On Friday afternoon, I had the chance to catch up with Dave Stephens, one of Coupa’s founders. Our discussion focused entirely on his new venture and the Open Source applications market. As background, you can read some of my previous thoughts on Coupa and Open Source here and here. Unlike most technology providers in the Spend Management market, Coupa is self-funded (Iasta is the only other boot-strapped provider with any significant traction that comes to mind). As someone who has been a part of venture-backed start-ups and helped launched boot-strapped ones on his own, I can honestly say that when one's own cash is on the line, you tend to make better decisions. At FreeMarkets in the early going, we made a number of smart decisions because of our limited available cash when it came to product development (e.g., Bidware), but we wasted so much more later on because we could afford to take chances. If it was the founder's cash on the line later on, I believe FreeMarkets' outcome might have been very different. Consider how Rightnow, a bootstrapped On Demand provider, is now a Wall Street darling.
Over on Sand Hill.com you can find an excellent blog post by Greg Gianforte, CEO of RightNow Technologies on the merits of bootstrapping. According to Greg, "Bootstrappers don't write lengthy business plans, chase deep-pocketed investors, or indulge in overly academic market research exercises. Instead, they focus all of their considerable energy, brainpower, determination and skills on creating a business that can actually succeed in the real world." Having now had a heart-to-heart with Dave on the subject of bootstrapping, I can honestly say they've put their heart and sole into building a new company and type of Spend Management application rather than wasting time chasing investors (which is the primary reason start-up executives waste far too much time in the early going). But of course Dave wants to leave Coupa's options open. "I do think there is a time and place for partnering with the venture community -- so I'd never say never," he remarked.
Dave mentioned to me that he's gotten a couple of early questions from prospects about company and product depth and scale based on how quickly they brought their application to market (less than a year). But I can say that since the Dave and his fellow founders did not have to worry about appeasing investors or chasing capital, they could devote all of their time to product development. And at the same time, Coupa's development team brought over the A-players for Oracle's procurement group, so they certainly had a good foundation for getting started -- it's not like they had not done this before! At the same time, Coupa was not bound by building on one technology stack (e.g., Fusion or NetWeaver) in bringing their product to market. Given this, I am not at all worried about the speed with which they introduced their first release.
From a sales and marketing perspective, Dave shared with me that "early interest has been good". Their goal, he noted, is to increase the overall size of the market versus going after the Oracle, SAP and Ariba installed base. Their plan is to offer a better, faster, cheaper eProcurment play by focusing on mid-sized organizations and the underserved segments of the Spend Management market including broader service industry providers, public sector, retail, financial services, and professional services firms. Given this focus, they've been able to develop a targeted lead list in a rapid period of time. But on a personal level, I believe Coupa will also have the eventual ability to steal renewals away from traditional eProcurement providers. Why? I've heard a number of customers complain about being fed up with the maintenance costs of legacy installed Ariba Buyer deals, SAP SRM, and other providers. A plausible scenario for Coupa in the next few years is that they replace a handful of existing eProcurement installs to complement their marketing to underserved market segments. How will Coupa get these new deals? From a channel perspective, they're finding that there are a number of implementation partner leads from firms who want to kick the tires to see if they can capture a larger share of revenue from installing and configuring an Open Source application rather than a traditional one. Dave told me that SugarCRM has been able to push channel sales aggressively thanks to channel interest.
Stay tuned on Spend Matters as we chronicle Coupa's progress and dig further into the application in the coming months.