based donation is technically not an equity investment. Equity crowdfunding is still pending in the United States, awaiting the Securities and Exchange Commission (SEC) regulations required for the implementation of the Jumpstart Our Business Startups (JOBS) Act, the 2012 legislation destined to open up equity crowdfunding to non-accredited investors in the United States for the first time in history. Several key valuation issues are worth discussing in the context of crowdfunding which are very specific to the crowdfunding platform and the regulations surrounding it. Continue reading
Churn Is King: How SaaS Business Models Affect Software Company Valuations
In 2012 Oracle CEO Larry Ellison announced the availability of Oracle Cloud, declaring cloud computing “a fantastic opportunity for technology companies to help customers simplify IT”. Software vendors across the world are embracing the ‘software as a service’ (SaaS) cloud-based business model in growing numbers. According to San Diego-based investment firm Software Equity Group, SaaS software revenues will likely represent approximately 25% of the overall
software market in the next five years. Research firm Gartner estimated that global spending on
SaaS will reach $22.1 billion by 2015. Some software vendors are converting their software delivery and revenue models to SaaS, while others acquire SaaS companies to gain access to this market. Ad
obe is a recent example of that shift: in May 2013 the company announced that it was halting future updates of its flagship product, Adobe Creative Suite, in favour of expanding the subscription-based Adobe Creative Cloud. On the M&A front, SaaS M&A transactions grew 25% last year and the median SaaS exit multiple was more than double that paid for traditional, on-premise software targets, according to the Software Equity Group. Continue reading