Coupa Adds $22 million to War Chest, Shares Strategic Direction (Part 1)

Earlier today, Coupa (the fastest growing eProcurement software provider in net new customer wins by our calculations, including Ariba, SAP, Oracle and others), announced that it had raised $22 million in its latest round of financing. According to the announcement, the Series E financing round was "led by new investor Crosslink Capital with existing investors Battery Ventures, BlueRun Ventures, El Dorado Ventures and Mohr Davidow Ventures also participating." While terms of the round were not disclosed, "the latest valuation was a very significant multiple of previous rounds," according to the announcement.

Coupa's momentum undoubtedly contributed to the high valuation and multiple. At their customer roadshow in Chicago last week, Coupa shared that year-over-year bookings are up over 180% and platform usage has increased by over 150%. But how will the new funding round support Coupa's strategic direction? Spend Matters put the spotlight on Coupa's CEO, Rob Bernshteyn, earlier in the week. We asked him some pointed questions around how and where he intends to spend (or not spend) the war chest, including planned areas of product expansion.

Rob Bernshteyn, Coupa's CEO (Caught on a Day Not Wearing a Tie)

Spend Volume ($/billions) Going Through Coupa Quarterly

Rob focused the discussion on his view of building organically from the core and the value of a single platform solution that could be deployed rapidly with the ability to switch on completely integrated new modules and capabilities quickly. In Rob's words, what is "even more important than the breadth of features and functions themselves is delivering solutions on an organically developed fully integrated cloud platform which relies on a common data model, access control, and usability." In this regard, "the interoperability of Coupa's new modules is going to be a key focus to drive differentiation" and users can expect when they purchase a new module, that it will "be ready to go" and a "tab will appear" instantaneously (with third-party data integrations and process configuration layered on, as required).

We'll save some of the product enhancements that are coming down the Coupa pike for Part 2 of this post. Coupa's expansion (in Rob's view) will not just focus on new product areas, but also on ramping the commercial team to enable the P2P upstart to better compete with the large sales organizations of its bigger rivals. Rob told Spend Matters that Coupa had added eight salespeople already this quarter and plan to have between 40-50 quota-carrying reps by the end of 2012, an increase of over 100% from the end of 2011. Coupa is taking a more conservative approach to international growth, with only a few salespeople in Europe at the moment. As we hear more from Coupa in Europe, Peter Smith will be sure to share what he learns over on Spend Matters UK/Europe.

Aside from direct sales, channel expansion is at the top of the priority list and "we can expect quite a bit of activity" in this regard. To date, Coupa has worked with some of the larger consulting firms and systems integration providers, but has yet to develop what we would describe as a comprehensive channel and VAR program. As Coupa scales and puts its latest funding round to work, we suspect getting in close to the larger consulting firms, SIs and BPOs will become increasingly important.

Spend Matters believes Coupa's latest funding round positions it well for the battles ahead, especially those where companies will be asked to select from the very different mindsets and views of the ERPs relative to Coupa. It will also help alleviate any concerns customers might have over vendor viability and IP/patent issues (a topic we'll cover in the coming weeks). But perhaps most important, the round should provide Coupa with the ability to more aggressively build out its functional footprint.

This is important, as Coupa will increasingly face competition from rivals such as Ariba and SAP, which have invested significant sums in new UIs, making their user experience more Coupa-like later in 2012. For this reason, Coupa will need to continue to pull the innovation lever in new product areas to stay ahead of the game. This may include functional build-out (e.g., e-invoicing, supplier network, analytics, contract management), but it will also include continued enhancement in areas at the core, including social connectivity and community.

The Coupa Buying Cockpit

Socially, Coupa shared that their social roadmap calls for the ability for users across organizations (and within, depending on permissions and controls) to "exchange best practices, make judicious use of aggregate data and capture and streamline communications across organizations." Look, for example, for "Yelp-like" supplier and item ratings shared across the community based on a variety of potential areas and showcasing a variety of potential vendor KPIs.

Personally, I think the comments could be as important as the ratings in such a scenario (which might lead to better vendor selection decisions in the first place, focused on total cost and not unit cost). I can almost see a Yelp-like string of commentary around an office products vendor: "I love this paperclip. But it's not the one we contracted for. Well, it sort of it is. It has all the characteristics of what we negotiated into our agreement. But they changed the SKU number on us. Come to think of it, they change the SKU number on us at least once a year." Perhaps Coupa's future social community will bring a level of group policing to vendors in certain categories that are famous for somewhat nefarious behaviors.

Stay tuned for Part 2 of this post when we share what some of the functional areas of enhancement for Coupa might look like.

- Jason Busch

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Voices (16)

  1. elephant in the closet:

    Ariba’s filing must represent a calculated bet — or either Coupa is really hurting them. The process patent is so broad for ORMS (read it if you’re so included) that the chance of invalidation is moderate to high, especially given the significant amounts of prior art that many on this site, let alone the broader industry, can dig up. This is likely why Ariba has not asserted it until now and why they have not asserted against SAP, Oracle, Verian, Proactis and many others. Coupa must be such a thorn that it’s worth the gamble.

  2. Thomas Kase:

    @"A Customer’s viewpoint" and "Move On" – Kevin’s comments are extremely sound advice – and don’t come across as ‘bitter’ at all, on the contrary solid, constructive, actionable advice.

    About the "losing" part – no need for Kevin to use that exact word, it is a (in)famous lawsuit, and we know the bigger picture score.

    Kevin’s additional detail is quite interesting and should be invaluable to anyone finding themselves in legal crosshairs. Thanks Kevin!

