Almost four years ago, France’s Sigfox was riding high as a newly anointed unicorn that signaled the potential of the internet of things (IoT). These days, SigFox is a cautionary tale about how too much hype can lead to expectations that are difficult to realize.
This past year has been particularly rough after the company announced in September that it would cut 47 of 400 jobs, with a headline in France’s Les Echos business newspaper noting that Sigfox was turning “a painful corner.” The fundamental problem was that the IoT revolution of connected objects Sigfox had hoped to lead had simply not arrived. At least, not yet.
This has led Sigfox to reboot its business model to focus less on IoT infrastructure and more on industrial data. In an interview with VentureBeat, Sigfox VP of business development Ajay Rane said he believes the company has learned some critical lessons after a couple of turbulent years and is finally on the right path.
“Moving into 2021, I think we have a very clearly articulated corporate strategy and focus,” Rane said. “And we need to just line up behind that and not only focus on our strengths but also learn to say ‘no’ more and more, where we really believe it’s not a core competency or strength. It’s very difficult for small companies to not chase the next shiny object. We need to be disciplined and to be focused.”
The great IoT hope
Founded in 2010, Sigfox planned to build a global communication network dedicated to IoT devices and then charge users subscriptions to use the network. In some cases, Sigfox would partner with incumbent telecom providers that had the capacity to help install things like communications antennas across countries. But in several countries, Sigfox would build its own network.
To communicate on the network, gadgets could use a small Sigfox module that allowed them to connect. The devices only turned on and connected when they needed to send small bits of data, typically about 12kB, over an unlicensed spectrum, which allowed for a long battery life. Someone could install the devices on a large scale without having to run extensive electrical wires or constantly change batteries.
“I came back to some very frugal technologies,” Sigfox cofounder Christophe Fourtet said in a late-2016 interview with VentureBeat. “There is obviously some need for low-energy, small data transfers, with minimal infrastructure.”
When we spoke with Fourtet, Sigfox had raised more than $400 million in venture capital, including $160 million in November 2016, to fuel its expansion into 60 countries. That made it one of the best-funded startups in French history and a big name in the global IoT industry.
At the time, Sigfox reported having 10 million devices connected to its networks and was just moving into the U.S. and other markets. The problem is that almost four years later, Sigfox has about 17 million devices on its networks — not nearly what analysts, the company, or its investors had projected.
Aspects of the problem were things critics had predicted several years ago. A competing open source IoT communication standard called LoRa has gotten more traction. In 2017, many telecom companies were just starting to roll out their competing NarrowBand IoT networks. And then more recently, 5G networks have begun wider deployments with faster connectivity.
But more broadly, the much-hyped IoT revolution simply hasn’t happened to the extent many had anticipated. In 2015, Gartner projected 25 billion connected devices by 2020. By last year, the firm lowered its 2020 outlook to 5.81 billion devices.
Within this shrunken market opportunity, Sigfox had a hard time standing out.
There have been reports in the French media about turmoil in Sigfox’s upper ranks and turnover as CEO and cofounder Ludovic Le Moan pushed out executives. Independent news organization Mediacities recently published a particularly brutal two-part series about Sigfox’s woes and accusations of mismanagement by former employees.
Amid all of this, Sigfox has set out to reinvent itself. Earlier this year, the company announced it was selling several of the networks it had built, including one in Germany. It plans to sell its U.S. and French networks in 2021, a move that will lower operating costs and raise some new capital, though it has declined to say how much. Whatever the amount, it wasn’t enough to avoid the layoffs in September.
The new strategy will emphasize helping companies leverage the data they are gathering from their connected devices.
In a November interview with France’s Journal du Net, just before the company’s annual Connect conference, Le Moan said Sigfox is going to emphasize products and services that focus on the data component of IoT, though he added it was too early to reveal any details.
By understanding the value of the data and insights that can be gained, Le Moan is hoping to finally unleash the true IoT revolution. To do that, Sigfox needs to help companies see the bigger picture, including how to overhaul their operations such that IoT makes sense and delivers a return on their investment.
