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MVP’s Michael Lenoce speaks at IoT Evolution “Swimming with the Sharks: Finding Investors to Back Your Future”

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IoT Evolution Expo Panel Offers the Investor View of the Internet of Things Space

By Paula Bernier

Executive Editor, TMC
What does the investment community value when it comes to the Internet of Things, and why? Yesterday’s IoT Evolution Expo general session panel, called Swimming with Sharks, aimed to address those questions.

The panel featured Allen Prithis, managing director at Capstone Partners; James Brehm of James Brehm & Associates; Mike Walkley, managing director and senior equity analyst of Canaccord Genuity Research; Homaira Akbari, president and CEO of AKnowledge Partners; and Michael Lenoce, managing director of Media Venture Partners LLC.

According to Walkley, IoT went through the hype stage, and now investors are getting interested in companies that make sense, with recurring revenue model companies seeing higher valuations. Lenoce agreed that IoT businesses with recurring revenue models are most attractive to investors.

But, added Allen, there’s an excess of money out there chasing after businesses that don’t meet investment criteria.

Most companies in the IoT space are subscale for most of the private equity companies out there, which tend to want to write $15-20 million checks to companies with $5-6 million EBITDA or $10-15 million recurring revenue models, said Lenoce. Companies that are below that threshold probably want to forgo hiring a banker and instead approach VCs, he said. But he added that the VC community in the early 2000s made a lot of big bets on IoT that did not pan out, so VCs may be hesitant to sink more money into this space.

Allen indicated that some of the early VC investments in IoT were duds because they had to do with widgets that never had a clear value proposition. Akbari said another reason some of those investments were not recovered is because the infrastructure and hardware were expensive at the time.

The panelists also shared their thoughts on what IoT categories they believe offer the greatest promise for investors going forward.

Akbari likes consumer products, as well as energy, gas, and water solution providers.
Brehm also likes IoT solutions addressing oil and gas, power and energy, and water.
Lenoce favors consumer wearables. “I look at companies like Fitbit, and I’ve never read an S-1 with that amount of growth,” he said.
The panelists seemed to agree that healthcare is a tough market given its high regulation and, thus, slow movement. And at least a couple of the panelists said they would avoid the drone space, not because it lacks potential, but because it’s over invested.

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