Gabriel Avner, Gedalyah Reback, Laura Rosbrow-Telem, and Alex Lazear explain what they think were the big themes in tech in 2015
We will admit that while 2015 was a big year of funding for tech, it was not the most exciting time for true innovation. For example, many of the big advances in tech in 2015 were laid out at CES, the year’s largest consumer electronic show. They heralded the Internet of Things, self-driving cars, and cybersecurity as major points of focus for 2015. All of these predictions were true – and all of which were big themes in 2014.
2015 also saw major funding going towards cloud computing, where a staggering number of companies started shifting their data from offline storage to the cloud, as well as fintech, which had impressive developments in online credit and lending and mobile payments, and baby steps in insurance. It was also a noteworthy year for the sharing economy, where startups like Uber are now valued at more than $50 billion, making it one of the largest companies ever to raise money in the private market.
However, 2016 will probably be a tougher year for startups. The end of 2015 displayed various signs that the tech bubble is about to pop, with various large startups’ valuations taking a serious hit and tech companies floundering in the public market.
One can only hope that sexy sectors like VR, self-driving cars, and private space travel will exceed our expectations in 2016. They may be startups’ – and tech consumers’ – only hope for a more interesting (if not more profitable) year. Without further ado, these were the startups and tech solutions that most impressed us this year.
IoT – Gabriel Avner
One of the most successful headline-grabbing buzzwords of the year has to be IoT. The Internet of Things has burrowed into our imaginations, opening up the possibility of turning the most mundane object smart. Cisco has predicted that the industry will rapidly ramp itself up in the coming five years, with an estimated 50 billion devices out there by 2020.
How close this futuristic vision is to the current reality is up for debate. Having debuted before this year, 2015 saw the first generation of wearables that people were prepared to be caught dead in. The Fitbit found success where Google’s Glass fell flat.
According to Ofer Schreiber, a partner at Tel Aviv-based YL Ventures who spoke with Geektime, IoT has caught the imaginations of everyone from the big players in tech, to startups, investors, analysts, and even some companies who are making their first forays into the world of connectivity: think Mattel’s Hello Barbie.
While the industry’s curiosity seems to have been piqued, Schreiber notes that, “Despite all the interest and financial activity (mostly investments in startups, and several acquisitions), we feel that the market is still in very early stages. Actual revenues, and real market traction of IoT devices are still low.”
Schreiber says that he expects this to change in the next few years. Looking to 2016, one of the key elements that he says are missing at this point is security. He says that the main drive that is standing behind the market right now is a focus on growth, distribution and market adoption, making security concerns fall into a lower priority category.
Along with security, the wireless infrastructure is in need of some significant revamping. The machine to machine (M2M) communications on which IoT is based relies mostly on 2G networks, which are much cheaper to use than 3G or 4G. If there are going to be smart cities where paying for everything from parking to coffee is connected over bandwidth, and sending large quantities of information, the providers will prefer to work with 2G rather than the more expensive alternatives.
Proper automated management of the different network options is key, and the industry is turning to self-organizing network solutions providers like Cellwize to keep the cogs turning. Their service eliminates the need for carriers or networks to build up their own 2G capacity, and helps them coordinate to provide the right network solution according to the need.
Another positive trend is that many of the barriers for smaller actors to break into IoT are beginning to fade away. Finnish Thingsee is one of those who are making it cheaper and easier to start developing their ideas. The company has developed a device and platform for testing out IoT concepts without the need to manufacture new hardware, thus lowering the costs and potentially democratizing the field.
It is worth keeping in mind that not all sectors of IoT are really equal at this stage, with some areas standing out from the rest. Schreiber describes YL Ventures’ perspective, saying that, “We think that the field of home automation (smart locks / thermostats / other home appliances) for example is still a little far from us.”
While many of these home-based devices are still confined to a small, tech savvy niche crowd, Schreiber sees the auto industry as ripe for development, saying that, “Connected cars is a rapidly growing field within the broad IoT definition, but the field that is already showing real market traction is the industrial market – smart sensors and devices used for manufacturing and industrial businesses.”
For those in the consumer market, 2015 can be taken as the year that IoT became a thing. Even with the limited interest that is out there at this point, this is a sector that is likely to find greater integration into our lives, even if it becomes so ingrained to the point that we are mostly unaware of its presence. In forecasting how 2016 will play on this technology, it is safe to say that this will be the year where the industry figures out how to make it actually work for the users, both in terms of security and connectivity. Only once these concerns have been addressed to a reasonable standard can we expect to see IoT make its way on stage in full force, making 2017 and 2018 more probable roll out periods.
