Generative artificial intelligence (AI) has taken the wind out of the sails of dealmaking in the internet of things (IoT) space in Europe and Israel.  

In the longer term, though, synergies between the massive data capabilities from IoT tech with the sorting capability of AI should act as a tailwind for both areas.  

“IoT is no longer the hottest kid on the start-up block,” said Alberto Onetti, chairman of innovation advisory firm Mind the Bridge. Venture capital (VC) firms are thinking about AI instead, he said. 

However, the integration of the two areas could be exciting in the future. “That could definitively re-boost the IoT phenomena by producing integrated solutions and applications”, Onetti said.  

The rationale behind the largest IoT deal in the year to date (YTD) in Europe and Israel pushes in this direction. AnyTech365, a Spanish IoT security services company, agreed to merge with special purpose acquisition company (SPAC) Zalatoris Acquisition Corp earlier in September. The growth story is based on using AI to harvest the data generated from multiple devices with sensors that are connected to the internet.  

Mergermarket revealed that AnyTech365 was in talks with an investor and planned to list before the end of the year in an article published in June.   

Despite this deal, IoT deal volumes in Europe and Israel have dropped significantly in the YTD, with aggregate volumes of just EUR 218m over 15 deals, according to Mergermarket data. This is a long way off the record in YTD21 (EUR 837m over 32 deals) or the previous bumper crop in YTD22 (EUR 651m over 24 deals).  

Although the term IoT dates back as far as the 1980s, the number of objects connected to the internet overtook the number of humans sometime around 2008 to 2009. Experts see this as the real beginning of the space.   

After a slow start to dealmaking for most of the first decade since this milestone, IoT transactions burst onto the scene in Europe and Israel in 2018, with total volumes of EUR 326m over 16 deals. Volumes then dropped in YTD19 and YTD20 before reaching new heights in YTD21.  

The largest funding round in YTD23 has been a Series C from floLIVE a UK-based provider of connectivity management solutions for IoT. It raised USD 47m in a round co-led by Greenfield Partners and existing investor 83North, with Qualcomm Ventures, Dell Technologies Capital, Saban Ventures, and Hazelnut Partners taking part in the round. 

Looking ahead, Engineering Ingegneria Informatica, an Italian engineering company backed by Bain Capital, has a score of 63 out of 100, according to Mergermarket's Likely to Exit (LTE) predictive algorithm.* This is weighted towards a potential carveout of its data centres. The company is positioning itself as a player in the IoT space.  

Meanwhile, AddSecure, a Swedish provider of secure IoT connectivity and end-to-end solutions backed by Castik Capital, is in talks with multiple smaller peers and anticipates at least one deal by year-end. AddSecure has been held by Castik Capital’s EPIC I SLP Fund (2015 vintage) since 2019 and was reportedly preparing for an IPO in 2021. It has an LTE score of 36, heavily driven by its active acquisition strategy.

Expect the combination of IoT tech with AI to act as a gust of wind for dealmakers in the months and years ahead.  

*Mergermarket's LTE predictive analytics assign a score to sponsor-backed companies to help track and predict when an exit could occur through M&A, an IPO, a direct listing or a deSPAC transaction. 

Proprietary Intelligence 

Nina (14 August) 

Israel-based IoT smart alcohol pouring company Nina will launch a USD 10m Series A round at a USD 40m valuation towards the end of 2023, CEO Yair Marom said. The fundraising will primarily target family offices, angel investors and investors that are coming from the liquor industry, said Marom, who is the majority owner of the business. VC firms can be reticent about investing in an industry with so many regulations, but the company does not plan to exclude any type of investor, he added. 

Reef Factory (3 August)  

Reef Factory, a Polish developer of smart aquarium management solutions, will be looking at raising growth financing from an A round planned tentatively for 2Q24, co-founder and CEO Jarek Wojczakowski said. The company will target an amount greater than its EUR 2.5m seed round completed in September 2022 and will offer a “maximum 20% stake,” Wojczakowski said. However, the precise amount will depend on its growth rate, market conditions and other factors, he said, adding that the company will start working out the details in 4Q23. 

Libelium (25 July) 

Libelium, a Spanish tech company in the IoT sector, continues to develop its build-up strategy, CEO and co-founder Alicia Asin said. Over recent months, the Zaragoza-based company has been focussing on integrating its last acquisition – HOPU – and on planning the opening of a subsidiary in Saudi Arabia, Asin said, but it has not abandoned its growth strategy with acquisitions. 

Invisible Systems (27 June) 

Invisible Systems, a UK-based environmental data and monitoring firm, will seek a Series A in the third quarter of 2024, CEO Jamie Robertson said. A “working assumption” is that the raise would be around GBP 10m, Robertson said. No specific figure has been settled but the firm is committed to raising a Series A, likely to raise a Series B, and may well consider further raises. 

Testbirds (1 June) 

Testbirds, a German crowd testing platform, is mulling over strategic scenarios in 2024, one of which includes a capitalisation (cap) table consolidation and the other a fundraise with a ticket of EUR 5m, CEO Georg Hansbauer said. If Testbirds decides to consolidate its existing cap table and pursue a strategy of market consolidation through M&A, it could seek an investor willing to buy stock from existing shareholders with a value between EUR 20m and EUR 50m, Hansbauer said.  

3d Signals (30 May) 

Israeli IoT manufacturing analytics company 3d Signals is in closing with an undisclosed investment bank to advise on funding for its next stage of growth, CEO Ariel Rosenfeld said. This next step, which is expected this year, could come in a variety of ways, Rosenfeld said. The first option would be to seek some USD 3m or more from a strategic investor to help significantly scale growth, he said.