Who’s going to show you the money?
Who’s Going to Pay For IOT?
“Advertising paid for the Internet, who will pay for IOT?”, said this ex-googler turned IOT entrepreneur on the terrace of the NOAH conference venue in Berlin last week.
It’s indeed a great question. IOT is so broad, and devices or infrastructure at times so expensive, who is going to foot the bill? Following this conversation and quite a few others, we proceeded to list the options.
That’s the idea by default. People want it? They pay for it. It works for most things under $100, less so for things under $200, and becomes much harder for anything beyond. Also, the product often has to deliver direct benefits to the individual user without the need for network effects or infrastructure.
Most “connected devices” probably fall into this category. Many products by Xiaomi are pushing toward commoditizing the bottom end of IOT products (“xiaomization”). With the introduction of the $9 computer C.H.I.P. (disclosure: a HAX startup), we can expect to see many more affordable devices hit the market.
Embed the tech into cars, chairs, planes, offices, residential buildings… This works well for products whose value is shared by more than one user, do not have direct personal ownership, or when part of a bigger system (like a car).
The problem is often product cycles: a new car takes 5 years to get to market. How can a startup survive such a long cycle? Car innovation is likely to be with later stage startups, or via the after-market.
Many medical and wellness devices could be fully or partly reimbursed by insurance. Some because of the direct benefits they provide to users, which would lead to less medical issues and save money to insurances and their subscribers. To some extent, the mere “self-selection bias” of good actors — who are often more willing to be tracked — could even justify a “placebo device”.
It worked for Elon Musk with cars, rockets and solar panels. It could work for IOT. In particular, cities aiming at lowering expenses, downtime of equipment, usage of utilities, etc. could be direct customers, or on behalf of citizens.
The education sector is also a great opportunity as many startup products could be used in schools to promote STEAM skills- one 3D printer per class, one $9 computer and one robot per child, etc.
Those categories are not incompatible. We saw some HAX startups get to market with crowdfunding (B2C) as a way to get attention for the bigger B2B play. The sales cycle and constraints of each potential customer vary greatly. Some — like insurance companies — also dislike the idea of buying from a “startup”. Teachers might not be able to pre-pay via crowdfunding, etc.
So our advice to founders: be tactical about your go-to-market, and keep eyes open for new types of customers! Within a few years, IOT products will be everywhere as a way to save time, save money and save lives! (and yes, possibly pry on your every move, heartbeat and blink too… what it becomes is up to us!).