Three questions to answer after the Opower IPO (from a competitor)



Quick Take:  I thought you might like to see how a competitor thinks of Opower's initial public offering (IPO). British Columbia-based Pulse Energy offers "energy intelligence software for utilities" - in particular, programs for commercial and industrial customers. (So does Opower, though it emphasizes residential.)


I think these are valid concerns that would apply to almost any company going public. I suspect that Opower is hard at work on all three. Meanwhile, privately-owned firms have their own set of issues.


Did they get it right? What else should Opower and its competitors be worrying about? Use the Talk Back form at the bottom to express your point of view. - Jesse Berst


Opower, the Arlington, VA-based energy software company has now completed its long-awaited IPO. Depending on the day and the price, the market response values these residential engagement experts at close to $1 billion.


At Pulse Energy, we’re happy to see this validation of the energy intelligence industry, and congratulate Opower on their success. But how will going public affect the company’s prospects? Here are three points worth considering.


1. Can they please both market and customers?

Energy intelligence is a relatively low-capital business, but Opower has had to substantially up its investments in a few key areas to meet growth targets. The company has over 500 employees today and spent $30.5 million on sales and marketing in 2013. When the quarterly earnings calls come around, investors will ask if the current fundamentals - $90m revenue and loss-making - justify these costs.


Utilities, on the other hand, are slower-moving entities. Major contracts in this industry can often take 6-24 months to negotiate, with no guarantee of a positive outcome. If won, this is followed by customization and deployment work, to integrate the utility’s data systems and branding requirements.


As a public firm, Opower will be under new pressure to deliver each contract on an accelerated timeframe for a positive earnings contribution. Maintaining positive utility relationships will be critical for Opower in the coming years.