Cloud – Gedalyah Reback
Back in September, Deloitte called cloud computing the strongest investment sector of 2015, for the third year running. Deloitte’s survey of some 200 investors showed investor confidence was highest in the cloud/SaaS market, while the 2015 IDG Enterprise Cloud Computing Study foresaw 25% of all IT budgets going to cloud-related expenses and investments. Between 2012 and 2015, the number of businesses using at least one cloud-based application went from 57% to 72%.
But calling it a sector can be misleading. It’s not right to talk about cloud computing and everything that it entails as a separate vertical anymore. Companies like Finnish hand-computer Solu are basing an entirely new concept of the personal computer on the cloud. Now it seems just a matter of time until the classic hard drive goes the way of the floppy disk.
Integration and API will remain a sentinel concern, as the more easily a new product can be integrated in an enterprise’s internal network, the faster it will be adopted. Public clouds offer a lot more storage capacity and the potential for faster processing and Internet. The issue many investors threw their cash at this year was hybrid cloud solutions, which integrate private and public cloud networks. This will undoubtedly remain a major trend in 2016.
Major investments in companies focusing on hybrid cloud issues included $41 million in Rubrik, $20 million in CliQr, $14 million in Velostrata and $8.3 million in Demo9. Other notable rounds included cloud storage company ClearSky Data with $27 million, $37 million to cloud networker ProjectWise in two rounds, $15 million to Teridion in Series B funding for its accelerated wide area network, and a colossal $85 million to Code42.
IDG also found that 43% of all cloud computing investments were less than $50,000, meaning there is a heavy dose of seed funding going into the industry. The top concern, above integration, is security, partially driving up the major investments in 2015 in the booming cybersecurity industry.
Ofer Schreiber from YL Ventures noted that changes in the way that companies are doing business are leading security professionals to develop new solutions, particularly for the cloud. “The migration to cloud and mobile introduced new attack vectors to enterprises,” he says. “Employees are using business applications via unmanaged networks and devices, and that creates a huge challenge for security teams. This is why the CASB (Cloud access security brokers) field is so hot, as it finally enables security capabilities within cloud applications usage.”
Cybersecurity – Gabriel Avner
This past year saw a mix of disturbing hacks that exposed the data of corporations, governments, cheaters, and plenty of average web users. Responding to the ever expanding threat of cyber attacks was a rapid growth in the security sector that included some fairly significant funding and acquisitions. Israeli cybersecurity companies, which had a particularly good year, pulled in major funding: Checkmarx and Cybereason raised Series C rounds valued at $84 and $59 million respectively. Cloud security outfit Adallom was sold to Microsoft for $320 million (this was later confirmed) just three years after its founding.
Over the course of 2015, various experts have told Geektime that cybersecurity has been moving from prevention more to detection and early response. In other words, assuming a hack is unavoidable, cybersecurity solutions need to focus more on detecting and mitigating attacks as quickly as possible. This notion leads to a change in focus from intrusion prevention systems (IPS) to sophisticated detection systems (IDS) and fast/automated incident response (IR) solutions.
The theft of nearly 30 gigabytes of data from the supposed adultery supportive website Ashley Madison sent shockwaves through the Internet, causing concern from a public that normally would not have given a hacking story another glance. Beyond confirming the fact that sex sells, it highlighted the vulnerability of our private data online. In another case, the hack over at the U.S. government’s Office for Personnel Management exposed the personal details of over 21 million people according to a report in Wired, of which 19 million had applied for security clearance background checks.
Emerging technologies also inherently create new security risks, with IoT being a focus this year. Of particular interest has been securing systems used in automobiles, due in part to the real threat of hackers as well as the overall creepy horror film-like feeling that somebody could take over your vehicle.
Director of Marketing at the automotive-focused security company Argus Cyber Security Tom Barav tells Geektime that, “A regular sedan can have a minimum of 60 computer components, with the more advanced have 150 or more. Each and every one of these computer components is potentially hackable. Currently, almost 100% of the cars are hackable and none of them have cyber protection. Recent events made car hacking go mainstream this year as we’ve witnessed a significant market inflection point.”
Looking ahead to 2016, the cybersecurity industry will likely offer another strong year in cloud, IoT, enterprise, and basically any emerging sector one can think of.
Digital finance – Laura Rosbrow-Telem
Since starting at Geektime in the fall of 2014, the fintech companies we’ve had the opportunity to cover have increasingly impressed me. Startups such as Fundbox, which helps businesses pay invoices on time with extremely cheap, automated small loans, and Lemonade, which raised an insanely high $13 million seed funding round to innovate the insurance industry, seem to be doing truly revolutionary work. Everything from online credit, lending, and mobile payments, a sector expected to experience a compound annual growth rate (CAGR) of 39.2% from now until 2020, are being innovated to lower rates and make financial transactions easier for the laymen.
