In the California gold rush, it was not the gold miners who made all the money. As savvy investors know, the visionaries who sold goods to the prospectors profited the most. California’s first millionaire was Sam Brannon, who got his start buying up all the picks, shovels, and pans, then selling them to the prospectors for amazing profits – buying pans at 20¢ each, then reselling them for 133 times that. Eureka!
My favorite example is Levi Strauss. He observed that the rugged mining environment quickly wore out prospectors’ trousers. He installed metal rivets at points of strain on denim pants, and eventually catapulted Levi Strauss & Co. to the largest producer of jeans globally.
Now, what about the “eureka” moment in the Internet of Things (IoT)?
We’re on the verge of the IoT gold rush. And just like past gold rushes that have occurred in many different locations – California, Australia, South Africa, and Brazil to name a few – this one is having a global impact. Last year, $1.1B flowed into 153 IoT startups. Real business problems are getting solved across manufacturing, healthcare, transportation, energy, and nearly every other industry beyond high tech. By 2020, experts predict that 50 billion things will become connected to the Internet. To put this in perspective, that means nearly seven connected things for every person on the planet. Cisco predicts that $19 trillion of value will be created as billions of things, data, business processes, and people become connected.
There will of course be success stories from companies that pan for gold and strike it rich. For example, just this year, Nest discovered a $3.2 billion gold nugget under the Googleplex.
But, the real “eureka” moment will go to those selling the picks, shovels, and jeans equivalents for IoT.
At Cisco Investments, we’re taking a lesson from Levi Strauss, focusing on the points of strain that are emerging in IoT. We need new paradigms to address the fundamentally different scale, security, real-time, and vertical-specific requirements that are emerging. Simply extending existing information technologies (IT) to IoT isn’t enough. The promise of IoT requires disruptive innovation in batteries, silicon, sensors, wireless and mesh, operating systems, identity and search, databases, and many more emerging points of strain. The greatest profits will flow to a new breed of innovators who create fundamentally new technologies and business models to solve for the points of strain.
We’re investing in entrepreneurs, on a global basis, who are focused on solving the hardest problems in IoT. We’ve dedicated $100M in capital, investing across vertical and horizontal layers of the technology stack. Our commitment spans stage (series A to growth equity) and investment vehicle (direct and indirect investments in companies, funds, and incubators). We’re already one of the most active investors in this space, and we’ll do much more. The who’s who of entrepreneurs in this gold rush that are working with us include:
• Yuval Bar-Gil, Aeroscout (acquisition)
• Ravi Belani, Alchemist Accelerator
• David Friedman, Ayla Networks
• Kevin Collins, BitStew
• Paul Grey, Cohda Wireless
• Will West, Control4 (IPO)
• Niall Murphy, EVRYTHNG
• Alan Knitowski, Phunware
I look forward to welcoming many more. Happy mining!
About the author – Nate D’Anna is a director in Corporate Development at Cisco, leading investment and acquisition efforts in IoT, in addition to having responsibility for Cisco’s broader enterprise networking technologies.