RFID Company: RFID Technology Firms Win Investors

Investment in firms serving the radio frequency identification (RFID) technology market has exceeded $ 1.1B over the 18 months ending in January 2007. These investments in RFID technology firms resulted in 59 investment transactions over the 18 month period. The $1.1B represents an investment rate in the 28-37 percent range of the RFID market's total sales. The investment rate is based on market estimates by market research firms placing the market for RFID systems and services in the range of $3B to $4B for the same 18 month period.

A look back: investment profiles

Investments include $.7B of transactions in which firms acquired other firms. The largest acquisition was Lockheed Martin's acquisition of active RFID systems provider Savi Technology. Investments also include $.4B of venture funding and private equity funding, with the firm Alien Technology topping the list of firms attracting the most equity investment capital. There were no IPO transactions – Alien Technology announced an IPO in April 2006, but withdrew its plans for that IPO in July 2006.

The majority of investment funding came from corporations with RFID technology initiatives. Corporate investors placed 67 percent of the investments. Private equity firms and venture capital funds placed 33 percent of the investments in RFID companies.

A total of 60 investment transactions resulted in an average of $19M per transaction. Some of the 59 investment transactions involved parties that did not disclose a transaction value. Taking into account the transactions without a disclosed value, the average transaction value was more likely to be in the $20-$25M range.

Systems provider firms and equipment companies have attracted the most capital among RFID technology firms over the last 18 months. Providers of RFID equipment and RFID tags attracted 86 percent of the investments. These firms provide RFID equipment in the form of tags, interrogation devices, real time location systems and contactless cards. Software firms, providing RFID software, middleware and business analytics, received 8 percent of the investments. Service firms, providing systems integration services, received 6 percent of the investments.

A look forward: segments likely to receive investment in the next 18 months

"Companies attract investment capital by having customers, cash flow and growth potential," said Mark Johnson, president of RFID Tribe. "Real time location systems (RTLS) and active RFID technologies for asset tracking applications have attracted a healthy amount of investment in the last 18 months," he continued. RTLS technology and active RFID technology firms Ekahau, IDENTEC SOLUTIONS, PanGo Networks and WhereNet have attracted investment in the last 18 months.

Industries like consumer electronics, apparel and pharmaceuticals have demonstrated a desire to track and trace their goods. Products in these industries often have high value, run at high volume and are targets of theft or counterfeiting activities. Item-level tagging allows companies to track products at a more granular level than tracking at the case, pallet or vehicle level. Firms that enable item-level tagging applications will see increased investment.

Communications providers will show interest in payment applications tied to cell phones. The area of near field communications (NFC) applications is emerging as an area of innovation attractive to investors. NFC applications enable cell phone users to make mobile payments and micro payments using their cellular device. Look for communications equipment providers like Nokia, Samsung, Qualcomm and Motorola and for payment providers like VISA, MasterCard and American Express to make investments in mobile payment applications.

As EPCglobal's EPC Information Services (EPCIS) standards evolve, they will facilitate use of the EPCglobal network. RFID technology firms designing products and services to use the EPCglobal network show substantial promise. RFID applications using the EPCglobal network focus on supply chain optimization – reducing out-of-stocks, reducing inventory, increasing sales and increasing the effectiveness of sales promotions.

Unique identification (known as UID) applications have significant potential. The US Department of Defense (DoD) uses UID in its supply chain and focuses its suppliers on UID applications. Suppliers to the US military look for UID applications to comply with US DoD supply chain initiatives.

A number of end-user firms are making investments in RFID technology companies. Firms like UPS, Pfizer and Kaiser Permanente have made investments in RFID companies hoping to enhance their strategic position by placing bets on promising applications of RFID technology. "When end users invest in technology firms, they are investing in technologies that may be of strategic value to their company," said Johnson

More information regarding the $1.1B of RFID investments – profiles for firms who received investment, investors who made the investments and transaction details are available at the RFID Investment Center at www.rfidtribe.com/investment_center.html

RFID Investment Summit

In-depth dialogue regarding RFID investment trends, uncovering RFID investment opportunities and showcasing some of the RFID firms seeking investment takes place at the RFID Investment Summit on March 26, 2007. The RFID Investment Summit is held at the RFID World 2007 Conference and hosted by RFID Tribe. Investors, corporate directors of business development and CEO's meet to discuss RFID technology investments and to tell their unique story around value proposition and intellectual property. More information about the RFID Investment Summit may be found at www.rfidtribe.com/investment_summit.html.

RFID Tribe is a community where entrepreneurs, corporate investors and private investors trade ideas regarding founding, funding and growing RFID firms. RFID Tribe tracks details on investments in RFID companies, researches trends in RFID technology investments and hosts the RFID Investment Center. www.rfidtribe.org

SOURCE: RFID Investment Summit