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Coupa Ventures execs: New fund seeks problem-solvers who have ‘bias for action’ in business spend management

06/10/2021 By

Coupa Ventures was unveiled last week as a $50 million fund to foster innovation and back entrepreneurs, according to two Coupa executives who spoke to Spend Matters.

“Ideally, this is going to be for problems around the business spend management space that our customers have. … And we’re looking for capable entrepreneurs, entrepreneurs who can solve those problems,” said J.J. Freitag, Coupa Senior Vice President of Corporate Development and Managing Director of Coupa Ventures.

Donna Wilczek, Coupa Senior Vice President of Product Strategy and Innovation, further focused the Coupa Ventures goal.

“A key thing we always look for is pragmatic innovation,” she said. “You see some start-ups that are founded around hot technology, effectively technology for technology’s sake. We’re not interested in that.”

To learn more about Coupa Ventures, Spend Matters Founder Jason Busch sat down with the Coupa execs to discuss plans for the program as well as to gain insights for entrepreneurs in the business spend management (BSM) space. In addition to this conversation, Spend Matters has done due diligence work with Coupa, has covered its M&A deals and analyzed its solutions. This article, edited for clarity and length, has been created from that conversation.

Q&A on Coupa Ventures

Jason: First, congratulations on the launch of the fund. I think it’s a huge step not just for Coupa but for the industry to have a corporate sponsor of your stature with a fund — as a real champion for the next generation of start-ups. So I think it’s just a fantastic move overall for everyone. But I’m guessing in our profession, many of us do not know how venture capital works and how corporate funds work in a corporate venture capital. Could you explain a bit about how corporate venture funds work, and are they different from other types of venture funds?

J.J.: Sure. Thanks, Jason. Let me start just by adding we’re thrilled as a company to be able to launch this. We started as a venture-funded company, nearly 15 years ago. To be in a position where we can help entrepreneurs in the BSM space innovate, contribute to their innovation and mentor them as venture sponsors is really exciting for us.

Corporate or strategic venture funds, in general, set aside capital that will be deployed for entrepreneurs to help grow their companies. We have the same mission as a typical venture fund but, based on Coupa’s platform, will be a little bit different. We don’t have a limited partner (LP) model. We’re funding the initiative ourselves. So that’s a key difference from a corporate venture fund, which is going to have an LP base that is investing solely for profit.

We also have a couple of different missions here, as you mentioned at the outset. We can raise the profile of the business spend management space in general. That is a contribution that we will make as a corporate venture fund.

Jason: What geographies are you looking at? Are you focusing on North America or are Europe and Asia also included?

J.J.: Absolutely global. We’ve got customers and partners globally. And there are great technology companies across Europe, Asia, Australia, South America and South Africa. All over the world. So we will definitely be global.

Donna: It always comes back to how we can accelerate value. Our customers are headquartered in more than 50 countries, and they’re doing business in well over 125 countries. Looking at any company solving real business problems and doing it with an eye toward smart innovation makes perfect sense in order for us to deliver more value faster to our customers. Where the team is physically located should not matter in today’s digital world.

Jason: What are some of the things that Coupa can give, on top of funding, to these companies?

J.J.: Mentorship, with Coupa’s world-class team. Many of the people in the company have grown the company from a start-up to about a $20 billion enterprise. So, access to the product teams, the go-to-market sales and partnership teams in alliances, to operational teams. Whether it’s cloud management or finance, we have world-class teams on every front.

Jason: Are there any corporate funds that you particularly respect and would like to emulate?

J.J.: Salesforce leads this generation of SaaS companies. They got into the enterprise and convinced the world that SaaS is more than just software for 2- to 20-person companies and SaaS is for the enterprise. They fought that battle, and they have done a terrific job leading the way. In the venture space, they’ve got multiple funds globally. So they have really set the table for us and everybody else following.

Atlassian and Okta also have done a really good job of consistently investing in great entrepreneurs. We’d like to contribute in the same way they do.

Jason: That’s great. Is there anything unique about the Coupa fund you could share?

J.J.: Sure, uniqueness is more in our category, in the business spend management space. We are unique, as you know, in that we’re one of one venture fund in our space. We’re really the clear leader. And so the uniqueness is going to be what we bring to the category: the go-to-market capabilities that we have, the product expertise and the understanding of the challenges of customers in this space. So when it comes to business management, no one else offers the same things we do in the fund structure.

Jason: Makes sense. But entrepreneurs always want to talk to venture capital firms and there are so many in the market. How do you source deals? At the top tier, it’s highly competitive. right? Ten funds out of 100 have fantastic returns, many have average returns, so deal sourcing becomes key. Obviously being Coupa has a huge benefit, as you’ll get a tremendous number of inbounds. How do you plan to source deals, and then how do you plan to evaluate deals?

J.J.: We certainly have a brand awareness advantage, which will help. I spent a decade as a venture capitalist before I joined Coupa, and deal sourcing is the lifeblood of venture capitalists.

But there’s no secret to it. You work hard, you knock on doors and make a lot of phone calls, you leverage your network. We’ve got tremendous customers and partners, Spend Matters included, that can point us in the right direction. Donna, and all her and her team’s work in the field with our customers, partners and our sales team. It is a labor of love for us. As you know, we have been doing this for a long time on the corporate development side, which is where this venture fund is going to live. We have had a lot of success there so it’s not like we’re starting this cold. You know we have a long list of companies that we’ve been talking to. We can use that and expand it.

