The two things that make a successful Internet Of Things company
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When tablet computers first appeared in Stanley Kubrick’s 1968 movie 2001: A Space Odyssey, they were science fiction.
More than 40 years passed before Apple had the commercial nous to make the iPad a household product.
Similarly, the “Internet of Things” (or IoT) was pretty far-fetched in 2002 when Forbes magazine published the first major media article on the concept.
Barely 15 years later IoT is an accepted part of our everyday lives — from trackable labels in shops to monitoring household energy use on a phone.
But as Apple’s Steve Jobs understood, the measurement of what makes a good — or great — IoT business is not just based on technology.
It’s technology plus commercialisation.
There are dozens of ASX-listed IoT companies, such as Simble Solutions (ASX:SIS) which handles energy management, Quantify (ASX:QFY) which sells smart locks and Connexion (ASX:CXZ) which makes connected car software.
But getting the tech and the sales right is a hurdle only a handful have achieved.
One of the biggest sectors around
The Internet of Things is a network of the billions of devices around the world that are connected to the Internet. They collect and share the data generated, from which people and companies can analyse and draw conclusions.
Anything from a car to a toaster can be connected to the Internet and can therefore be IoT, and there is barely a tech giant on the planet which doesn’t have a finger in the IoT pie, from Amazon with its self-service stores and home hubs to Uber (self-driving cars are the epitome of IoT).
The take up of IoT-enabled devices and software is so rapid that in Australia the IoT-at-home market grew 55 per cent last year to be worth $583 million, according to market researcher Telsyte.
It said smart energy, security and lifestyle devices will drive that even higher in the years to 2022.
Tech + commercialisation
But making and selling IoT successfully, however, is a mountain many companies are yet to conquer.
TMT Analytics managing director Marc Kennis says the key element of any IoT device or software platform is compatibility.
“The product that you have needs to be compatible with a lot of partner companies, so you need to have the protocols in place that can work with different equipment, different networks,” he told Stockhead.
“So really, these companies need to have multiple communications protocol in their products.”
Then there is the commercialisation side of the equation.
Mr Kennis says the key way to market for an IoT company generally is via channel partners.
“You may have a great technology but to go out to each and every individual customer is hard. You need companies that have an existing customer base… and have them go out for you then share the revenues,” he said.
With functional technology and the right sales strategy underway, measuring how well a company is progressing comes down to how fast they’re making these two elements work.
There are dozens of companies on the ASX which can be considered to be IoT, but drilling down into one sector provides a blueprint to how listed stocks are achieving the tech and the commercialisation.
In the energy management sector there are five companies: Simble Solutions (ASX:SIS), BidEnergy (ASX:BID), Building IQ (ASX:BIQ), Buddy Platform (ASX:BUD) and EnergyOne (ASX:EOL).
Buddy is valued at $140 million after launching their energy product along with a costly marketing campaign in 2017. Their energy management product is available around the world but after 11 months on the market, they are still making losses, reporting a $6.2 million hole in their half year financials at the end of December.
They secured major channel partners like Ingram Micro to distribute their product, but earlier this year mutually agreed to not go ahead with a Telstra partnership they were working to secure.
BidEnergy is worth $31 million and listed in 2016. They have followed a growth-by-acquisition strategy in the US, which is where it makes most of its money, and targeted large corporations as customers rather than go the channel partnership route.
They made a $2.9 million loss in the six months to December,
EnergyOne is worth $18 million and listed in 2007. It is an example of what energy management companies can achieve in the sector, raking in half year revenue of $4.6 million and a profit of $950,948.
They offer software that allows trading in energy and carbon credits.
Simble, worth $15 million, listed in February and is in the earliest stage of commercialising their technology. They are going the channel partner route for their flagship Energy Platform, signing up major reseller and distribution partnerhips in Australia and the UK in the three months since listing.
Expected customers sign-ups from just Optus and Powercor are about to commence, while Synnex gives it access to 6000 resellers.
Building IQ is the smallest, worth $14 million and listed in 2015. They saw customer growth of 20 per cent in 2017, and turned in a full year loss of $3.5 million.
Time in the market is no guarantee of profitability in energy management, as Buddy, Building IQ and BidEnergy show.
While all of these companies have technology that works, only Simble is achieving rapid commercialisation growth rates.
This special report is brought to you by Simble Solutions.
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