Are VCs closing the door on IoT start-ups?

Are VCs closing the door on IoT start-ups?

Bad news for IoT start-ups?

New data analysis from CB Insights reveals a slight fall in the funding going into IoT start-ups in the first half of this year.

The IoT marketplace is projected to become a multi-million market in the coming years, both in terms of revenues and deployed devices, and it has thus been to little surprise to see the emergence of a number of start-ups in this area, as well as increasing consumer acceptance. Increasingly, both consumers and business people see the benefit in connected devices talking to each other.

However, while it seems people are increasingly open to having IoT in their homes, on their bodies or at their workplace, investment trends for IoT start-ups appear to at their lowest level since the start of 2013, with total funding predicted to fall by 7 percent year-over-year by the end of 2016.

In addition, deal activity also seems to be taking a hit, with a 30 percent fall recorded over the same period.

Related: How to survive and thrive as a connected start-up (video)

Mixed news for IoT start-upsiot-start-up-financing

CB Insights says there has been a downswing in deal volume since a peak in Q2 last year. Funding sank from $837m in Q1’16 to $656M this quarter, and activity fell from 75 deals to 62. Quarter-over-quarter, that translates to a 22 percent fall in funding and a 17 percent drop in deals. Q2’16 also represented the lowest quarterly deal total since Q1’13.

In slightly more positive news, major Q2 deals saw new investment in IoT platform Ayla Networks ($39M Series C) and smart thermostat Tado ($23M Series C).

Whether this trend will continue through the final two quarters of 2016 or if the industry will recover with additional growth to counter this fall is a matter of debate.

The potential reason for this is the reassessment of risk of funds and venture capital investors as the stock prices in China and US correct themselves.

The original heighted excitement concerning IoT could be drying up as investors stop pushing the new investments and relax gradually to see how the funding in the industry pans out.

However, the question is has the industry in fact started to mature and its evolution commence slowing?

By Oliver Baxandall

Related: The 10 hottest Internet of Things start-ups of 2016