Depending on who you ask, the market for low-power, wide-area networks LPWAN is either really hot… or not. On the one hand, Sigfox and its proprietary LPWAN are facing the U.S. equivalent of bankruptcy proceedings in France. And on the other hand, Helium Inc is celebrating a 4,000% growth rate in its decentralized network deployments over the past year. That celebration includes a rebrand to Nova Labs. The company also announced on Wednesday that it raised an additional $200 million in Series D funding at a whopping $1.2 billion valuation.
Investors in this round include Tiger Global, Andreessen Horowitz (a16z), NGP Capital (a Nokia-backed fund), and Seven Seven Six (Alexis Ohanian’s fund). That spectacular growth rate in Nova Labs hotspot coverage might have wooed the participants a bit. Really, even expensive cellular infrastructure isn’t experiencing such expansion.
To be fair though: Centralized cellular networks have evolved over more than three decades using wireless spectrum purchased at expensive auctions.
LoRa, or Long-Range networks use unlicensed sub-Gigahertz spectrum and are relatively new by comparison. And Nova Labs’ decentralized approach minimizes infrastructure costs: Its network uses LoRaWAN hotspots purchased by individuals who deploy them and supply the internet connection. Stacey has done exactly that for nearly two years, so any IoT devices, sensors, or supply chain trackers using the Nova Labs network can update their status on the web when in range of her home.
The number of devices and trackers on the network is surely growing because Helium keeps attracting new customers. Volvo Group, Cisco, Schneider Electric, Accenture, Olympus, One Planet, Careband, Hoopo, Invoxia, Victor, are Nova Labs network customers today. Others such as Goodyear are looking at how to use the Nova Labs network. Why wouldn’t they be with an explosion in coverage and relatively low data costs?
It’s in the data costs, along with the Helium Network Tokens (HNT) mined by hotspot owners, that does raise a question though. How does Helium, I mean Nova Labs, make money?
I’d bet the company has shared that answer with the Series D investors. Here on the outside though, we don’t have that luxury. A Nova Labs representative said it would share more at a later day when asked.
What we do know is that the tokens, listed by the name HNT, are “mined” or created by hotspot owners. HNT is mined when verifying the presence of a new hotspot or when devices connect to the hotspot. Customers who want to use the network pay for data credits at the rate of one credit per $0.00001. So $1 provides 10,000 data credits for a device to use the network.
Stacey previously figured out a rough estimate of what that really means for a single IoT device:
A data credit is worth a packet of data on the network (roughly 24 bytes), which is enough to send a GPS location, time, and temperature, or another bit of data. If you had a sensor transmit every five minutes, the year-round cost would be $1.05 on the Helium network.
That’s a pretty compelling cost compared to many other network technologies and prices. But again, it doesn’t explain how Nova Labs as a company makes money and justifies a $1.2 billion valuation.
The only information I have is that in the company’s first year, Nova Labs and its investors receive 35% of the token allocation. The percentage decreases over time.
Those tokens can be sold on the secondary market and the price fluctuates accordingly. Stacey sold some of the HNT mined on her hotspot for example for $10,000 last year. That’s not a bad return on a hotspot that costs around $400. For reference, here’s a historical chart of HNT prices, peaking at $55.22 back in November.
Perhaps the company does the same thing with the tokens allocated to it? After all, network data credits are converted from HNT:
To acquire Data Credits, network users convert HNT or obtain them from an HNT owner. Any HNT converted to Data Credits is permanently removed (“burned”) from the circulating supply.
Even if that’s what Nova Labs does, the reduction in token allocation over time isn’t a revenue growth strategy. So we’ll have to wait for the company to share additional details on that front.
In the meantime, however, network expansion continues. Nova Labs is aiming for one million deployments of its LoRaWAN hotspots by the end of this year. That’s up from just 14,000 last year. And if, like me, you want to host your own hotspot, take a number. There’s a waitlist of 3.5 million wannabe hotspot owners. I ordered one 13 months ago and it’s still not here. That said, it’s hard to argue against what may be the fastest deployment of a network made for the IoT this large.
By choosing an open network standard in LoRaWAN, decentralizing deployment, and creating network roaming deals, Nova Labs is succeeding in stark contrast to Sigfox. And if you’re a hotspot owner, you might be riding that wave of success too.
John Weber says
$1 buys 100,000 messages, not 10,000 messages. $10 buys 1,000,000 messages.
Rick Somerton says
Heliums numbers don’t make sense to me. I don’t know at the charge rate for messages that they can sustain revenues to their citizen hosts. A fully loaded Lora Gateway can support about 120 devices signalling every 16 minutes.
That means about 300,000 messages. per month which at $.00001 delivers a total revenue of $3 per month.
This is fully loaded and without packet losses which are as hight as 20% and before a cut for Helium.
For you to make $15,000 Stacey you would need to carry 150 million messages. At 300,000 messages per month that would take 500 months.
The fees are higher for other functions but does Helium even generate revenues from this function?
Is this a Ponzi scheme or am I missing something?
A single 8 channel LoRaWAN gateways can handle a lot more than 120 devices sending every 16 minutes… How did you get that figure?