Get all the news you need about Smart Buildings with the Memoori newsletter
This article was written by Daphne Tomlinson of Tomlinson Business Research.
Memoori’s brand new report entitled Startups and Their Impact on Smart Buildings 2017 highlights the critical contribution that Startups are making to the introduction of innovation in the Smart Buildings space.
We define a startup as: a private company formed no earlier than 2008 that is focused on the commercial and industrial buildings market, is not a subsidiary or an acquisition of a larger company and is often financed by venture capital or private equity funding.
Over the last nine years, a plethora of venture-backed startup companies have targeted commercial and industrial building owners and operators with technology offerings aimed not just at reducing energy costs, but also improving facility management efficiency and real estate operations, increasing the performance of physical security and safety in buildings and offering smart building to smart grid applications.
More recently, the Internet of Things is starting to have a profound effect on the competitive landscape, as software platforms, advanced sensors and networking solutions enable a new range of data-driven solutions for buildings. New players are emerging offering innovative solutions and new business models, reflecting the market disruption currently underway.
The diversity and range of emerging players in the marketplace is demonstrated though the identification of over 250 companies, segmented into six main categories: Building Internet of Things; Enterprise Energy Management; Real Estate and Property Management; Physical Security in Buildings; Smart Building to Smart Grid Applications; and Other Applications.
The offerings from new entrants is predominantly building performance software focused, confirming that software is a key differentiator in intelligent buildings and has low entry barriers.
Over 60% of the companies identified are based in North America, reflecting the comparative ease with which startups can gain funding from US investors. Despite an 11% decline in overall VC investments in US startups (Crunchbase 2016 Global Innovation Investment Report), new entrants in the smart buildings sector received over $1.4 billion in funding last year, an increase of 85% compared with the previous year.
Startups have attracted over $3.9 billion since 2008, with the highest level of funding achieved in 2016, showing increased confidence by investors in the sector and indicating the positive response companies are receiving for their products and services in the market.
The importance of corporate investors in the development of technologies and applications for smart buildings is evident over the years we have been tracking venture capital funding in this sector. Corporate investors have been involved in around 30% of the 520 funding rounds identified between 2008 and 2016.
New entrants exploiting key emerging technologies with applications in smart buildings are reviewed in the report, namely, Artificial Intelligence, Commercial UAVs & Smart Robots and Blockchain.
The report also outlines the fundamental change in the last two years in the nature of collaboration between established incumbents and early stage startups, which is now regarded by many players as being critical to their respective success.
Corporations and startups have begun working together in fundamentally new ways, with a focus on flexible, early-stage, open-ended partnerships, as a survey by MassChallenge and Imaginatik in April 2016 confirmed. The key findings are highly relevant to the smart building space.
Our report demonstrates the increased level of interaction between incumbent players and new entrants in the last two years, with an analysis of corporate venture capital funding, acquisitions and strategic alliances between startups and corporations, exemplified by the initiatives of 12 major players in the smart buildings sector.
At the same time, accelerator and incubator programs focused on smart buildings and sponsored by the major players have also proliferated. Deployment of open innovation strategies and co-development with external partners to increase the speed of innovation is becoming commonplace.
Utility companies and energy services providers are also adjusting their business models towards new technologies and services aimed at differentiating themselves in tomorrow’s energy market, and have been particularly focused on building relationships with new entrants, through acquisitions, venture funding and partnerships.
As part of the research for this report, Memoori also identified 15 StartUp Companies to Watch in 2017. The full list is 75F / Asset Mapping / Camio / Ecorithm / Enlighted / Foghorn Systems / GELI / Levaux / Origami Energy / PointGrab / Prism Skylabs / Riptide / Stem / Switch Automation / Verdigris Technologies.
You can download a document profiling all of these companies here – 15 StartUp Companies to Watch in 2017.