This week, Ray Ozzie’s IoT startup Blues Wireless raised $22 million on top of an $11 million round raised in March of 2020. The premise behind Blues is that building IoT devices is hard, so how can a company make it easier for developers to add connectivity to their products?
This is a super common premise for IoT startups, the most successful of which include Particle, Twilio (it bought Electric Imp), and Tuya, which launched its own board tied to the Tuya cloud and app development offering. But despite the efforts of dozens of startups that have launched since 2013, it’s still really hard to build IoT products.
So there’s an opening for Blues Wireless. To differentiate itself, Blues focuses on the modem and the link to the cloud, specifically pricing limited connectivity into the $49 cost of its device, called a Notecard. It has a deal with AT&T and other carriers to provide 500 MB of data over a 10-year span, so companies that buy and install the Notecard don’t have to worry about paying constant connectivity charges or selling a data subscription to device buyers.
I like this approach, which we first saw back in 2009 when Amazon launched the Kindle. At the time, it was pretty revolutionary because it allowed Amazon to sell a product that was revolutionary. If you had the first-generation Kindle, you could download a book anywhere, whenever you wanted.
And because it was built by Amazon — which is well aware of the economics associated with providing services — the cost of those downloads was negotiated in advance and built into the price of the device. (Also, Amazon may have been willing to lose a little upfront to gain market share in e-books.)
As the IoT developed, I expected the carriers to build out plans like what they offered Amazon so as to help drive the adoption of smartwatches, connected sensors, and more. But that didn’t happen. Instead, we got $5-a-month data plans for watches and connected dog collars that required a $10-a-month subscription.
For products that don’t need to send a lot of data, such as trackers, smoke alarms, a variety of sensors, and industrial monitoring devices, a limited data plan and a lack of subscription fees could be enough to drive adoption. It certainly changes the economics for a lot of use cases — specifically use cases that need cellular connectivity. The first Blues Notecards work on NB-IoT and Cat M networks, with a second Notecard offered for Cat 1 networks that require a bit more bandwidth. According to Mobeen Khan, the COO of Blues Wireless, the company might eventually offer other flavors of connectivity outside cellular, such as Wi-Fi or Bluetooth.
However, Notecards are not for devices that require low latency or high data rates. So despite the hype surrounding 5G, this isn’t a play for that market.
But a radio and cellular subscription are only half of any IoT device equation. A developer also needs a cloud component where the device data gets sent and then is either used for computing in the cloud or is built into some application.
The other side of the Notecard is the Notehub, a thin software layer sitting in the cloud to receive data from the Notecard that enables developers to use the data however they wish. According to Khan, together the Notecard and Notehub are basically a “data pump” that sends information from a device to wherever the developer needs the data. Blues Wireless charges a fee based on the amount of data it ingests, so a device that sends a lot of data will be more expensive to run than one that doesn’t get used as often.
This is one of the economic challenges of cloud-connected devices. If a device is a success and people love it, the costs associated with operating the device rise. So manufacturers need to have a really good understanding of those dynamics when planning features and prices. The last 10 years are littered with dead startups that failed to think about this.
So far, according to Khan, many of the customers using Notecard are retrofitting older devices to allow for remote monitoring, especially after the pandemic, which has made people reluctant to travel and made it hard for companies to find staff. Other use cases are asset tracking and new sensors.
Will Blues Wireless succeed in a market full of developer-friendly ways to connect devices to the cloud? I think it solves a critical problem in building an IoT device, but I also think there are still plenty of other complexities that companies have to solve for, including building a real cloud architecture to handle incoming data, building apps — even figuring out the right security for all pieces of the IoT solution, not just the radio (the Notecards have a secure element on the board and encrypt data headed to the cloud).
I don’t think there’s an “easy button” for building connected products that handles the tech side, the business realities and the need for security at scale.
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