Start-ups creating technology for home automation — allowing users to control appliances, energy, security and other functions — attracted $468 million in venture capital since 2012, according to a new report.
Investors made 56 deals backing home automation technology last year, said a report from CB Insights, a New York-based venture capital research firm.
This included early-stage funding for ventures such as SmartThings, a Washington-based start-up selling kits of sensors and switches that users can control from their smartphones. SmartThings raised $12.5 million in November.
Home automation technology is a subset of what has been dubbed the “Internet of Things,” a term for a network of connected devices. Start-ups related to the Internet of Things — creating the sensors allowing devices to communicate, or using those sensors in other areas such healthcare or consumer devices, for instance — attracted $752 million in the past year, a previous CB Insights report noted. This was distributed over 112 deals.
Barry Eggers, partner at Lightspeed Venture Partners, an investment firm based in Menlo Park, Calif., follows companies related to the Internet of Things.
Lightspeed Ventures invested in Nest, a company selling smoke detectors and thermostats that users can monitor from their smartphones. Nest’s thermostat learns to program itself according to residents’ temperature schedule — if they turn off the heat before going to work at a certain time, for instance, the thermostat learns to lower itself at that time automatically.
Eggers said he sees greater opportunity for Internet of Things ventures in software than in hardware, though Nest is an exception. Consumers may soon tire of adding new smart devices to their homes, but will likely have a stronger appetite for smartphone software allowing them to monitor and control their homes.
And for investors, there’s huge value in the data this new hardware and software collects, Eggers said.
“This isn’t just about connecting things, it’s about having a big data back-end, deriving intelligent insights” about people’s behavior — when they use energy and how they can reduce their usage in the case of Nest, for instance.
But since there’s a lot of hype surrounding the Internet of Things, Eggers said, entrepreneurs often “are a little bit fixated on the hardware piece.”