Internet video advertising company YuMe successfully went public today, raising about $46 million in total proceeds and achieving a market cap of about $320 million, but it priced 5.1 million shares at a disappointing $9 per share after initially targeting a range of $12-$14.

After debuting this morning, shares traded at $9.40, up about 4% over the offering price, before falling back. Initially IPO watchers were hoping the company could get a $500 million market cap in the $12-$14 price range.

YuMe specializes in delivering video ads over the Internet. Because there are so many different formats and locations in which video ads can run, this is a complex task. The company aids advertisers by aggregating a large audience and handling all of the technical challenges of delivering ads to different devices and keeping track of the data. YuMe dynamically matches the ads with an audience with its software, serving up about 250 million unique viewers per month.

The company's edge comes from two components: It embeds an SDK, or Software Development Kit, in the properties of media owners so that it can collect data about the audience from the smartphones, tablets, computers and other devices where the video ads are served. This software collects data and enables the ads to be intelligently deployed using proprietary delivery algorithms. YuMe said in its most recent S-1 filing with the Securities and Exchange Commission (SEC) that it had 500 total advertising customers. The average spend per customer was $213,000.

The company will now focus on increasing the market spend from each customer, international expansion, and acquisition opportunties, said Senior Vice President of Marketing Ed Haslam, who spoke with Rayno Report this morning shortly following the IPO.

Haslam was on hand to ring the bell on the New York Stock Exchange, which he said was an exciting experience. “It's definitely a professional bucket list item,” he said.

Haslam said the YuMe management was not disappointed in the IPO pricing because “that's what the market priced it at.” He said the company was focused on raising money for long term expansion so that it can build more value.

YuMe was profitable in 2012, though through the first three months of 2013 it lost $3.3 million as it ramped up operations ahead of its IPO. In 2012 it booked $116 million in revenue and showed net income of $7 million. The company had $26 million in cash on hand at the end of the first quarter; It will now net somwehere around $43 million in the IPO after feeds, giving it a solid balance sheet with about $80 million in cash.

Over the life of the company, however, YuMe still has a net deficit of $25.3 million. The company's S-1 filing it stated in the risk factors that growth is likely to slow. “Although our revenue has increased substantially in recent periods, it is likely that we will not be able to maintain this rate of revenue growth as a result of a variety of factors, including increased competition and the maturation of our business, and we cannot assure you that our revenue will continue to grow or will not decline,” said the S-1.

YuMe's biggest challenge will be growing in a highly competitive and fragmented market. There are dozens of video-ad delivery technologies, as the Rayno Report mentioned when Tremor Networks went public.

Of course, despite the risk factors and a slightly lowered share price, all of this will make investors and employees happy. Going public is a significant accomplishment in any market. Co-founders Jayant Kadambi and Ayyappan Sankaran have been at YuMe since the company was founded in 2004. Kadambi owns 3.7% of the company folloowing the offering and Sankaran owns 4% of the company, giving them net worths of about $12 million and $13 million, respectively. Kadambi is now the company Chairman, President, and CEO; Sankaran is the CTO and Executive Vice President.

The VCs did well too. The largest holders include Khosla Ventures, with 19.5%, Accel Partners, with 18.7%, and DAG ventures, with 12%. That brings Khosla and Accel stakes to $62 million and $59 million, respectively. The VC stars who rise in this deal where partners David Weiden of Khosla Ventures and Ping Li of Accel, who spotted the opportunity in video advertising early on and backed YuMe. They won't be able to cash in right away, of course -- YuMe shares will be locked up for 180 days.