SendGrid (NYSE:SEND), a cloud-based customer communication platform with lofty market ambitions, brought in an impressive $131 million from its IPO on Wednesday. The company, famed primarily for its email distribution services, enjoyed a surge in share prices of nearly 16%, with stocks ending at the day at $18 per share.
After selling some 8.2 million shares, most of them at $16, above its initially expected $13.50-15.50 range, SendGrid (NASDAQ: SEND) may yet inspire more investors to get on board while its prices are hot. According to filings made with the SEC, the company saw a serious increase of revenue in the past few years. After pulling in $42.3 million in 2014, SendGrid rose to rake in $58.5 million the next year, and totaled almost $80 million in revenue in 2016. Before it can lure in more investors, however, it will need to translate those growing revenue figures into positive profits.
SendGrid lost $3.9 million in 2016, for instance, a factor likely to discourage investors looking for immediate returns on their investments. The company has shown progress cutting said losses, however, given it lost $5.9 million in 2015. For SendGrid to remain viable well into the future, it will need to continue chipping away at those loss figures while keeping its revenue figures growing steadily, as they’re perhaps the last thing keeping its head above its water.
After last year’s IPO drought, SendGrid’s beating of expectations could come as welcome relief that the market is alive and well heading into 2018. Tech IPOs like SendGrid’s, which possesses a unique ability to woe in business-savvy investors as well as tech-gurus, could very well become the new norm if the email distribution service shows it’s capable of generating serious returns for its backers.
SendGrid is no stranger to accumulating financial backing, either. The company enjoyed having Morgan Stanley & Co (NYSE:MS). as well as J.P. Morgan Securities as its book-running managers, and accumulated more than $80 million in venture funding in 2009. With the money pouring in like that, and with the new mountain of capital gained from its IPO, SendGrid could foster in new business changes to help stem its losses while boosting its already impressive revenue figures.
Relying on market changes for success
The Denver-based startup had some impressive non-financial figures to flout in its IPO, too. SendGrid is responsible for sending some 36 billion emails a month, the company claims, which could wow investors looking for companies with an established footprint in their fields. While SendGrid faces competition, such as that from Amazon’s SparkPost and Hongkong storage’s mini storage, its existing customer base is growing, given its steadily rising revenue figures these past few years.
SendGrid’s key to remaining relevant in the market may just be to pump as much capital as it can into retaining and boosting its existing consumer base, then, in order to keep its revenue figures growing until such a time as it can iron out whatever kinks are causing it to post losses. With a market cap of some $725 million, assuming its prices hold at around their $18 high mark, it will certainly find itself well-funded and capable of making the changes needed to thrive in the marketplace for years to come.
As email marketing continues to grow alongside of the rapidly expanding IoT, and more companies embrace business models that see them sending out newsletters, rewards programs, and purchase confirmation emails in greater numbers, businesses like SendGrid stand to benefit. Now that the company has overcome the poor press that dogged it a few years ago, too, and remade its public image, it could stand to broaden its consumer base among tech gurus who previously shunned it.
SendGrid’s future is anything but certain, but then again, no company’s future in the marketplace is. As long as the company keeps showing positive revenue growth and continues to cut back on its current losses, it can rely on the continued business of its existing customer base and expect future growth as email marketing and other digital trends increase demand for its services. It’s not easy to rebrand your company after a PR scandal, but SendGrid’s determination to redefine itself as an ethical company capable of tackling the demands of a 21st century market could very well see it rise to the top of the market in the coming years.