After almost two years, Silver Spring Networks has finally held its long-awaited IPO. And with a couple hours left until the market closes on its debut, the IPO could be considered a modest success. Silver Spring priced at the middle of its expected range ($17 per share), and then saw its shares soar almost 30 percent on its debut.
While the $81 million that the company raised in the IPO wasn’t as much as the maximum value of the $150 million that Silver Spring originally filed for back in the summer of 2011, the sale was “oversubscribed,” said Silver Spring Networks CEO Scott Lang, and the company opened up a million more shares to sell on Tuesday night. We’ll still have to see how the company’s stock fares over the following weeks and months, but the overall debut day has been positive.
Here are five reasons why it’s important that Silver Spring Networks had a relatively successful IPO:
1). Priming the smart grid IPO market (Opower?): At the Distributech show earlier this year, smart grid execs told me that all eyes were on Silver Spring’s planned IPO to see how the market would react. If the IPO was successful that would mean that a company that has been growing, like Opower, could potentially follow in its footsteps. Opower, like Silver Spring, has been considering an IPO since late 2011. 2012 was clearly a difficult year for IPOs from energy-focused companies, but it looks like 2013 could be better. Opower and Silver Spring also share an investor: Kleiner Perkins.
2). A modest win for cleantech investors: While it wasn’t a huge return, the IPO represents one of the rare successful exits for venture capitalists that put money into cleantech companies. Foundation Capital owns 12.26 million shares after the IPO and its private placement (it agreed to buy $12 million more worth of shares at the IPO price). At, say, $21 per share, Foundation’s shares are worth $257.46 million. Kleiner owns 5.66 million worth of shares, and at $21 per share, that’s worth $118.86 million. So yep, not huge, but at least these are exits.
3). Silver Spring needs to be a big public company: The IPO is important for Silver Springs because the company is competing with large public companies for utility business. Utilities like to do deals with big, stable firms, that they feel will be around for awhile. It’s hard to break into the utility sector as a startup. To take business and sales to the next level, Silver Spring needed to bulk up. The funds, of course, will also be helpful to grow the smart grid business.
4). The smart grid is real and being built: The rollout of the smart grid has suffered from PR problems due to smart meter security fears, and an expected slow down of the installation of smart meters in the U.S. Successful moves by smart grid pioneer Silver Spring shows how the smart grid continues to be built out in the U.S. and internationally.
5). The importance of patient investors and entrepreneurs: Silver Spring was founded in 2002, and has been building its business for over a decade. Foundation Capital was an early investor in the company and has supported Silver Spring’s ups and downs over the years (including an early time when the tech hit some hurdles). Now a decade later, Foundation has gotten its exit and still owned a little over 30 percent just before the IPO. (Foundation owned over 40 percent when Silver Spring first filed for its IPO in 2011). Foundation’s Warren Weiss, sits on the board. The company was co-founded by Eric Dresselhuys who still remains at the company as Executive Vice President and Chief Marketing Officer.