“We want to create service platforms and APIs because no one clearly tells manufacturers that they should not rush into a solution but rather take the time to do internal work on the data equation,” Le Moan said in the interview. “You have to prove their value before finding an industrialist who will produce the object in question. It is a long process before optimizing the production chains. Especially since if you want to capture other information, you have to start all over. It is for these reasons that the market is slow to develop. For IoT to reach large volumes, it is necessary to specialize in verticals in order to understand customer issues and offer them an analysis grid with an economic impact.”
As Sigfox develops its next generation of tools, it’s trying to generate optimism around its progress in signing big clients. At its Connect conference, many of the sessions involved speakers’ testimonials about why they signed deals with Sigfox.
At the conference, Sigfox officially announced a deal with Austrian Post, which will use Sigfox to track its roller containers in warehouses that carry letters and packages. Austrian Post had been looking for better ways to monitor the use and location of containers, but many solutions cost more than $100 per container.
After a Sigfox trial involving 500 containers, Austrian Post will expand to 30,000 by the end of 2020. The devices connect to a network operated by Sigfox telecom partner Heliot. At the conference, Austrian Post officials talked about the savings they will see from optimizing their containers across more than 2,000 sites by the end of 2021.
Rane said cases like this have made logistics and supply chains one of Sigfox’s fastest-growing verticals. The company has another deal with DHL in Europe to monitor 250,000 roll cages with Sigfox smart trackers. And it announced yet another deal with Australian keg supplier Konvoy, which has already placed tracking devices on 20,000 kegs.
“We believe that we have found our sweet spot,” Rane said. “And asset tracking is one of them.”
In cases like these, Sigfox works with partners to develop a customized, low-cost version of the trackers that is adapted to their forms or use cases. Many of these Sigfox-powered devices also have a battery life of seven years or more. The cost per device is now well under $2 per unit, which makes them far more cost-efficient than connected devices for Narrow Band IoT or even 5G.
Rane said Sigfox is having more success making the case that its devices are superior for uses that only demand occasional data, such as location, rather than rich streams of live data.
“NB IoT and cellular, in general, can do everything Sigfox can do — there is no doubt about that,” Rane said. “What we’re stating is that we can do it at much more of a value-creation point. When you look at the total cost of ownership, including the cost of buying the devices and subscriptions for the network and the energy consumption, Sigfox is a better value.”
Rane said one of the difficult lessons Sigfox has learned in recent years is that it is not the best solution for many use cases. For instance, things like electric metering require continuous data transfer, so utilities are better off using cellular-based transmission. On the other hand, water and gas meters work well with Sigfox devices, Rane said.
Rane said Sigfox is also not the best candidate to handle things like a vehicle’s telematics unit or in-car entertainment. But the company has developed a product to track stolen vehicles and prevent theft. Its stolen vehicle recovery unit has been another big success for the company, thanks to a program developed in South Africa. In this case, thieves often jam cellular signals coming out of the vehicle, but Sigfox’s network is harder to jam.
Going forward, Rane sees more opportunities for retail store devices that can help remotely monitor temperature for things like food storage. He also believes smart cities are a growing market.
“We have city governments now coming to us and saying, ‘Can you find me a solution we can use in our parking?’ because they want to enforce parking but also make it smarter and report available spots on people’s apps.”
Of course, critics will point out that the company has displayed sunny optimism about its prospects before. What matters now is delivering on a vision that validates a $1 billion valuation built on an IoT world that has yet to exist. To do this, Rane said the company needs to maintain its hard-won focus.
“Rather than trying to take a piece of the other people’s pie, we’ve actually expanded the pie itself so that everybody can have a more enriched market access and be able to be successful,” Rane said. “And we’ve done that by focusing on areas where we are strong, and also by learning to say no to other opportunities, where we kind-of-sort-of work, but we are not the best solution.”