Wearable investments plunge 63 percent

Only $370 million was invested in wearable companies in 2015, with deals decreasing 20%

Financial trends and news by Steven Loeb
March 22, 2016
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2015 was hyped as the year that wearables were finally supposed to break out, and that turned out to be correct. Stat show that millions of devices, especially smart watches, were purchased last year. The numbers should be even better this year.

That has now, however, resulted in a rash of investments in the space, however. In fact they declined last year, according to data from CB Insights

Only $370 million was invested in wearable companies in 2015, down a significant 63 percent from the $1 billion invested in the year prior. 

Comparing the two years may be unfair as Magic Leap's $542 million made up over half, 52 percent, of all funding into wearables in 2014. So let's take that out; you're still left with $484, or a 23.6 percent decline in 2015.

Looking at the four quarters of 2015 shows deals nearly double in Q2, from 14 to 27, then declining in Q# and Q4, all the way down to where they were at the beginning of the year. 

At the same time, the number of dollars invested took an inverted path, dropping 30 percent in Q2, then steadily rising the next two quarter to their highest level since the end of 2013. 

Investor trepidation in the wearables space is also reflected in the market performance of Fitbit, which was named the best IPO of 2015, but which has been struggling lately enduring investor trepidation about its smartwatches.

The company, which accounts for nearly 80 percent of activity tracker sales, raised $731 million in IPO, to be valued at $3.4 billion, more than 10 times its $300 million valuation after raising $84 million in venture capital.

However its stock price has suffered. It ended trading at $15.28 a share on Tuesday, down 48.4 percent year-to-date and down 23.6 percent from its $20 IPO price. 

The fact that investors seem to be weary of wearables doesn't coincide with sales numbers. 

In all, 39.5 million adults in the United States used at least one wearable, including a smartwatch or a fitness tracker, in 2015. That was an increase of 57.7% over the 25. 1 million who used them in 2014. That included 17 million smartwatches, more than 50 percent of which were sold by Apple. 

And those numbers are expected to explode after that. This year, there are expected to be 63.7 million wearable users, or nearly 30% of Internet users and 25 percent of all adults in the United States.

That means that over a third of all U.S. adults will either wear accessories or clothing at least once per month that have Internet-connected electronics and exchange data with a manufacturer.

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