Michael Brown of Bowery Capital and Kelli Fontaine of Cendana Capital discuss trends and themes using Cendana Capital manager data.
In what was probably the last deal of the year in enterprise software land, on Dec 30th PTC bought ThingWorx for roughly $122m. For those informed about the B2B side of the Internet of Things (IoT) space, the 5 year old company had been a pretty strong emerging player in the category that every analyst is saying will be the hottest and have the most economic impact in the coming years. ThingWorx was probably the smallest and newest of the 3 major companies in the space (Axeda and Etherios are the other two) but the deal does have broader implications on the overall IoT landscape and the M2M market in a big way. The deal was relatively small overall at $122M but high on comps given the business will add <$10m in revenue. That said, this will really give PTC a leg up over other companies and is a very smart way to play the long game.
So why does this deal matter? Because it has big implications for the business software side of the IoT space. PTC is one of the biggest players in the Product Lifecycle Management (PLM) and Service Lifecycle Management (SLM) spaces and ultimately wants to be the provider of the most comprehensive set of software tools for their customers like BAE Systems, NASA, Pratt & Whitney and other major manufacturers. The sheer volume of connected products, machine & sensor data and wearable devices is hard to ignore, and manufacturers are beginning to augment and reposition their service and development practices. The acquisition is smart, in that they now have a pretty big competitive advantage and increased revenues in designing and servicing the emerging world of smart, connected products.
What does the future hold then for PTC? We know that PTC is working on a ‘product cloud’ (called Jolt) to capture and then shape (through business applications) the increasing amount of data created by connected devices to provide real-time visibility and control to its customers. Our guess is while they start selling the ThingWorx standalone solution, PTC ultimately offers a platform that is able to integrate with PLM and SLM business and provide both the inputs/outputs as well as a strong business intelligence layer over the top. When things start to think in bigger ways, this world will get very, very important and PTC should be one to watch for everyone looking at the business software side of the IoT space.
**As a side note, most folks know the IoT space from the consumer hardware and software side (i.e. quadcopter drones, August locks, Nest thermostats, etc). This is the other side, focused on business hardware and software that sells into big corporations and manufacturers. It would not be impossible for one of the consumer hardware companies to build business software using their (mostly) open source communities, but that would be difficult from a competition and resource standpoint and is for another post. 🙂
***Second side note – for those that don’t know, the title references where this all started…MIT and the Media Labs
The Bowery Capital Team discusses early stage go-to-market strategy with the Revenue Council
The Bowery Capital team is doing deep dives on various companies, interviewing founders and investors, and learning what it takes to build success in the B2B Marketplace arena. This week, Tyler Ellison, Founder & CEO of ChemDirect, answers some of our questions.