Future Returns: How to Invest in Industrial Internet of Things

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Future Returns: How to Invest in Industrial Internet of Things

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“A lot of people believe that IoT is the power behind such a revolution, which is going to drive increases in productivity, transform business models, and redefine the way that organizations relate to their customers and suppliers,” she says.
“Now we see the acceleration in adoption of technology in the industrial market, and the customers, which are big corporations, are stepping up with their own innovation projects in-house,” Nguyen says.
Here’s what Nguyen says investors need to know when entering the emerging industrial IoT space.
“In the Internet of Things, we cannot shy away from the things,” Nguyen says, even with a move to more software plays in the information technology sector.
In Silicon Valley, Nguyen says people “run away” from investing in hardware because investors used to software, like apps, want to make quick returns with light capital.
Investing in IoT hardware usually involves bigger round sizes and higher working capital requirements than other investments.
Nguyen says she often faces a CAD$3 million to CAD$5 million (US$2.28 million to US$3.8 million) initial check size when investing in hardware as part of a syndicate.
“So if you are not a deep pocket investor and can’t play it for a longer term, then hardware is not going to be the ideal kind of product for you to invest in,” she says.
“Asking a startup in the IoT space to immediately have a big percent of Software as a Service (SaaS) revenue at this stage is, I would say, impractical,” she says.
There’s also a need to understand how blended margins from hardware and software sales paint a truer picture of an investment’s potential.
“Usually in the IoT offering, hardware and software come as a unified offering,” Nguyen says.
In software, Nguyen says margins can be around 80% to 90%, with hardware margins ranging as low as 30% to 40%

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