A “deep dive” study on Israeli start-ups working in the Internet of Things (IoT) space by Innovation Endeavors, the early-stage venture capital firm backed by Google founder and Alphabet Executive Chairman Eric Schmidt, indicates shows that IoT is a thriving field in Israel – and if there hasn’t yet been a “breakout company” that has gone on to major commercial success, said investment team member Aaron Dubin, it’s just a matter of time before there is one.
“It’s still very early for Israeli IoT (and IoT in general), and thus, there have not been many notable Israeli M&A’s or IPO’s in this space recently,” Dubin told The Times of Israel. “But there are several companies that could be viewed as “successes in progress,” based on visible metrics such as their ability to generate revenue, reach scale, secure partnerships, and/or raise significant rounds of investment capital.”
IoT, of course, is the technology that will connect anything and everything to the cloud, collecting data that will be used for a plethora of purposes, from helping us to eat, sleep, and play in a more healthy manner, to helping us reduce our carbon footprint and save energy (and the environment), to keeping track of our shopping and consuming habits, with the idea of giving us more of what we want. “Even Cheerios will be ‘collecting’ data on you,” according to Robert Scoble, an American evangelist for IoT.
Surveying Israel’s IoT landscape
Israel is right in the thick of this revolution, the VC’s study showed. Over the past three months, members of the Innovation Endeavors team reviewed more than 50 market reports, held countless meetings with top Israeli and global technology leaders, studied and evaluated IoT vendors based on their position in the IoT value chain, vertical, sub-vertical, and stage – and came up with a graphic form study called the 2015 Israeli Internet of Things Landscape. The graphic classifies the 330 current IoT players based on existing models of use, as well as newly defined verticals and sub-verticals. Among those new verticals: Solutions that address the natural environment such as energy, agricultural technology, and water, as well as “IoT-Enabling” tech that includes technologies that peripherally facilitate industry growth, such as wireless charging solutions for the IoT devices that will be deployed everywhere.
Among the study’s findings is that IoT represents a surprising five percent of the Israeli startup ecosystem, with companies addressing unique problems across many major markets, especially healthcare, life sciences, and ag-tech, areas where there is already a lot of Israeli tech development. However, the industry is “far from mature and severely lacks infrastructure.” – in that it focuses on niche applications like fun games instead of providing overall solutions for industries, such as the infrastructure or agriculture industries.
That this is the right move for Israel’s IoT industry is clear, said Dubin. One area where Israel does not usually perform well is in consumer products, which is where most of the IoT products that have been developed until now lie. But “a convergence of factors, including new access to global markets and a reinvigorated market for consumer IoT devices, has created a meaningful opportunity for Israeli entrepreneurs to get back into the consumer and hardware spaces.” Areas such as health/wellness, for example, is an area where there is a lot of Israeli development, and with the success of IoT devices like the Fitbit exercise band, Israel can “ride on the wave of success from companies” in that space, said Dubin.
Another good market for Israeli IoT is cyber-security, another area that Israel excels in – and a sorely needed technology in the IoT space. “Cyber-security most often intersects with IoT from two sides,” said Dubin. “First, on the industrial/infrastructure side, cyber-security becomes crucial where information technology and operational technology intersect. This often involves protecting critical assets and infrastructure such as the smart electricity and water grids, oil and gas, and telecom networks, etc.”
In addition, said Dubin, “cyber becomes important where physical and digital security intersect – for example, a weaponized drone, a smart home breach, or a hacked car – which often represent real-life safety concerns. “In any case, we believe cyber-security specifically will continue to emerge as one of the most exciting themes in Israeli IoT going forward.”
Despite the lack of industry maturity, there were some rising stars on the horizon, said Dubin. “For example, EarlySense, which develops contact-free and continuous monitoring solutions that help identify early signs of patient detoriation, has raised $88M to date, established partnerships with Samsung and Mitsui, and is likely headed towards an IPO. Another company, Israeli robotics manufacturer Roboteam, recently secured a $25M strategic contract with the US Air Force to sell its military robot systems.”
“While it is generally too early to tell which are the “best/most promising” Israeli IoT companies, especially from an investment perspective, there are a few that are interesting in that they represent unique concepts and are great examples of Israeli ingenuity – for example, Engie is bringing transparency to the automotive repair industry through a mobile app that can read your car’s diagnostics codes via the vehicle’s onboard computer, and send notifications about your car trouble in real-time to local garages, who can then bid on fixing your car. Another example is Neura, a platform where smart devices can interact with one another, or a sort-of ‘Google Now’ for IoT. With such a system, essentially your alarm clock could notify your coffee maker that you’ve woken up and to start brewing your morning cup of joe, and more,” added Dubin.
While Innovation has not invested in these firms, said Dubin, “we are a proud investor in IoT, especially in Israel.” One of the fund’s most recent IoT-related investments, he said, was skyTran, which is building and commercializing “a high-speed, low-cost, elevated unique mag-lev personal rapid transportation system. The skyTran system is a network of computer-controlled, 2-person ‘jet-like’ pod vehicles employing patented passive, magnetic levitation technology. skyTran intends to revolutionize public transportation and, with it, urban and suburban commuting by transporting passengers in a fast, safe, green, and economical manner, which closely aligns with Innovation Endeavors’ investment mission to apply cutting-edge technology to transform large industries.
“Due to leading tech, good timing, and a number of other enabling factors, Israel finally has the ways and means to make a lot of noise in IoT on the world stage, and each of the specific tech advantages Israel holds will play a strategic role in IoT going forward,” added Dubin. “This makes Israel of critical importance to the global evolution of IoT, and very uniquely positioned to become a future leader in the field.”
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