Jason: It’s great. You’re going to get a lot of deal flow, and you’re going to have lots of decisions to make. But what types of investments are you looking for? And do you ever see being a lead investor, are you going to take a follow-on role? What are you looking to do and at what stages?

 J.J.: So I’ll be clear that we’re not looking to lead investments, we’re looking to co-invest with venture capitalists in series A, B and growth companies. We’ve got the capability to do some seed rounds, but we don’t expect to lead or write the only check. It’s very straightforward … we’re not looking to take board seats.

Jason: If I’m an entrepreneur and I want to get Coupa’s attention, how should I do that? Do you have advice for entrepreneurs in the space who would jump through the proverbial hoops to have Coupa join one of their funding rounds?

J.J.: Sure. Ideally, this is going to be for problems around the business spend management space that our customers have. When we ask the question to our business customers, they say: “Absolutely. This is something that is hard for us, this is something we can’t solve today.” It could be very specific or it could be very broad. But it’s a market problem. And we’re looking for capable entrepreneurs, entrepreneurs who can solve those problems, coming to us with the problem and the desire to get it done. It needs to be a fit with what we do.

Donna: A key thing we always look for is pragmatic innovation. You see some start-ups that are founded around hot technology, effectively technology for technology’s sake. We’re not interested in that. Instead, we’re asking what is the specific business problem? What’s the market need? And how are you solving it uniquely in a way that no one else has done?

We’re also looking for passionate leaders who have a bias for action. We’re looking at business problems across supply chain, across procurement, across payments and across finance. All of these categories are deeply interesting to us.

J.J.: Jason, that’s exactly why it won’t surprise you to know that, like most of the people you’ve worked with at Coupa, we’re going to back people who are passionate about solving problems and have an absolute desire to get it done.

Jason: So, I know you guys have done a lot of total addressable market (TAM) work. I have read the quarterly earnings statements and interviews when your earnings come out. For a year or two, you said this is a $50 billion market, not counting B2B payments. Do you think — as you’ve seen since that time you came out with that number, and you look at venture opportunities — is the TAM even bigger than that? Or do you still think you know that’s a good conservative number to work with?

Donna: That’s a good conservative TAM number. When you think about the entirety of the supply chain and interactions between buyers and suppliers from start to finish. It’s certainly much larger than $50 billion. Our latest investor materials show our calculation of business spend management TAM at $56 billion, excluding Coupa Pay, and so we’ll leave it at that. Even at $56 billion, we can all agree this is a very healthy market.

Jason: You describe the space as “business spend management.” We could call it procurement technology or finance technology or supply chain technology — or business spend management. It’s almost irrelevant what you call it, but you know it when you see it!

But how far outside of the core would you like to go with the fund? Maybe that’s a work in progress, but if I’m an entrepreneur and I’ve got a great payments idea or if I’ve got a great idea that looks a little bit more supply chain-esque than procurement that maybe touches on procurement, if I’m a vendor of sustainability technology, etc. — am I still a fit for the fund? How do you think about where you draw the lines?

J.J.: I think the nice thing about being a venture fund is we can expand that scope a lot. We want it to be tied to business spend management, of course. But we are defining spend management to include these relationships with suppliers and the supply chain. Certainly sustainability and the health of the supply chain and suppliers ties into that. So, we have the opportunity to be as broad as we need to be there.

Donna: Jason, when you say “outside of the core,” we look at all of the ways an organization spends money and specifically how we can increase the value of the dollars that are going to be spent. Whether it’s increasing the value by reducing the risk of the dollars that are being spent, increasing the sustainability of those dollars, creating some type of a social economic impact. It’s broad. And the reason it’s so broad is because our customers are working with these types of problems and trying to make decisions around these areas every single day. So, if we can introduce our business spend management platform that allows Coupa to be the core of our customer’s spend management program and allows customers to easily connect third parties into their core, these venture-funded companies are a perfect fit for this connected core ecosystem model.

Jason: Makes sense. So one of the major value propositions of Coupa is your strong partner ecosystem. You have an API framework. Coupa Link is the program name. So, I know you say you want to be hands-off and you don’t want to add restrictions on these companies, but I’m sure they’ll be clamoring to take advantage of the Coupa platform ecosystem, and obviously that’s a win-win for both, if they do. How do you plan to develop portfolio companies around the connected core ecosystem? Are there any technical integrations or specifications that you’re thinking about guidance to make it easier for them to slot in.

J.J.: Coupa Link is a clear starting point. We want to encourage and guide them to take advantage of Coupa Link benefits. It’s more exposure to Coupa and the customer base that becomes important. I’m really excited about the symbiotic relationship between the Coupa platform and what we can do on the venture side. That should help each other really well. It would be very rare for one of these companies not to be part of the Coupa Link program because that’s what the program was designed for.

Donna: Coupa Link helps us extend our customer’s BSM footprint, making Coupa a single pane of glass for our customers, connecting this ecosystem of third-party software solutions. As it relates to your question of how they will connect or what the integration type will be, it’s all dependent on the business process and the problem that these companies are solving. We have a lot of different connection models. Whether it’s API, or what we call panel applications that surface up data within Coupa applications and as part of business flows such as real-time risk detection. We’ll determine the method of connection based on the problem statement. The Coupa Link program has really expanded how a third-party solution passes data to and from Coupa, or how their systems and screens are exposed within a group of products. It’s a natural fit, and we expect that to be a common component of most, if not all, of these venture relationships.

Jason: Great! Well, I wish you guys and Coupa the best of luck with it. I think it’s a huge step for the sector to have Coupa launch a dedicated venture fund.

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