Wearable device market potential set to gain ground in 2014

Written by Shruti Ambavat | Mumbai | Updated: Feb 26 2014, 09:34am hrs
The market potential of wearable computing devices is set to gain traction this year with at least seven venture capitalists saying that they are evaluating deals in this space.

The Consumer Electronics Show 2014 displayed an array of next-generation technology products. Large tech giants like Google, Intel and Samsung have already entered into this segment which has made venture capitalists sit up and take notice of the segment. Google Glass, Nike Fuel Band and Samsung Galaxy Gear are some of the popular wearable devices.

Technology and related sectors will continue to dominate investments in 2014. Wearable computing will attract funding, says Pradeep Tagare, director at start up investor Intel Capital in India. The firm is looking to fund two to three wearable computing firms this year. These companies are involved in manufacturing devices that can be worn on bodies like gloves, censors in helmets. We are looking at wearable computing deals in almost every pitch meeting and 2014 should be the year when we actually visit the space, says Padmaja Ruparel, president at Indian Angel Network (IAN).

Wearable computing includes products like temperature-based wearable electronics, gears for nerve stimulation and pain management and other transformational technological products.

One of the earliest wearable technology firms to have received venture capital funding was Hyderabad-based climate conditioning apparel company Dharma Innovations in 2009. Angel investment network Mumbai Angels alongwith Reliance Venture Asset Management invested Rs 90 lakh in the company. Both the venture capital firms received an exit on the company two years ago with three times return on capital.

We are looking at wearables in India and globally. The young demography in India is very tech-savvy and want to track everything at the same time. It will be much attractive here but obviously cost is an issue that will come down once the scale and volume are reached, says Niren Shah, managing director at VC firm Norwest Venture Partners. The company is in discussions with a firm that makes a prototype of a fitness product.

Wearable technology has gone beyond watches and armbands to smart collars and shirts. Obviously, this has made venture capitalists interested in the category, says Anshul Gupta, principal research analyst at Gartner. Wearable devices are amongst the top IT trends driving digital power growth, based on a report by IT firm Accenture titled 'Technology Vision 2014.'

According to market research firm Research And Markets' report titled 'Wearable Electronics Market and Technology Analysis (2013 2018)', the global market for wearable technology generated $2.7-billion revenue in 2012 and is expected to reach $8.3 billion by 2018, growing at an estimated CAGR of 17.7% from 2013 to 2018. Wrist-wearing devices accounted for the largest market revenue at $876.7 million. North America, with the US accounting for more than 80% of the market is the single largest one and expected to continue at this position during the forecast period as well. However, Asia - Pacific, with China leading the way, is likely to grow at the highest CAGR during the same time, the report stated.

Experts say that since the market in India is still very young, it is only now that the actual investments will happen. The year 2014 will be the initial funding period for this category, Tagare of Intel Capital said. In India, it (wearables) is still in its early stages and restricted to health enthusiasts, says Gupta of Gartner. We still haven't caught up with smartphones, hence, wearables are way behind because they are an extension of the smartphone use, he adds.

So far, many investors are keen on funding the platform or the back-end that supports manufacturing of wearable devices, says Alok Mittal, managing director at venture capital firm Canaan Partners. As far as India is concerned, there aren't many back-end manufacturers though the consumption of wearables will rise here, he said.

Currently, the market for wearable computing is very local. The research and development requires its own time to fructify into a product and needs a large scale investment to take the product at a global scale. There are companies in India which are starting up in this direction but the Silicon Valley remains the Mecca, says Shah of Norwest Venture Partners.