Developers of innovative sensors attracted $3.4 billion, or nearly 80% of the $4.3 billion funding for sensor modules over the past decade, underlining their importance in the fast-emerging IoT market, according to Lux Research. Overall investment in innovative sensors tripled between 2006 and 2015, reaching $486 million in 2015. Over the past decade, sensor processing-related technologies received over $620 million in funding, while packaging solutions attracted just over $200 million and developers of energy harvesting solutions for sensors raised around $100 million.
Lux Research analysts evaluated the investment patterns in different types of sensor technologies from 2006 to Q1 2016. "Innovative sensor startups will continue to attract large amounts of venture investment as the Internet of Things emerges as the next major phase in computing, following on the heels of the PC and mobile eras," said Pallavi Madakasira, Lux Research analyst and lead author of the study.
Over 340 companies in the Americas attracted nearly 80%, or $3.4 billion, of the total investment in sensor technologies since 2006. Europe, Middle East and Africa (EMEA) accounted for over $950 million, while Asia got $200 million.
Source: Lux Research
Sensor innovations are attracting investors
The Internet of Things (IoT) is the next major phase in computing following on the heels of the PC and mobile eras. Within the IoT, sensors constitute the "things", as end-points of the network system. Thus, sensor developers of all flavors and sizes have attracted investment over the past decade.
The investor pool that has poured money into the sensors space includes everyone from venture capitalists (VCs) to private equity and investment banks to government entities and large corporations.
Corporate commitment to sensors is at an all-time high. Samsung is investing $13 billion towards development of sensors and sensor system software, and Sony is raising $4 billion in funding to ramp up sensor production. Panasonic has invested $780 million to build capacity for image sensors, and IBM is investing $3 billion in sensor data. Additionally, Ford opened a research and development (R&D) center in Palo Alto, CA, to focus on sensors for transportation.
Several leading corporations across multiple industries have invested in sensor developers over the past 10 years, and many subsequently went on to acquire them, as well. The following table summarizes corporate investments of $10 million and above in sensor developers.
Source: Lux Research
Sensors to detect position of objects or humans attracted over $1 billion
Sensors to measure position attracted nearly $1.1 billion; sensors to detect motion attracted about $485 million, closely followed by sensors to detect light, which attracted over $475 million.
Approximately $400 million was invested into developers of sensors to detect pressure, while another $400 million was invested into developers of sensors to measure concentration of liquids and gases. Sensors to detect composition attracted over $260 million, while sensors to detect flow saw an investment of over $290 million.
Source: Lux Research
Corporate and private equity acquisitions top nearly $1.5 billion
In addition to the $4.3 billion invested in sensor developers over the 10-year period, corporations and private equity firms invested over $1.5 billion in acquisition of sensor developers. 45 companies were acquired over the 10-year period, although the transaction value for most deals is undisclosed. The table below summarizes the documented deals and their value. Almost all the acquisitions are in line with where VCs have invested most of the money -- into developers focused on sensors for building and heavy industry, and consumer markets to track physical and chemical attributes.
In the period since 2006, 45 sensor developers got acquired for a total of $1.5 billion. An overwhelming majority of the companies acquired focus on innovative sensors, with less than a handful built around processing and packaging solutions.
Source: Lux Research
Takeaways and outlook
Innovative sensor startups will continue to attract large volumes of venture investment; in the first three months of 2016, approximately $154 million was invested by VCs in sensor developers. At this rate, 2016 could likely continue the upward trend and beat 2015 investment levels in sensor developers.
Investments in processing technologies are heating up as well, with nearly $62 million already invested in 2016 (compared to $97 million in 2015). With the need for wireless sensors and ability to process and transmit larger data packets, expect investment levels to continue to increase in processing technologies.
Energy harvesting remains a largely unexplored area and presents opportunities for both developers to innovate and investors to find growth opportunities.
Corporate investors will continue to acquire sensor developers that are likely to offer an edge in sensing, packaging, and processing. Since startups cannot usually succeed and operate independently, strategic partnerships that startup developers forge are more likely to transition to acquisitions by corporates. Those developers without these strategic partnerships will find the going tough and will likely be forced out of the supply chain.
Copyright 2016 MEMS Journal, Inc.
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