Investors Ready To Cash In On Your Internet Of Things Nightmares

You see your Smart TV being hacked as a privacy breach—venture capitalists see it as a path to great riches

Illustration: R. A. Di Ieso
May 20, 2016 at 1:42 PM ET

If all those articles about high-tech cars, televisions, smart fridges and even pacemakers getting hacked seem to foretell a terrifying near future to you, maybe you should get into venture capital, where terrifying near futures mean big bucks and bigger, shinier smiles. The impending security disaster that is the so-called internet of things is music to venture capitalists’ ears. Investors hope to make tens of millions by backing entrepreneurs catering to the demand for greater internet of things security, and they expect to plough almost half a billion dollars into the industry by the end of 2017. 

A new report from Lux Research shows that investment in cyberphysical security startup companies (the people who make the “things” in the internet of things secure) is booming. Makes sense, as the smarter and more digitally interconnected our world becomes, the more risk is added.

Venture capitalists’ decision to pour money into this area is also pretty logical. Just two years ago, a report from Hewlett-Packard found that a whopping 70 percent of IoT devices were vulnerable to attack. Since then, investments in the cyberphysical security realm have risen by over 200 percent, and Lux expects that the investment total could reach $400 million by the end of next year.

Cyberphysical security, which has been deemed the “next frontier” of tech by Security Week, is the expansion of cybersecurity into the realm of high-tech cyberphysical applications, like smart grids, process controlled systems, and automatic piloting (driverless cars, coming to a neighborhood near you very soon).

And it’s hugely important to preventing the kind of IoT hacks, exploitation, and malware opportunities that we’ve become familiar with, like past mishaps with hackable Smart TVs, thermostats, and refrigerators. In the case of wearable medical devices, for instance, the ramifications could be as severe as having your heartbeat or robotic limbs hacked. All that fear is going to generate a lot of willingness to spend money on security.

“The next generation of easy-to-use technologies will be the ‘wearables’ and ‘scannables’,” expert Karen Sulprizio told Pew Research in 2014. “However, with that said, this will also open up the potential for cyber attack, if the security is not included/embedded in the devices.”