Announced this morning, Coupa has added $40 million to their war chest via a Series F investment round lead by Meritech Capital Partners – with other new investors (Icon Ventures and Northgate Ventures) as well as their original investors (Crosslink Capital, Mohr Davidow Ventures, Battery Ventures, El Dorado Ventures, and Blue Run Ventures) also participating.
The press release from Coupa highlights many impressive growth and customer retention statistics. The following, concerning Coupa platform transaction growth in 2013, are perhaps the most impressive:
- Total spend amount through Coupa: 117% increase
- Purchase orders processed: 103% increase
- Invoices processed: 160% increase
- Number of expense lines: 222% increase
- Number of Coupa users: 82% increase
And it should be noted that Coupa’s baseline from 2012 had seen strong growth too. In fact, Coupa claims to have sustained over 100% growth over the past five years – which means the company is now over 30 times the size it was five years ago! Other growth statistics include the following:
- Over 100% revenue growth
- Over 95% customer renewals (which, although impressive, we think this number really should be higher considering the sticky nature of P2P systems)
With that as backdrop, Spend Matters had the pleasure of speaking this morning with Rob Bernshteyn, Coupa’s CEO and founder. Here is some of what we learned from Rob, in sound bite format:
“This is another growth stage round … we're going to focus on three core areas. We roughly doubled the R&D team over the last nine months. Part of the fund use will be to double our development capacity again over the next 12 months."
"Our plans are to continue to develop on the [Ruby on Rails] platform organically… expanding our breadth of offering, and continuing to innovate.”
“We do not have plans to buy a whole bunch of companies to integrate. We already have 400 [many global] customers with billions of spend running through Coupa”
“Our second area is global expansion … we’ve had really good success in Europe … we're going to expand more within Europe [with] more customer support in Dublin, Ireland … we’re expanding in London, Paris, Germany, and the Nordics -- sales, marketing and implementation expansion.”
“We’re also expanding more into Latin America … we have success there with the Columbian government … We will start carefully with a move into APAC region – starting with Singapore.”
“Our third area [is] we constantly monitor where our bottlenecks are [and] become aware of them at the Coupa front end. We have gotten successful, and gotten measurable results out of Coupa [for customers] by removing bottlenecks wherever they are found. For example, customers don’t have enough partners certified [on Coupa], or not enough technical support folks, or not enough sales talent. This is what we monitor every day [so] wherever bottlenecks are, we will bridge those."
According to Rob Bernshteyn, the company has raised about $87.5 million in total, and now they will have about $55 million in the bank (which means that they have only burned through about a third of the maximum raised). Rob claims that they are thrifty, but adds that they didn’t complete this round because of dire financial needs, and in fact pointed out that the company has had a positive cash flow over the past few quarters. Key to him is being able to take advantage of the market opportunity and he wants to put their business model and technology platform to maximum use.
Coupa sees Australia as an important area but will start meaningfully out of Singapore. Growth in that region will be approached “organically and carefully” with South Korea, Japan, and then China following. Rob stresses the “very carefully” aspect and that he doesn’t want them to overstep. He references their phased roll out in Europe and says that the last thing he wants is “sell a bunch of big deals” [and fall on his face] and that he wants Coupa to really learn local requirements, particularly the regulatory requirements first.
We asked Coupa how they view their platform opportunity and these are Rob’s comments:
“There are different levels of platforms. Force.com for example has very flexible workflow, routing engine. My view is that you want to be really close to the business requirements. We also have a very flexible workflow routing engine. The key is not trying to be all things to all people … we stick to a business process focus.”
“Coupa will continue to integrate well with others… we have no interest in platform strategy beyond that. At least not in the sense of having others build on top of Coupa, but rather integrate seamlessly with us, matched to the needs of our customers.”
“Regarding a platform that people can build on -- we're not going in that direction yet. Our focus is always on the customer.”
Rob had no updates on patents but stressed that "we have no animosity towards SAP of any kind whatsoever. It [the current lawsuit they are involved in] was brought on by a company they [pre-SAP Ariba] bought."
Spend Matters’ thoughts
This is a solid expansion to Coupa’s coffers – the amount seems a little surprisingly high, the terms must have been quite attractive for Rob and the other investors to agree to this. Our very much back of the envelope analysis is based on recent deals in the industry (and the very healthy valuation multipliers at the moment – in the range of 10X to 20X revenues) suggest to us that Coupa probably gave up something in the 10% to 20% range in equity in this round in return for the $40 million.
Likely their strategy was to take on enough capital at this stage to be able to avoid another private equity fundraising round down the line. With around $55 million in the bank, the R&D efforts and global sales expansion effort that are now under way appear to be well funded. Particularly considering that the company is cash flow positive, has a substantial user base, and enjoys a very high renewal rate.
Even if Coupa officially doesn’t plan on making any acquisitions, there are ancillary solutions that would make a lot of sense to add to their suite; solutions that would not be competitive with their broad network of channel sales and solution partners. We can see acquiring one of the smaller best of breed SLM providers, as this would help support a Coupa business network. Or even flat out buy someone like Hubwoo—so to be able to offer a broader marketplace or business network along with Coupa’s existing P2P solution. Time to market is important, and even if it is admirable to want to create everything from scratch in-house, at times it makes sense to just buy a takeout meal.