Tuesday 11th August 2020

How to create a successful IoT transport business model

Published on June 29th, 2018

IoT entrepreneurs need to ask themselves a crucial question: does my business meet a market need? If the answer is “no”, then they should either rethink or stop working on their project immediately, according to Tim Stone, venture partner director, Breed Reply – a European early stage, active operational investor in IoT.

It seems obvious, but sometimes a creator’s passion, excitement or stubbornness can blind them to a basic law of economics – supply and demand. Put another way, are you providing a solution to a problem? If your company is achieving this, whether it’s addressing a highly technical issue or a simple one, you potentially have the basis for long-lasting business model.

There are, for instance, IoT devices on the market which provide all-in-one home security. They pick up subtle sounds and vibrations which, if deemed to be unusual or unwanted, result in an alert being sent to the owner’s smartphone.

People are security conscious, particularly when it comes to their family and property – so this device is meeting a real market need. The same business-led logic is being used in the IoT transport sector. For example, consider how difficult it can be to park in central London.

Kerbside mapping keeps traffic moving

Typically, there is heavy traffic throughout the day and when you finally think you have found a free spot, you discover to your dismay that you don’t have the right permit or that you have to pay a hefty fee to park there. It’s stressful, time consuming and generates a lot of emissions.

Breed Reply invested in AppyParking because it solves a real need for cities and drivers. The app uses a smart city platform to show drivers where the nearest and cheapest off- and on-street parking is. It provides frictionless payment so local authorities and drivers are both satisfied, and it reduces congestion and pollution as drivers find parking more quickly.

AppyParking has produced a digital overlay of the city using the firm’s own Signs to Lines mapping technology, which deploys vehicle mounted LiDAR scanners, photography and machine learning to create HD kerbside maps accurate to 3cm. Companies can use the digital map to avoid parking fines and increase productivity, while local authorities can see from it which parking slots are the most popular, or where moving street furniture or adding signage might be a good idea, for example.

Tim Stone

Excellent management matters

Another reason for investing in AppyParking was that it has a great management team, which is critical if a company is to succeed. A founder may be innovative and possess the technical know-how, but can they scale their creation? Have they the skills required to manage people effectively and the marketing and sales abilities to boost revenues?

Researcher CB Insights, for example, analysed more than 240 start-up failures to discover what had led to their demise. The subsequent report, published in February, found that 42% of respondents said there was no market need, while just over a fifth (23%) of interviewees said they did not have the right team. Poor marketing was highlighted by 14% of respondents.

If the IoT entrepreneur takes an honest look at themselves and do not meet these requirements, then they need to hire or closely co-operate with people who complement their talents and can help them in these areas. If they don’t, their start-up risks a short lifespan.

That is also why an ‘active operational investor’ model for early stage businesses adds so much more value than the traditional venture capital model. By partnering with them, start-ups gain access to a range of experienced marketing, sales and business development, finance and technology professionals. The research doesn’t lie – you need a team of good people to meet a market need.

The author of this blog is Tim Stone, venture partner director, Breed Reply

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