UPDATE: Model N Shares Jump After Tech Firm's IPO

(Updates share price; adds details throughout)

By Chris Dieterich and Alexandra Scaggs

NEW YORK--Shares in Model N Inc. (MODN) rose 37% as the first business-software company to head to market this year continued the strong run for initial public offerings in the niche sector.

Shares opened at $20.30 on the New York Stock Exchange, above their $15.50 offering price. They were up to $21.36 in recent trading.

"I'm very excited about the way shares are trading today," said Zack Rinat, founder and chief executive of Model N.

Model N, based in Redwood City, Calif., raised more than the initial $87.2 million planned. It sold six million shares in the deal, while existing shareholders sold another 740,000 shares, giving the deal a gross value of $104.5 million.

"Over the past couple of years, venture-capital [firms] in particular did not invest in enterprise software. They were investing a lot in consumer Internet [firms]," said Mr. Rinat in an interview Wednesday. But now, he says, "there's a realization among the investment community that this generation of software can deliver value."

The firm makes revenue-management software for pharmaceutical and technology companies. It sells software licenses and subscriptions via "the cloud," which refers broadly to Internet delivery.

Model N's customers--which include Merck & Co. (MRK), Dell Inc. (DELL) and Bristol-Myers Squibb Co. (BMY)--use its software to manage functions such as pricing, contracting and issuing rebates.

Sales climbed 29% to $84.2 million in the 12 months that ended in September. Model N reported a net loss of $5.6 million over the same period as research-and-development and marketing efforts expanded.

Model N comes to market as the latest issuer in the enterprise-software industry, where companies sell software that serves business needs. The niche last year ushered in a host of well-performing IPOs, from the likes of human-resources software maker Workday Inc. (WDAY) and tech-support software maker ServiceNow Inc. (NOW). Workday's stock has more than doubled since its debut, and ServiceNow's has done nearly as well.

One potential risk is that Model N's customer base is highly concentrated, meaning the loss of any customers could bite. Merck and Amgen Inc. (AMGN) together represent nearly one-quarter of its business; some 15 customers represent three-quarters of the firm's revenue stream.

Tech-focused private-equity firm Accel-KKR Company LLC was the existing holder selling 740,000 shares in the offering, according to SEC documents.

The company said it plans to use funds raised in its IPO for working capital and general corporate purposes.

On Friday, advertising-analytics software company Marin Software Inc. is set to launch its IPO, which could gross as much as $91 million.

J.P. Morgan Chase & Co. (JPM) and Deutsche Bank AG (DB) are listed in Model N's filings as lead underwriters for the IPO.

Write to Chris Dieterich at christopher.dieterich@dowjones.com and Alexandra Scaggs at alexandra.scaggs@dowjones.com

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