Mobile payment startups are particularly interesting to watch in emerging markets where a large portion of the population is leapfrogging, or skipping, traditional bank accounts and going straight to mobile payment systems. M-PESA, a Kenyan subsidiary of Vodafone that enables users to send and withdraw money via mobile phones, as well as pay bills, has experienced enormous growth: In 2013, a whopping 43% of Kenya’s GDP went through M-PESA.
Tal Morgenstern, a Sequoia Capital Partner, commented in a recent interview with Geektime, “With fintech, I think we’ve just seen a drop in the ocean. We’ve seen credit, we’ve seen alternative lending, but there is so much to do on the infrastructure level. If you look at the amount of dollars that actually run through the so called modern solutions, it’s not even the tip of the iceberg in the sense that it’s still not a mainstream product to households around the world.”
Specifically, he noted that, “Insurance is very competitive. I think credit in general and lending has been super competitive lately. You see companies attempting all sorts of lending structures. We think insurance is next.” While Sequoia may be biased considering they are an early investor in Lemonade, we happen to agree that insurance is a sector ripe for change.
Interestingly, one of the areas that fintech didn’t perform so well in this year were companies that aimed to combine personal finance and cybersecurity. Trustev, an automated fraud tracker and one of Ireland’s most prominent startups, was sold to TransUnion for a meager $44 million in December. Similarly BillGuard, a personal finance app and darling of the Israeli startup scene, was acquired by Prosper Marketplace for about the same amount in September.
The lesson from these two titans’ tanking? Consumers are not willing to pay for this kind of security. Additionally, many users may have been suspicious to give apps like BillGuard personal bank account information. There needs to be a real payoff for users to give over financial details, such as lowered rates or ease of business.
Finally, it is important to note that Europe, and the UK and Ireland more specifically, are leading the way in fintech. According to Accenture, Europe has experienced the highest growth rate in fintech investments since 2013 and the UK and Ireland make up 2/5 of Europe’s total new funding in financial technology. In fact, the European sector almost tripled in funding between 2013 and 2014 from $264 million to $623 million. If you’d like to learn more about fast rising European fintech companies, check out this list.
Sharing economy – Alex Lazear
Considering the sky rocketing valuations and various legal disputes of sharing economy startups such as Uber and Airbnb, which we will focus on since they were the most prominent, the sharing economy made a crucial mark on tech news and innovation in 2015. Airbnb claims revenue of $900 million, a CAGR (compound annual growth rate) of 90% from 2013. Uber had a valuation of more than $50 billion, making it one of the largest startups in the private market, and claimed an estimated revenue of $2 billion in 2015, up from $400 million in 2014. However a Gawker investigation discovered that the company was actually working at a loss of millions of dollars a quarter, bringing their estimates into question.
While many investors view the startups’ legal troubles as a sign of their pioneering into industries worth disrupting (we use this phrase sparingly, but in this case, it is true), lawsuits obviously contain the risk of blocking their growth. Airbnb faced its most difficult challenge yet when it went up against San Francisco’s Prop F in the November elections, which aimed to limit the amount of time rentals could be available. While Prop F was defeated, the company will likely face similar struggles in cities such as New York, where the law requires that rentals of less than a month have the renter staying on site.
Airbnb may also face regulations concerning how it insures its rentals. Matter published a piece by Zak Stone, which detailed the gruesome death of his father while staying at an Airbnb, and the company’s strategies to avoid culpability. The piece went viral, bringing about a new conversation on the matter of Airbnb’s health and safety guidelines versus that of traditional hotels and bed and breakfasts.
Uber similarly beat its main legal challenge this year. In July, New York City Mayor Bill De Blasio considered putting a cap on Uber drivers, limiting their hours, numbers, and locations. Uber responded by issuing a rallying call, which got its users and advocates riled up. In response the city canceled their plans, allowing the company to continue growing uninhibited.
However, Uber faces other battles in worker rights. There is a class action lawsuit filed in the Northern District of California of Uber drivers seeking reclassification as employees of Uber rather than 1099 contract workers. This desired change follows a similar development in Seattle, where the city council voted in mid December to allow ride hailing drivers, like those from Uber or Lyft, to unionize and be able to collectively bargain. Both of these cases would also require Uber to cover things like gas reimbursement or repair costs for their drivers, something that would add a significant amount to their operating costs.
While both sharing economy companies beat city attempts to limit their services, it is unclear whether they will be able to get past regulations in covering the safety and rights of its users. And if that happens, they will need to develop other sources of revenue quickly to achieve similar growth.
What do you think were the big tech trends of 2015? Let us know in the comments below.
Laura Rosbrow-Telem contributed editing.