Why B2B investors like the Internet of Things

The Internet of Things (IoT) is drawing serious interest and money from investors.

IoT is a network of physical objects — “things” — that are embedded with sensors, software, and other technologies for the purpose of connecting and exchanging data with other devices and systems over the internet.

New research from Avnet Abacus analyzed Crunchbase data for companies listed under the Internet of Things and Industrial Internet of Things to provide insight on the level of investment activity across the sector. Avnet Abacus an electronics distributor that consults engineers when they’re designing new products.

They found that while there had been a 22% drop in total funding within the sector in 2022 — mirroring the trend across venture capital markets — the average funding round for Industrial IoT startups more than doubled in 2022. It was also the highest since 2006 (a year in which there was only one deal on record). IoT companies raising funds in 2022 pulled in $15.9 million on average, up 30% from the previous year, according to Avnet Abacus.

“The amount of funding companies receive in any product category gives an indication of how investors view the future for that technology,” says Avnet Abacus technical director Dr. Sara Ghaemi. “Despite venture capital generally cooling off due to current economic conditions, the research reveals investor confidence is higher than ever for the long-term prospects of companies developing products in the IoT.”

he Industrial IoT also experienced a record year in 2022. Last year, the average funding round reached $16.1 million. That’s more than double the average investment of $7.3 million in 2021, according to Avnet Abacus.

Acquisitions of companies in IoT worldwide reached their second highest ever in 2022 with 116 companies snapped up. That’s marginally down from the peak of 117 companies in 2021. In the United States, 48 IoT startups were purchased in 2022. That’s down from an all-time high of 58 in 2021.

While the total amount IoT startups raised globally dropped from $5.6 billion in 2021 to $4.3 billion in 2022, the money invested in early stage startups was on the rise, according to Avnet Abacus.

The investment into early stage IoT startups (those seeking funds in venture rounds A and B) reached the highest amount on record last year at $2.45 billion. That’s up 12% from $2.19 billion the previous year.

Angel and seed investors in the IoT were also proceeding more cautiously last year, providing funds of $261 million in 2022 compared to $404 million in 2021.

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