Startup general interest

Growth in the internet of things

By July 31, 2013 One Comment
Internet of things - 50bn connected devices

Internet of things – 50bn connected devices

Back in 2011 Cisco predicted that there would be 50bn connected devices by the end of this decade. That’s just 2.7% of the 1.8 devices that they estimate exist on the planet today. They arrived at the 50bn by assuming a 25% growth rate per year.

The interesting question for me is what these new connected devices are going to be, because there will be a lot of them (40 billion). I read this morning about $120 connected socks that are packed with sensors and track fitness (now available on Indiegogo), and whilst the price seems too high too build a big business around this is a good example of what will happen – entrepreneurs coming up with clever ideas for products which may not be obvious at first sight.

One of our more successful investments at DFJ was Graze who sell punnets of healthy snacks. In their early days there was considerable scepticism over the size of the market and I think many novel connected products will face similar issues. The entrepreneurs and investors who have success in this space will be the ones who have worked out how to tell the wacky-but-good ideas from the plain crazy.

I’m writing about this today because Singularity Hub has a post up which questions whether Cisco’s assumption of a 25% annual growth rate in the number of connected devices is too low. Cisco’s model is primarily based on the declining cost of connecting and doesn’t take into account the declining cost and increasing power of embedded chips and the increasing value we are able to wring out of the data which connected devices generate. They suggest that because of these additional factors the growth rate might double to 50% per year or more. At 50% pa growth we would have 223bn connected devices by 2020. That’s still only 12% of the devices in use, but would mean that use cases for an additional 200bn+ devices needed to be invented. That spells opportunity.