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Growing in Tough HEM Sector, Opower Files for IPO

Neil Strother — February 19, 2014

News of Opower’s filing for an IPO comes as little surprise.  The privately held company hired investment bankers months ago, and speculation about going public dates back several years.  Nonetheless, it is worth noting what Opower has done right to survive what has been a rocky road for other companies navigating the home energy management (HEM) sector – and what the competition will look like.

Opower offers software-as-a-service (SaaS) to utilities to help customers reduce their energy consumption.  In essence, Opower combines customer data and behavioral analytics into tools that encourage residential customers to reduce their energy use in part by comparing their energy habits to those of their neighbors.

What’s noteworthy is how Opower has sustained measurable growth.  In 7 years, the company has gone from a small startup to employing more than 400 people.  It also counts more than 90 utilities as customers and its software connects with 22 million homes, most of them in the United States.  One of the keys to this growth has been Opower’s investment in research and development (R&D).  The company has invested some $25 million annually on R&D, which has enabled it to adapt to the changing needs of utility customers.  In its confidential IPO filing, the company is taking advantage of the Jumpstart Our Business Startups (JOBS) Act, which permits companies with less than $1 billion in revenue to begin the IPO process with the Securities and Exchange Commission (SEC) without having to divulge financial details.

Market Savvy

Another factor in Opower’s success has been the quality of its analytics.  The company’s methodology and the insights it provides get high marks from a variety of independent sources, including the American Council for an Energy-Efficient Economy (ACEEE), The Brattle Group, Navigant Research’s parent company Navigant Consulting, and public utility commissions (PUCs) across the United States.

What’s more, Opower has been a savvy marketer, promoting its wins and casting doubt on results from competing vendors.  For instance, the company makes a strong point of highlighting its randomized control trial (RCT) methodology to distance itself from the competition.

For these and other reasons, it was no surprise either that Opower topped Navigant Research’s recent study, Leaderboard Report: Home Energy Management, which ranked suppliers of HEM software.  But Opower cannot stand still.  Plenty of competitors are poised to challenge that company’s dominance.  Firms like Google (now in control of Nest Labs), Silver Spring Networks, EcoFactor, and C3 Energy will battle for market share in the coming quarters.  The IPO only means that the target on Opower’s back just got larger.

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