Earlier today, Coupa announced it had raised $22 million in financing -- you can read our first take on the news here -- in its latest capital raise. Based on the valuation and size of the round, there's no question that investment interest in P2P is alive and well. We hope this round will provide a much-needed jumpstart to the sector for VCs and private equity firms to invest in innovative providers across the eProcurement, e-invoicing and supplier network areas. But what are the most important takeaways from Coupa's sizeable round?
- The round (based on the size and valuation) should provide evidence that investor interest in the sector is at the highest it's been since the B2B days from 1998-2000. Yet investors are looking for a number of things: recurring revenue, "true cloud" business, technology models and disruptive innovation (e.g., faster, cheaper -- and better, but better in different ways). Spend Matters recommends that other established vendors as well as upstarts in the market should take advantage and ride the coattails of Coupa when looking to raise capital or at potential exits. The window for these types of valuations and investor interest in procurement and related supply chain areas may not last long.
- Customers should view Coupa's funding as proof that the provider presents little risk relative to Ariba, SAP, Oracle and others. This is a provider that, while certainly in the commercial and legal crosshairs of other providers, has disrupted the market to such a degree that incumbent providers are, and should, be running scared. The genius of what Coupa has done is that they've written their own P2P rules which allows them to avoid direct comparisons to others when they get into a deal.
Feature/function wise, Ariba still wins in our head-to-head comparisons. But in the real world of eProcurement, there's virtually no scenario where Coupa does not impress and demo better in 80% of cases (except those where companies are doing an exhaustive checklist comparison).
- Part of the investment community (VC, private equity) is finally recognizing the potential returns of investing in true innovation in procurement. In the past decade, there's been painfully little of it -- investment and vendor innovation -- in the P2P space, aside from Coupa and TradeShift. And in fact, the most innovative offering of all in the broader sector came from is, drumroll please, SAP, in the form of Supplier InfoNet (at least in our view)!
Spend Matters believes that the P2P and broader procurement and supply chain market could be in for some serious disruptive forces in the next decade if investor interest stays strong. It may come from the bottom (e.g., Coupa, TradeShift and new entrants). Or it may come from the top (e.g., Amazon). Our bottom line: the time is right for those with good ideas to put them into play. If you have an idea, go out and build it. Write a business plan. Get to work. This market could very well change in serious ways. As for practitioners, don't be afraid to keep your eyes out on the horizon for new ideas. We recently spoke to one TradeShift reference who barely considered them in comparison to legacy providers. But after a demonstration and deeper diligence after others were further up on the shortlist, they were hooked.
It's exciting times for the sector. Let's hope this round signals a willingness of investors to fund innovation in procurement and supply chain once again at the levels they did over a decade ago -- and for companies investing in procurement technologies to consider upstarts with disruptive new ideas over legacy incumbents whose core competency is lead generation, sales and business model tweaking (versus products and innovation). It's time to put a muzzle on vendors pushing fear, uncertainty and doubt (AKA: FUD) over ideas and improvement.