This article was written by Daphne Tomlinson, Senior Research Associate at Memoori.
Since 2017, Memoori has tracked around 970 funding rounds worldwide across the smart buildings space which have attracted over $16.5 billion in disclosed capital investment by venture capital, private equity and corporate investors.
Investment in 2019 amounted to $5.4 billion spread over 316 funding rounds. This is around 31% lower than the record level of $7.8 billion capital investment over 361 rounds in 2018, but a 61% increase on the 2017 level of $3.3 billion spread over 301 rounds.
The data in our new report on M&A and Investments in Smart Buildings H2-2019, has revealed an unprecedented rise in global investment since 2017, which is confirmation of a shift in the slowly evolving smart buildings space. With the number of funding rounds rising to over 300 per annum, this heightened level of activity maintained over the last 3 years is a significant indicator that a tipping point has been reached in the acceptance and adoption of intelligent building technology. We believe this shows increased confidence by investors in the sector and indicates the positive response startups and established players are receiving for their products and services in the smart buildings marketplace.
An analysis of the high value deals over the last three years reveals a consistent higher level of funding provided in the Chinese market for smart home, smart building and physical security solutions such as AI driven face recognition. In the US market, the analysis also highlighted the higher levels of funding achieved for smart glass products, such as those from View and Kinestral Technologies, which require extended research and development cycles.
The top 8 deals ranked by dollar value in 2019 include 4 in the Chinese market (Megvii, Terminus Technologies, Lumi United and Youdian Tech) and 4 in the US market (Motorola Solutions, Kinestral Technologies, Vayyar imaging and Sunnova Energy).
The high dollar value of deals in 2018 can be attributed to around 10 funding rounds with values over $100 million, the majority of which were in the Chinese market, including the funding of face recognition firm, SenseTime. A $1.1 billion funding round of View in the US by SoftBank also contributed to the final outcome.
In 2017, there were 6 funding rounds with values of over $100 million: two Chinese companies (SenseTime and Megvii) and four in the US market (Ring, View, Sunnova Energy and Interface Security Systems).
Of the 970 investments over the past three years, 54% were to companies located in North America, reflecting the comparative ease with which firms based in the USA and Canada can gain funding. Companies based in Europe and the Middle East accounted for 35% of the total number of funding rounds while firms in the Asia Pacific region accounted for 11% of the total.
Another trend we have observed in the last 3 years is the increased participation of corporate investors in funding technologies and applications for smart buildings. Major incumbents in the built environment from across the building lifecycle are leading and supporting funding rounds to a much greater extent than before as they face competitive pressure from a wave of smart building startups, in the continuing race towards IoT and data-driven buildings. Corporate investors account for around 50% of the backers in the smart buildings space. Their involvement confirms an increased impetus to interact with startups at an early stage, in order to explore disruptive technologies and new business models.
We predict that funding in the smart buildings sector will continue at current levels into 2020, with increased investor confidence to interact with startups and innovative solutions.
Our latest report on M&A and Investments in Smart Buildings H2-2019 consists of 70 slides and supporting Excel files with complete listings of acquisitions and investments covering 3 years since January 2017, based on our database of deals. The report includes 20 company profiles of acquisitions and investments together with 20 profiles of buyers and investment firms, presenting our view of their respective strategies and significant M&A or investment activity.