Funding the sensor start-ups in Central and Eastern Europe

Sensors have been here long ago before the IOT rise that started in 2010. Meanwhile they became the single-most dominant element representing IOT – standing at the intersection of physical and digital worlds. They are not only enabling smartification of products, objects, materials, services but also have immense impact on our everyday life as such – no matter whether you talk about lidars, strain-gauges, thermocouples or gyroscopes . Advancing developments in connectivity and AI created a wide space of smartification possibilities and further broadened the scope of sensor usability.

IOT and Sensor Markets Dynamics

According to research by Fortune Business Insights, the IOT market will reach 1.46 trillion USD by 2027 and is expected to witness a growth at CAGR almost 25 % annually. You may wonder why the global sensor market is worth 167 billion USD in 2019, projected to grow annually only at a pace of approx 9 % annually between 2021 to 2028. Answer may be simpler than you think – and first we should draw a line between sensors and smart sensors. Smart sensors typically consist of three important parts:

• sensing element;
• signal processing part;
• and microprocessor.

In other words, a sensor is considered smart when it takes a predefined action based on the input it receives, thus vastly boosting the automation of the overall operation. Another difference between a smart sensor and a conventional one is typically the size, accuracy, sampling frequency and power consumption. When we go back to the global smart sensor market size (valued at 36.6 billion USD in 2020) it is set to grow to 87.6 USD billion by 2025, at a CAGR of 19 % annually. It is driven by the ever-growing adoption and implementation of smart sensors across all industries and escalating demand for smart sensors by automotive, healthcare and other manufacturers to deliver improved safety and comfort. Investing in IOT or more specifically to sensors not only brings business opportunities, but it also opens the door to cost reduction, efficiency, safety and personalization for clients. Adoption of IOT strategy becomes inevitable for many businesses and the itching question is whether to invest in developing their own strategy, join forces with the sensor specialists or look for suitable acquisition targets.

Global sensor companies investment landscape

According to Crunchbase, that keeps track of 2124 sensor companies – the market is flourishing. Despite the slight decline and corona related setbacks reported in automotive IOT and sensor markets (notably in 2020 and 2021) the market has been more than active and shows no decline. Quite the contrary. Since 2019 the number of investments has been more or less stable, but the investment volumes in funding rounds rocketed significantly during last 2 years:

• from 834.2 million USD in 2019;
• to 4.942 billion USD in 2020;
• and 5.720 billion USD in 2021.

Europe has been active and matched up both the US and China/Asia in terms of funding transaction count, yet the average funding per transaction is lower.

Global sensor start-up investment landscape

Based on Crunchbase ‘s report that gathers data on 479 sensor startup companies – the market is also on the rise. Recorded investment volumes in funding rounds showing stable growth during last 2 years:

• from 305.9 million USD in 2019;
• to 726.8 million USD in 2020;
• and 1.236 billion USD in 2021.

Again, Europe is matching US and China/Asia in funding transaction count, however the average funding per transaction is lower as in case of sensor companies. Most active investors on European level that provide not only access to funding sensor startups , but also mentoring, acceleration programmes, scaling etc. include EISMEA European Innovation Council and SMEs Executive Agency (Belgium), Parkwalk Advisors (UK), High-Tech Gründerfonds (Germany), 360 Capital (France) and Robert Bosch Venture Capital (Germany).

Most active investors on CEE level that provide funding local sensor start-ups include:

• EU funds (mainly Horizon2020, EIC Accelerator and EISMEA) and EIB;
• Amadeus Capital Partners, Credo Ventures, Earlybird Venture Capital, eQventure, J&T Ventures, RSJ, SEB Alliance, KBC, eQventure, Trind VC, United Angels VC, Zabolis Partners, Fund of Innovations and Technologies;
• International VC’s such as Next 47, Y Combinator, SAP.io, Plug and Play Tech Center;
• and many others.

Geographical complexity, diverse languages spoken and complex history make this region hard to tackle for western based investors. On the other hand – the bottom-line stays the same regardless of the region. What is understood very well in the world of investments is solid business model, proven revenues, technology applicability, R&D backed solution, IP protection, firm business strategy and last but not least striving for success. And in the wake of recent years also trusting science.

Good luck in the next investment round.