Guest post by Ted Konnerth, EGRET Consulting Group
Strategies in Light held their first joint conference with the LEDShow during the last week of February. Attendance was solid and the technical conferences featured four different tracks of presentations covering arcane technical issues to overall market influences on the adoption of LED. On Tuesday, they held their Investor Forum; a mini-version of the popular Shark Tank TV show, Investor Forum features a panel of 8 investors and a rotating presentation of emerging companies.
The conference is by far the industry leader in covering all issues pertinent to LED technology. I came away from the presentations and private meetings with a long list of interesting concepts:
• LED has had over $4B of investments over the past 10+ years and most investors have lost money in the technology. The reasons for the losses varied but one comment by the investor panel was particularly notable:
• The Channel Matters. The investor explained that bringing new technology into a legacy market takes time and energy that was largely unanticipated by the newer entrants. As many of the newer companies were in a rush to revenue, they carved their own paths to market… and mostly failed. I’ve remarked several times over the past 7-8 years that selling light bulbs is a whole lot more complicated than most people believe; and relationships matter.
• M&A valuations for LED have declined. This is a direct response to the loss history. Investors are far more wary of rosy predictions and novel solutions to selling those products.
• Acquisitions have declined. The major strategic companies had a very quiet year of acquisitions in 2014 (Acuity, Eaton, Hubbell, Cree, Philips, GE). They felt that M&A may pick up steam in 2015 and as evidenced by Acuity’s eye-popping valuation for Distech this week… we may be back in acquisition mode.
• IPO’s are expected to rise; primarily fed by the much heralded spin-off of LumiLeds by Philips.
• The available market is still huge; with the replacement lamp market estimated as 45 billion sockets with only 5% filled by LED currently. Ironically, as LED replacement lamps rise, the expected peak is a forecast decline by 2022 as the LED fulfillment and long-life shrinks the market.
• The global fixture market is estimated currently at $59B with $19B being LED. The market is projected to rise to $66B by 2022.
• Low voltage distribution is rising and is seen by many companies as a large movement in the near future; with estimates of construction cost savings of $75/sq ft or more. With LED enabling the low voltage movement, I think this will become the primary mode of power distribution in homes in the near future.
• Lighting is moving quickly into bio-genetics with new bulbs that can affect circadian rhythms, or promote plant growth or farm animal growth and integrate into newer smart devices like Nest.
And then there’s the real future; the Internet of Things (IoT). It was notable that one of the keynote speakers was a senior VP of Cisco. Cisco? At a Lighting show? Really?
Really… Cisco is heavily invested in the technology of IoT; including security and mass-adoption practices. There are currently 12B devices that connect to the internet; globally. By 2020 that number will be over 50B devices.
There are companies already developing data collection and management solutions through lighting that will feed into the Big Data movement. A ‘simple light bulb’ integrated with sensors and communication capabilities can do a lot more than light up your closet.
And one final note… the transition to LED seems to be working despite years of naysayers and skeptics. DOE reported that last year the US saved $1.8B in utility bills. And that number will grow significantly; spurring a rise in the investor-owned utility community to create new revenue streams via promoting solutions that in essence sells less of their product.
The pace of technology growth is the highest of any time in any currently living person’s life. It is exciting, confusing, bewildering and amazing. Enjoy the ride.
