REDWOOD CITY -- The appetite for Silicon Valley initial public offerings has grown to a massive hunger, with the latest companye managing to rake in more money than it expected, yet still find healthy increases in its market debut Wednesday.
Model N, which makes software originally targeted at life-sciences companies that is used to manage revenue streams, priced its IPO $1 above its expected range at $15.50 Tuesday night, leading venture-capital investor Accel-KKR to boost the number of shares it sold. In total, 6.74 million shares brought in a total of $104.5 million, with $93 million going into the Redwood City company's coffers and the rest going to the Menlo Park VC company that backed it.
When Model N reached the trading floor of the New York Stock Exchange under the ticker symbol MODN on Wednesday, that price shot higher. The stock opened at $20.40, or 31.6 percent higher than the IPO price, and traded in a range of $19.85 to $22.25. Shares closed at $20.15 for a first-day gain of exactly 30 percent.
CEO and founder Zack Rinat said demand for the shares was "many, many, many times what we wanted to sell," and credited Silicon Valley with the IPO's ability to find a large audience of investors.
Model N's success is "a testament to the type of innovation that comes from Silicon Valley, the kind of technology that's really focused on solving deep business problems of the world's largest companies," Rinat said in a telephone interview from New York on Wednesday.
Model N is one of eight companies that plan to sell shares for the first time this week, according to Renaissance Capital, by far the busiest week of 2013. Half of those eight focus on biotech or scientific endeavors; another Silicon Valley software firm -- Marin Software of San Francisco -- plans to make its debut later this week.
The market for new companies is hot. As the Dow Jones industrial average trades at record highs and the Standard & Poor's 500 nears a record, even lightly regarded financial bets such as Redwood City cleantech company Silver Spring Networks have found gold on Wall Street. Silver Spring, which seemed likely to pull its IPO after waiting more than a year after its initial filing, instead gained 29 percent in its first day of trading a week ago and remained trading more than 23 percent higher than its IPO price Wednesday.
"If the IPO window opens, you jump through it ASAP, ... (it) can shut anytime and without warning," Sam Hamadeh, founder and CEO of PrivCo, which follows private companies and the IPO market, said Wednesday.
Hamadeh noted that Model N is a small company, but that its diminutive stature and growth opportunity used to be the standard for Silicon Valley IPOs before recent massive deals for companies like LinkedIn, Zynga and Facebook.
"Silicon Valley grew over the decades by designing technology and software that made business, government and other organizations run better," Hamadeh said in an email. "Model N is precisely in that tradition."
Model N's revenue-management software was developed by Rinat, who remains CEO and chairman of the company. Rinat is seasoned in software startups -- his previous effort, NetDynamics, broke ground in the use of Java in application servers and was eventually sold in 1998 to Java's creator, Sun Microsystems.
Rinat left Sun and founded Model N in 1999 to bring together the disparate pieces of software companies used to manage their different revenue streams into one cohesive whole.
"People manage revenues in spreadsheets, in homegrown systems, on pieces of paper, and manage this across different silos of the organization," Rinat said, adding that Model N software "enables companies to optimize, automate and execute revenues."
Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.
Redwood City software company Model N has shown the revenue growth IPO investors seek, but its profits dipped because of losses in 2012 as it increased spending. All figures are for the company's fiscal years, which run from Oct. 1 to Sept. 30.
2010: $624,000 net income on revenues of $50.44 million
2011: $1.48 million net income on revenues of $65.17 million
2012: $5.69 million net loss on revenues of $84.26 million
Source: SEC filing