Phew … Coupa Gets Another Round of Funding

Yesterday, Coupa, an eProcurement SaaS vendor, announced it had received another $7.5 million cash infusion. Fortunately, this round is not just another cheap but well intentioned marketing gimmick. It represents cash that Coupa has needed for some time. My only concern about it is the chance that the much deserving founders were crammed down even further with little or no hope of seeing serious return for all their hard work unless the thing ultimately IPOs or sells for hundreds of millions of dollars. While I'm not sure if this will ever be the case, Coupa has had some cash challenges for quite a while now thanks to slower than usual revenue growth. But fortunately, this round -- combined with recent 2009 growth -- should point the revenue line in the right direction after they make additional sales and marketing investments.

Up until this point, Coupa was seriously under-capitalized given the fact that revenues at the vendor were microscopic given its overall brand and name in the market (which was in significant disproportion to the cash it was generating). In fact, most companies on Coupa's cash flow trajectory up until 2009 would have simply gone out of business or sold off their assets to the highest bidder. This slow start was due in large part to not only an initial free open source business model but also the fact that when Coupa did start to charge for its application, they originally came at their price points significantly lower than where they had to be, banking on the quantity of potential customers rather than charging a more targeted amount for the value they would receive.

I hesitated to mention this on Spend Matters until now because I wanted to make sure Coupa had the best chance at not only winning customers, but also additional funding. They've been one of the only vendors in the space that I've personally been sincerely excited about on a near continuous basis since their launch -- from an initial absurd but daring open source model to their most recent creative and highly entertaining marketing videos. In other words, in a sea of relative P2P sameness, Coupa stood out -- and continues to stand out -- for all the right reasons, perhaps the most important of which is a product at a reasonable price point that gets the job done.

Moreover, 2009 is proving to be a solid year for Coupa due both to interest -- which is translating into a healthy pipeline -- and higher prices at the pump. The eProcurement pump, that is. One thing Coupa did under its new executive and sales leadership in recent quarters was to materially increase its pricing. But still, even at current levels, Coupa remains a bargain if there ever was one for middle market eProcurement not only based on subscription cost but also on total implementation and management costs.

On the Techcrunch video interview, Rob Bernshteyn, Coupa's CEO, highlights three key areas about what customers should get excited about deploying their solution. These are: ease of use ("as easy as Amazon" Rob mentions, or something to that effect), rapid deployment ("hours, days and week, not months or quarters") and low/reduced TCO relative to other options in the market due to the SaaS business and overall solution simplicity and elegance. While I would not disagree with this media-trained three-part response, I'd also add to the list a couple of additional items.

First, Coupa is targeting a segment of the market in desperate need of procurement controls and systems. Small and middle market organizations have perhaps the most overworked and under appreciated procurement staff who don't have the time to police every single approval or PO landing on their desk. Moreover, Coupa is capable of selling to these types of practitioners directly versus through IT. This will be critical to drive adoption in this segment of the overall Spend Management market.

In addition, Coupa is bringing a fresh approach to the eProcurement process. From integrating consumer buying paradigms to social media constructs into the application itself, the application makes itself extremely easy for anyone with buying -- or requisitioning -- authority to use. Moreover, for these types of users, especially in the middle market, Coupa will represent a much more simple and efficient process than picking up the phone or heading to the Staples website (not to mention all of the benefits procurement can see from driving users to negotiated pricing and terms, preferred suppliers, stopping maverick buys, etc.). In short, there are many reasons to get excited about Coupa and to celebrate this funding round. We're all lucky Coupa will not only remain in the game, but will have a chance to shape Spend Management's second technology half. Kudos, gents. Kudos.

Jason Busch

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