Internet of Things in Russia

Mythology Return from operations Return from investments Our recommendations

Return from operations Return from investments

I. How IoT projects earn money?

II. Potential market

III. What problems they solves?

orWho’s ready to give them money?

IV. Who solves them and have this

money?

I. Potential best deals in Russia

II. Best deals in the world

III. Active funds in IoT market

How IoT projects earn money

Monetization prospects:

Maturity

Steps

No working

business

models yet

$$: M&A

Hardware

sales

+free cloud

services

$$: hardware,

capex

Connected

thing is part

of service

contract (as

cell phones)

$$: service,

opex,

data

Unified service

across sold

Things

$$: hardware,

capex +

services, opex

Commodity

service

assumes

ubiquitously

available

things;

as prepaid SIM

$$: service,

opex,

data

Experiment:

Hardware:

Bring-your

own-thing:

Service-funded

thing:

Commodity IoT:

B2C iBeaconsfitness

wearables

wearables

based

health

insurance

health-ins.

provided

motion

tracker

yet no

examples,

most

potential

benefits

for whole

ecosystem

B2Bsmart

meters

industry 4.0

sensored

farming

predictive

maintenance

of

manufacturing

connected

industry

products

Sources: Harvard Business Review, HarborResearch, ECIS2014

Mythology Return from operations Return from investments Our recommendations

Challenges:

•Diversity of objects

•Immaturity of innovation

•Unstructured ecosystems

From “firm business

model”

To “ecosystem business

models”

Customer

needs

Solution for existing

needs in (reactive

manner)

Address real-time and

emergent needs

(predictive manner)

OfferStand-alone product

Updatable product that has

synergy value

Role of dataSingle-point data used

for future products

Changing experience for

current product

Path to profit Selling next productRecurring revenue for current

product

Control pointsCommodity advantages,

brand

Network effects between

products

Capability

development

Leverage core

competencies

Understanding how other

ecosystem partners make

money

Traditional product mindset Internet of Things mindset

Sources: Harvard Business Review, HarborResearch, ECIS2014

How IoT projects earn money

Mythology Return from operations Return from investments Our recommendations

Sources: Cisco IBSG , MIT Technology Review Business Report

More

connected

devices than

people

World

Population6.3 Billion 6.8 Billion 7.2 Billion 7.6 Billion

Connected

Devices500 Million 12.5 Billion 25 Billion 50 Billion

Connected

Devices

Per Person

2003

2010

2015 (P)

2020 (P)0.08

1.84

3.47

6.58

Internet of Things

Transport

Energy

Other

Earth

Home

Education

Business

1. Individual

networks

2. Connected

together

3. With security,

analytics, and

management

Potential IoT market

0

10

20

30

40

50

60

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

ThingsTabsPCSmartphones

IoT world market

bn, USD

Mythology Return from operations Return from investments Our recommendations

Sources:

Security

Safety

PrivacySteal of sensitive

personal information

Enabling unauthorized

access and misuse of

personal information

Problems with automatic

trading software, which

can get trapped in a loop

causing market drops

Symantec reported on a

Linux worm that targets

routers, cameras, and other

embedded devices

The flaws in Samsung

Smart TV

Major security holes in

traffic light systems that

allowed hackers to control

100 signals in Michigan

What can

be done?

Bolster the security of IoT

environments with:• security tools like data

encryption

• strong user authentication

• resilient coding

• standardized and tested APIs

that react in a predictable

manner

Old

infrastructure

Old

infrastructure

Mythology Return from operations Return from investments Our recommendations

Sources: RusBase, Tecnocrunch, Skolkovo

Mythology Return from operations Return from investments Our recommendations

Sector:

Health and fitness

Sport tracker +

Fitbit app

Sector:

Cloud Service

Sector:

Transport

Sector:

Cloud, M2M

Cloud service that

allows you to

combine different

devices operating

in the format of

"Internet of

Things"

Sources: CBInsights, 2014, eWeek 2014

Future Prospects

Short term

Medium term

Long term

Block A

For a short-term investment the

most attractive areas are:

• Home Automation & Energy

Management

• Healthcare

• Monitoring & Tracking

• Quantified Self

Block B

• New IT infrastructure, especially

with “fog computing”

• new protocols and ways of data

transfer

• new ways of data cleaning and

reduction of its complexity

Block C

Artificial intelligence technology

the ability to collect and process

all data about one process, to

select significant indicators from

that dataset and to make the right

management decisions on the

basis of algorithms.

Creation of this technology may

change or destroy the existing

market of Block A products.

Creation of this technology will

use infrastructure, owned by Block

B companies, so revenue of Block

B will rise with development of

Block C

Creation of this technology is

impossible without creating Block

B technologies

Mythology Return from operations Return from investments Our recommendations

Sources: CBInsights, 2014, eWeek 2014

Problems - Russia

Industry/application area Case description Products/services/benefits

offered

Technology neede

Manufacturing IoT-adapted manufacturing

process

Customization of products

during the production process

Situation-aware smart

machines and robots

Health Health related products and

service

Medical expertise Sensors, IoT communication

infrastructure

Health guidance service Monitoring of key parameters,

analyzes by medical experts

Sensors

Home Home owner’s digital service Monitor and manage facilities Pnp devices, installation

package, open and user-

friendly applications

Saving energy Measuring temperature,

reducing energy consumption

Sensors

Traffic Traffic data marketplace Real-time traffic & weather

conditions

Databank, sensors

Shopping Electronic shopping assistant Key information about a

product

Electronic shopping assistant

device, RFID

Food Food security tracking system Tracing of food products from

original material providers to

consumers

Sensors, RFID

Real estate Real-time waste monitoring Reducing the cost of waste

collection

Sensors

Mythology Return from operations Return from investments Our recommendations

Sources: Sources: CBInsights, 2014, eWeek 2014

Mythology Return from operations Return from investments Our recommendations

Type of technology Problem solving idea Growth drivers

Smart house

Sensor unauthorized access to the premises

Remote video monitoring sensors

Intelligent light control

Motion detectors

Detectors of presence

Energy consumption sensors They will provide savings of $ 200 to $ 500 billion

a year by 2025, according to the McKinsey

Global Institute.

