IPO Prospects: Sigfox Delivers IoT at a Fraction of the Cost

A recent report by Machina Research estimates the total number of Internet of Things’(IoT) connections to grow 16% annually from 6 billion in 2015 to 27 billion in 2025. Nearly 71% of all IoT connections today are connected using a short range technology such as WiFi. That number is projected to grow marginally to 72% by 2025. By 2025, 11% of connections are expected to use Low Power Wide Area (LPWA) connections such as Sigfox, LoRa, and LTE-NB1. During the same period, the total IoT revenue opportunity is estimated to grow from $750 billion in 2015 to $3 trillion in 2025.

Sigfox’s Offerings

Labège, Midi-Pyrenees, France-based Sigfox was founded in 2009 by Ludovic Le Moan and Christophe Fourtet. The founders believe that IoT will transform the lives of people in the next 25 years. Prior to setting up Sigfox, Moan had tried to set up another IoT business called Anyware Technology. But while its intention was noble, the product it built wasn’t and the company didn’t do well.

Sometime later, Fourtet met Le Moan through a former colleague at Freescale Semiconductor. Fourtet had already developed a technical specification for what would be Sigfox’s network but hadn’t planned on a business model for the network. When the two met and talked about their interests, Le Moan realized that Fourtet had developed a technology that could be revolutionary. The two joined hands and set up Sigfox.

Today, Sigfox is among the leading providers of connectivity for IoT. It has built a global network to connect billions of devices to the Internet while ensuring that the devices operate at as little energy as possible, and as simply as possible.

Its network is used for automated objects instead of mobile devices and is inspired by the submarine communication technology during World War I, which uses wavelengths that carry less information but travel farther. Its technology relies on unlicensed airwave frequencies around the world. Its network is constructed like traditional carriers i.e. with a grid of connected cells that cover an area and link back a central network. The structure thus ensures that information such as the location of a device, energy consumption, alarm, or any other type of basic sensor information can be transmitted inexpensively.

Sigfox transmits data in 12-byte packets at a time. That amount of data may not be enough to download an app on a cellphone, but it is enough to ensure that a gadget’s location or a sensor reading can be communicated. Where traditional wireless providers like AT&T and Verizon will need billions to power the network, Sigfox is able to do it at a fraction of the cost. Traditional cellular networks, both 3G and LTE, consume too much power. Instead, Sigfox relies on sending its radio signals over an unlicensed segment of the airwaves, which is lightly regulated and free and is able to connect a large batch of devices for as little as $1 to $2 a year. Additionally, since its radios transmit only minimal information, they can operate on a very small battery.

It targets industrial IoT applications and has been able to build a network in of more than 10 million devices in 26 countries. It is expected to cover 60 countries by 2018. It is now expanding its presence in the US and believes that it will be able to expand to over 100 cities in the country.

Sigfox is not the only player in the industry and is facing stiff competition from LoRa. LoRa is another LPWA-based IoT services provider that focuses on wireless battery operated IoT within a network. It provides seamless interoperability among smart Things without the need for complex local installations. It is owned by Semtech, a well-established, chip company that has invested in the standard and is supporting several partners to provide hardware and infrastructure. LoRa allows mobile operators to roll out infrastructure and allows for the infrastructure to be used for both public and private networks. The chips for these products are supplied by Semtech, thus making it a win-win situation for Semtech. Sigfox, on the other hand wants to become a global Internet of Things operator. It is doing deals with operators to roll out networks, and ensuring that all of the data comes back to Sigfox servers which is then forwarded to individual companies who have deployed devices.

Sigfox’s Revenues

Sigfox is privately held and does not disclose its detailed financials. Analysts believe that it doesn’t have significant revenues at present as it charges a small subscription fee for its services. It earned about $13.5 million in revenues in 2015. But the company is hopeful of gearing up to $100 million revenues by 2020. Sigfox may have a fast expanding user base, but given that its margins and costs are low, it will need to scale tremendously to achieve those targets. As of early 2016, Sigfox was not profitable due to the investment in expansion. Its customer list includes names like Swedish security company Securitas Direct, Korean electronics giant Samsung, and French smart-home company Otio to name a few.

Sigfox has been venture funded so far with $310 million raised from investors including Air Liquide, Alto Invest, Ambition Numérique, Bpifrance Large Venture, Elaia Partners, Elliott Management Corp., Engie, Eutelsat, Henri Seydoux, Idinvest Partners, Intel Capital, IXO Private Equity, NTT DoCoMo, Partech Ventures, Salesforce Ventures, SK Telecom Ventures, Swen Capital Partners, Tamer Group, and Telefonica Ventures. Its last round of funding was held early this month when it raised €150 million (~$160 million) at a valuation of €600 million (~$637 million). Earlier funding rounds were held at undisclosed valuations. Analysts believe that Sigfox is getting ready for an IPO as well.

Photo Credit: Tumitu Design/Flickr.com

This segment is a part in the series : IPO Prospects