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Ayla Networks has raised $14.5 million in funding from investors including Cisco so that Ayla can finish building software that controls the “Internet of things.”

The Internet of things — where everyday objects are outfitted with sensors and connected to the Internet — has become a huge economic juggernaut for the tech economy. But somebody has to create software that manages those sensors, massages the data, and passes it on through the network, Ayla Networks chief executive David Friedman told VentureBeat.

With this software, just about any mainstream manufacturer can move into the connected products market. Such software makes the control of connected devices more efficient, helping to save money through smart monitoring. Investing in the Internet of things can yield paybacks that cover the cost of adding sensors and processors to everyday devices, said Friedman.

“We saw that the Internet of things would happen and that it would need this software layer to manage things,” Friedman said. “We want to own the software on all ends.”

New investors in the round besides Cisco include the International Finance Corp., Linear Venture, SAIF Partners, and SFJ Ventures. Existing investors include Crosslink Capital and Voyager Capital.

Ayla is adding the new investors from China (SAIF and SFJ) so that it can expand its business in China, where saving on energy costs is a big priority. Initial applications include software for controlling lighting, door, and window monitors, as well as indoor air-quality management. Last year, Sina, the Chinese language web portal, adopted Ayla’s cloud platform for consumer devices.

Ayla Networks apps

Above: Ayla Networks apps

Image Credit: Ayla

Ayla launched its product last year. Customers are using it to power devices such as smart locks from Locksmart and thermostats. It is working with large makers of fire alarms and water heaters.

“We’ve got some of the largest manufacturers in the world,” Friedman said.

Ayla previously raised $5.4 million in June 2013. Since that time, Ayla has partnered with chip and system companies that are focused on the Internet of things. Those partners include Broadcom, Murata Americas, NXP, STMicroelectronics, and United Scientific Industrial.

The company has also won customers in residential fire and safety monitoring, thermostats, and broader heater-air conditioning control, water treatment and management, door locks, and home control.

The potential market is huge, as evidenced by Google’s $3.2 billion purchase of Internet of things startup Nest.

Friedman started the company in 2010 with cofounder Thomas Lee, who runs the microwave circuits lab at Stanford University; hardware expert Philip Chang; and Adrian Caceres of Amazon. Ayla has 25 employees and is building that up to 75. Rivals include Electric Imp, Arrayent, and Xively. To date, Sunnyvale, Calif.-based Ayla has raised $20 million.

Ayla has architected its backend infrastructure so that there are no recurring fees for manufacturers. It designed its cloud system to partition and manage devices, with thousands of devices feeding data to a single server. It also has added features like auto wake-up, networking, and security.

Three of the founders sold their wireless chip startup Zero G Wireless to Microchip Technology in 2009.

How Ayla works

Above: How Ayla works

Image Credit: Ayla

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