  3. A customer's viewpoint:

    I recently evaluated both P2P solutions and can understand why Ariba would pursue a lawsuit against Coupa. The first 15 minutes of the Coupa presentation was anti-Ariba vitriol and it was a theme they returned to in every single meeting throughout our process. By contract the Ariba sales guy claimed not to have even heard of Coupa – which I don’t believe btw! I don’t know anything about the Emptoris lawsuit but Kevin’s comments do seem to omit the fact that Ariba won… therefore must have had a valid claim. Or am I missing something? (And before you ask… we chose neither solution in the end!!)

  4. Jason Busch:

    Kevin has moved on … and he’s one of the most level-headed guys I’ve ever known. If you knew him well, you would know how even keel he is. It’s almost a stereotype to call him a marine officer, but that’s his DNA — grace and leadership under pressure. You’d also know his analytical coolness under pressure is the exact opposite of Avner’s passionate in-your-face intensity. I think Kevin’s observations have lessons in here for Coupa, Coupa customers and others (both vendors and customers) who might find themselves on the defending side of a patent case, from Ariba or others.

    Thanks, Kevin, for chiming in. There are lessons in history for all of us. Don’t be afraid to share and interpret despite the peanut gallery — ever!

  5. Move on:

    Avner Jr., I mean Kevin –

    Are you saying the court judgement was wrong and that Emptoris never played dirty pool – C’mon now.

    Relax, Release, and Move on.

    Seeing where you are now, I’m surprised your bitterness does not outweigh your loyalty.

    Move on – Start Fresh

  6. Kevin Potts:

    I was VP of Marketing at Emptoris when Ariba sued us for patent infringement back in 2007-2008. If history provides any lessons, here are my observations/expectations:

    1. The good news for Coupa is that Ariba must not be able to compete in the market, and this is impacting Ariba’s business materially. This is why Ariba is resorting to non-market efforts. What I heard relayed from Ariba customer testimony during the court case was that major customers of Ariba were defecting to Emptoris due to our more innovative capabilities, and Ariba was not able to respond via its product roadmap.

    2. Don’t underestimate Ariba’s resolve to prosecute this even if it costs them more money than they recover in damages. Based on my analysis of Ariba’s earnings statements from 2007 to 2009, they spent over $14 million prosecuting the case against us, yet they recovered only about $6 million.

    3. Coupa should have a contingency plan to get rid of the features as quickly as possible, so they don’t have it held over them in renewal cycles. We did our modifications and roll-outs in under 45 days. Coupa’s SaaS model should make for easy to roll-out.

    4. If Coupa loses, they should get pro-active with customers to explain the outcome quickly. Don’t underestimate how much dirty pool Ariba will play in the installed based. They will paint it in the most negative scenario available. For example, CEO’s and CFO’s at every one of our customers were given certified letters followed by phone calls from an SVP and GM at Ariba explaining the court ruling in a extremely one-sided way. From what I recall, despite the fact that these were minor auction features Emptoris infringed up, the Ariba letter implied that Emptoris would not be able to provide a fix that would be adequate, and that any fix would significantly reduce the customer’s ability to run successful sourcing events. Both statements were proved false within 45 days of the ruling. However, this letter instantly put our customer champions on the line. They were getting calls from top officers asking them to respond. That was not pleasant for anyone, but fortunately they stuck with us, and this made Ariba look incredibly petty with our installed base.

    5. Coupa should focus now on a “customer love” campaign to mitigate the risk of losing. Despite Ariba’s dirty pool tactics, I believe Emptoris lost only one customer to Ariba based on the lawsuit. If I recall correctly, that customer’s needs were not very advanced, and they wanted price concessions from us. I can only imagine what concessions they received from Ariba in exchange for going public with their defection.

    Kevin Potts
    VP of Product Management and Marketing

  7. Cynical:

    Not so Cynical: "..or that the company is taking off like a rocket and wants to go even faster!"

    … in my book this would come down to poor financial planning. They would be very unlikely to get caught off guard by unexpected growth in this timeframe (15 months), as the decision cycle in their market is 9-12 months and often even longer. Also there was nothing in the Series D presentation that suggested a Series E was even planned let alone imminent. They are either burning lots more cash than expected or they are expecting to burn lots more cash than planned (perhaps due to a patent suit).

  8. Jason Busch:

    We NEVER block comments. We do delete spam comments that only attempt to drive SEO without anything of relevance. If we deleted something because we thought it was spam please post again. Will address the hype and numbers issue next week. Two sides to it. I will try to present both.

  9. Your the best! At blocking comments:

    Don’t allow freedom of speech here

  10. hype city:

    Too much hype – everything on their website is in superlatives. @previous posting analysis of $53M spend per company, shows most customers using them for a very small part of their business – and all indirect. Jason, need your help to separate fact from hype.

  11. Not cynical but curious:

    Jason what are your thoughts on these spend thru-put numbers? Coupa cites "hundreds" of customers on its web-site. That makes me wonder why we’re only seeing $8bn spend on its platform. Are they over-stating the number of customers or are the customers only using Coupa for very specific types of spend. Or are there adoption issues? (My rough calcs show that even if "hundreds" was say 150 customers, that’s still only $53m spend per company).

  12. Not cynical:

    ..or that the company is taking off like a rocket and wants to go even faster!

  13. Anonymous:
  14. Cynical:

    Series E coming so close on the heels of previous funding suggests there’s either a panic or very poor financial planning. Reading about mention of a patent lawsuit I would guess the former.

  15. Jason Busch:

    We’re doing our homework on this one at the moment … will cover in depth later in May. Agreed, too many lawyers. But Ariba has been on both ends, in their defense. However as Coupa goes, investor interest appears to have been just as high after the filing.

    Give us some time … we’ll be reporting back on this soon.

  16. Too many lawyers:

    hopefully Series E will cover the litigation / settlement fees in the patent lawsuit.

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