Iota, led T-Mobile Vets, Seeks a Simpler Way to Navigate the ‘Internet of Things’

With big bets by the titans of technology and consumer finance, 2011 is becoming the year that American business got serious about jumpstarting the “Internet of things“—a broad web of digitally enhanced locations that consumers can navigate the same way they now use smartcards to pay their bus fare or open security doors at work.

For Seattle startup Iota, that transformation isn’t happening fast enough. This team of former T-Mobile employees is aiming its considerable experience in the mobile sector at a new type of device that it says is ready to go right now. They believe it can be made cheaper, easier, and more open than expensive new radio frequency ID-enabled smartphones controlled by the big market players. Their mission is to put the futuristic promise of what’s called “near-field communications,” or NFC, into the hands of anyone who doesn’t have a smartphone, or wants to spend less time digging around in a field of apps. The company, based in Seattle’s hip Capitol Hill neighborhood, has raised $1.4 million so far and is currently about $600,000 of the way through a $1 million convertible-note round, founder and CEO Russ Stromberg says.

Iota’s first device is called the Tapp. With physical design from partners here in Seattle, the Tapp looks and feels a bit like a thicker Zippo lighter, with a slit in the middle that kind of reminded me of a futuristic moneyclip. Inside are an RFID reader, a cellular radio, and a Bluetooth radio.

The initial idea behind the Tapp is making it easy and entertaining for people who don’t have cell phones to check in to places via social networks and collect consumer discounts by physically activating an RFID tag, rather than digging around in a smartphone app and hitting a touchscreen button. With cheap, reprogrammable RFID tags embedded in logos or advertising collateral on a retailer’s countertop, for instance, a consumer can wave their Tapp device nearby and collect rewards, while also spreading the word to friends about where they are.

Sounds fairly cool—but another device? Isn’t the market racing toward two powerful chunks of computing hardware at maximum? Iota gets this question a lot. The answer rests on two major points.

First, while smartphone use is on a rapid ascent, there’s still a big chunk of people in the U.S. who haven’t chucked their old-style mobile phones. The latest estimate from research firm Nielsen says that 38 percent of mobile users are using an iPhone, Android, or some other smartphone device—a considerable leftover of people with older-style feature phones.

The other part of Iota’s answer points to successes from companies like Nike, which has seeded its Nike Plus fitness monitoring technology into watches and other small devices, and, which upended the book industry again with the Kindle e-reader.

“Users will migrate towards the simple. I can download the Kindle app on my iPhone, but I still want the Kindle because it’s portable and it’s much better for reading books,” Stromberg says. “The mobile consumer space is ginormous. It’s interesting—when you talk about the number of startups that are just doing apps, they’re all developing toward the same platform, toward one type of consumer behavior, which assumes I want an app for everything I do.”

Smartphones, of course, are controlled by a few big manufacturers, software providers, and carriers. For small merchants and other businesses, Iota is pitching its system as a way to quickly build out a customer engagement platform, called “Tapp Engine,” that is much more wide-open: Merchants can do basically whatever they want with the Iota-powered web of RFID tags, going online to change the coupon, media, or other handouts that are connected with the tag whenever they want.

“Do whatever you want with it. You want to send [shoppers] a coupon along with this song? OK, then do it,” Stromberg says. “So now, without the mobile operator in the way, we’ve created this ecosystem where brands can directly engage consumers with this simple one-tap experience.”

Overall, Iota wants to be a platform company that makes NFC simple and friendly enough for everyone—enough so that they can step back and let other people implement the consumer technology, transitioning to being a big consumer data and retail service company.

“If this isn’t the form factor for you, put it in your automotive keyfob. If that’s not the form factor for you, put it in, like, a wearable bracelet. If that’s not the form factor for you, make it feel you’re your money clip or your wallet. You could put the experience in your phone as well, if that’s what you want to carry with you all the time,” Stromberg says. “We will license our embedded software to do different form factors. We are not becoming a hardware manufacturer—we need to seed a device, a very low-cost device, [to] get the platform up and running.”

There’s actually even more that Iota devices can do—as mentioned before, they have cellular and Bluetooth connectivity. That means you could purchase a simple voice and text plan from a carrier and pair the device to a tablet computer to make calls and send messages, theoretically dumping the need for a separate cell phone if you had enough other broadband to satisfy heavy-duty data use. Check out this report from Endgadget a few weeks ago profiling the new type of Iota design for those uses, a soft plastic bracelet-type thing called a Flex.

Iota’s marketing chief, Lisa Brown Spencer, jokes that the different capabilities almost makes the simple-looking devices seem “a little too Ginsu knife” when she’s listing them all.

“We’re not trying to replace a smartphone. We’re not trying to replace everything in it. We’ll never be able to play Angry Birds on this,” Brown Spencer says. “We’re trying to take an incredibly useful subset of things and lower the barriers to use.”

I get the sense that breaking down those barriers, both for consumers and businesses, is a big part of what’s driving the Iota team. With many years working in the wireless industry, they see a lot of potential in the mobile Internet that isn’t being exploited yet—and feel that they’re tapping into demand from other businesses that want to get ahold of that potential now. Stromberg says one major RFID tag provider has already indicated that it’s not interested in waiting for Google to define the market with its own NFC-enabled Android smartphones.

“So our low-cost device dramatically increases access and makes it so that a tag environment can be deployed. And our open environment means you’re not getting one corporate branded kind of tag,” Stromberg says. “We think the way to market for us is to start with one or two markets, to seed it, and build this tag experience. It’s kind of like building the mobile network—people start buying mobile phones. You build a tag network, and show how simple it is to use without having to access a smartphone—they get it. It’s very disruptive.”

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