Water leakage sensors Doha city, Sao Paulo and Beijing have reduced

leakage by 40 - 50%

Healthcare

A connected pill bottle that ensures patients take

their medications.

Ministry of Labor estimated the number of elderly

people is increasing by 1 million a yearDevices that monitor the status of health of the

elderly people

Corporate Advertising and marketing According to Cisco research

Governmental

Intelligent traffic management system

The study of “Machina” expects 2020 revenue of

$ 100 billion through the use of IoT in road

payments and fines

Waste management systems

City of Cleveland was able to eliminate 10

loading routes and reduce operating costs by 13

percent..

Sources: Rusbase.vc, Siliconrus.com, angel.co/internet-of-things

Startup Raised Capital Info

$3 mlnInvestor: LETACapital

Core business: intellectual autopiloting

systems for vehicles

$ 1,5 mlnInvestor: LETACapital

Core business: Remoto

$ 1,1 mlnInvestor: Qwave

Core business: LED solutions

$ 1 mlnInvestor: Almaz Capital, Aventures

Capital

Core business: Remote pet camera

$ 250k - 2mln

Investor: TMT INVESTMENTS, Maxfield

Capital

Core business: secure connections for

IoT

$218 kInvestor: crowdfunded on Indiegogo

Core business: cellular tracker

$ 160kInvestor: Skolkovo

Core business: Smart. Safe. Robot.

N/AInvestor: RVC

Core business: system for remote

control of vehicles

Potential best deals in Russia

Mythology Return from operations Return from investments Our recommendations

Company InvestorsAmount

RaisedSeries Year

Exit Size

2014Exit Type

Nest Labs Google Ventures $80M С 2013 $3 200MAcquisition

(by Google)

Dropcam

Institutional Venture

Partners$30M C 2013

$555MAcquisition

(by Nest and

Google)Accel Partners $12M B2012

Felicis Ventures $5.8M A 2011

GoPro

Foxconn International

Holdings$200M PE 2012

$427,2MIPO on

Nasdaq

Walden International

Investment Group$88M A 2011

Riverwood Capital,

Steamboat Ventures$205k VC 2010

Oculus VR

Andreessen Horowitz $75M B 2013

$2 000MAcquisition

(by

Facebook)BIG Ventures $16M A 2013

Crowdfunding $2.4M - 2012

Mythology Return from operations Return from investments Our recommendations

Sources: Rusbase.vc, Siliconrus.com, angel.co/internet-of-things

Sources:

$3 500M

$613M $406M $3,5M

1Q2014 2Q2014 3Q2014 4Q2014

Exit Flow

Narrative

IFTTT

Kinsa

SimpliSafe

Sources: CB Insights, The Pitchbook Platform

IoT CATEGORIES FUNDED

Wearable Tech

TOP 10 INVESTORS 2014…

NOTABLE EXITS

KEY TRENDS

Healthcare

In-store Retail

Wearable Tech

Drone

startups

Connected Car

Building Blocks & Platforms

Connected Home

2014 Median Exit Size = $29,8M

Largest Exit: Nest Labs Acquisition by Google

Only 1 IPO – June 2014 GoPro Inc. on Nasdaq

$108M Raised

29 Deals in 2014

104% YoY Growth

10 Drone Companies

$997M Raised

in TOP 10 Deals

$542M – Largest Deal

…INVESTED IN FOLLOWING STARTUPS

LIFX

Misfit

Helium Systems

Boombotix

Acquisition Buyout IPO

15 2 1

Exits 2014 by Type

Mythology Return from operations Return from investments Our recommendations

Sources: Skolkovo, Intel, RusBase

Russian Funds – IoT activity

Competition of the IoT on the

basis of the first compatible with

the Arduino platform Intel

Galileo and Microsoft Azure

cloud service

Raised capital: $50 mn

Founded at 24th of

April 2015

Glance

control system

of smart house

+ Project’s NPV est.:

200 mn RUB

+ Investment

requirements: 60 mn

RUB

+ Raised funds: 1 mn

RUB

Geo Watch

watch with

GPS-tracker for

kids

InHome

Power System

M2M devices

Emdea

blood pressure

monitoring

system

Internet of Things-IT

Challenge

+ 1 place – 3 mn RUB

+ 2 place – 2 mn RUB

+ 3 place – 3 mn RUB

B2B

orientation

10 projects

DiSiKon – early fire

warning system

Electronic seals on

the one of railroad

SNG

Cisco IoT Innovation

Grand Challenge

Mythology Return from operations Return from investments Our recommendations

Google’s $3.2 billion acquisition of smart thermostat startup Nest Labs

Sources: According to our analysis

Mythology Return from operations Return from investments Our recommendations

Block A

• active PR

• marketing campaigns

Block B

• strategic partnerships with

main players from

• block A

• IT companies

• telecom companies

• Focus on fog computing

• new ways of data

transfer

• initial data analysis.

Block C

R&D fuelling

Home Automation &

Energy Management

HealthcareMonitoring &

TrackingQuantified Self