Coupa Software this morning announced that it raised $22 million for its cloud-based enterprise expense management platform, which it says helps companies -- particularly their CFOs -- see how much money they're spending and manage the purchasing process.
Crosslink Capital led the San Mateo, Calif.-based company's Series E funding round, followed by Battery Ventures, BlueRun Ventures, El Dorado Ventures and Mohr Davidow Ventures.
We spoke to CEO Rob Bernshteyn.
ZD: Let's start with the basics. What is the problem you're trying to solve? What's the opportunity?
RB: The opportunity here is to get companies' arms around how they spend money.
We ask companies large and small, do you think you're doing a good job at managing that process? They definitely think that information technology is not being brought to [solve] the problem in a helpful way. When they buy something, they have to go to their boss, or file a request, or something [unnecessarily complicated].
Companies like McDonald's, BNP Paribas bank, Gannett, Salesforce.com -- they are using us to be the purchasing, spending platform for their organization globally.
The [venture] funding has been to develop this one, cloud-based, multi-tenant platform that can let us serve all these customers on an ongoing basis. This latest round will be used to give us more reach in the marketplace, research and development, build more modules around our core procurement and expense management offerings, and develop a channel strategy to get the ubiquity we're seeking.
ZD: Coupa was founded in late 2006. How did you get started?
I've been in all the key spaces with ERP -- where there's clearly a cloud winner on the way -- Siebel, Salesforce.com, SuccessFactors. The only other big area around businesses that I thought was exciting was around spend. Suppliers -- there was no clear winner in the cloud in that category. We wanted to create the category of spend optimization.
ZD: You didn't bring the platform to market until late 2008 -- not a great time to be selling to companies.
RB: It's a difficult value proposition to say, "Hey, spend money to save it over the long term" That's why a cloud-based subscription service works very well. Cloud in the back office, in my mind, was in its infancy in 2007, 2008. Now it's coming along. It feels very much like the HR space in 2005. There's much more awareness.
The back office is one of the last areas for this. It's not a high-risk area for a CEO to move to the cloud. It's not like we're replacing their books. We're giving them a chance to visualize their spend. We're not sharing their trade secrets.
ZD: What was your sales pitch?
RB: You go in and say, "Look, what percentage of spend do you really have under management? Do you really know who's buying what where at any given time?" Most have about 45 percent. What is that other 55 percent? Are they buying peripherals at a premium somewhere? It's being expensed or being bought by some central organization. What if you could get better deals?
The R.O.I. on this stuff is just so high. Even in 2009, when it was very difficult to sell subscription software -- sell anything, frankly -- we were able to get customer traction. Let us help you get your arms around spend.
We take a CFO's hand, literally -- let's go take a walk down the hall. Who put these Polycoms in the conference room? How did you get them? And they have no idea.
Now they can do it like you [do at home]. Search for the price of a unit. Get it approved. Actually get it ordered from the supplier. The receiving is handled, and the billing is matched so you're not overpaying.
The CFO is the ultimate signer for this type of initiative. They're responsible for overall spend and compliance. Our own CFO is a former customer, when he was at a company called Blade [Network Technologies], which was eventually sold to IBM.
We're going after that back-end function that has never seen innovation ever. They're still using spreadsheets and data ERPs.
ZD: Surely you've hit some resistance during your pitch. What are the challenges? What reasons don't they want to give you a try?
RB: It's the same challenges that exist in all enterprise software. You can't do an Instagram and Facebook thing where everybody just logs on and uses it. There are gatekeepers in companies. You have to sell to them: "Hey, I've drunk the Kool-Aid, and it's good."
And there's the too-good-to-be-true thing -- they've bought huge ERP systems for this. If you want to make this thing look hairy and complex, you can -- but let us help you. We allow you to see across the company base. We give you sanitized data showing a workflow process taking three days where in your company it takes a month. We give them the data. That's something nobody does.
ZD: The point of this is simplicity, but corporations are very good at complicating processes. How do you prevent them from doing so on your platform?
RB: We try to be as flexible as possible. We tell them that best-in-class companies tend to have a certain kind of approval chain and approve at this kind of requisition price point. If you have a different chain, or self-approval, and run it through Coupa...you first just want to get their messy world into the online environment. Once they see how easy it is to adjust, they're more willing to change. I've seen companies with 170 routing rules. Others don't have any controls. It actually works very well for us.
I spent six years working at Accenture implementing SAP. Every meeting, someone would say, "Hey, can you do that in SAP?" We're trying to have an architecture that's so flexible. To ask, what are we trying to achieve here, really?
ZD: We spoke earlier about companies that are wary to spend more money. How do you get potential customers to take that first step?
RB: We offer them a 30-day trial. We had a company recently that was off and running on it, set up their suppliers. We limit the scope of the jump to one year. We have a lot of companies that sell for 3, 4, 5 years but we only ask them to put enough skin in the game for a year.
We want there to still be a little bit of a leap. If there's no skin in the game, the champion in the company may never prioritize that initiative.
ZD: What are Coupa's next steps? Where is the company headed?
RB: We already have a very robust offering in expense management. When you step out of a cab in Manhattan and somebody hands you a receipt, you take a picture and it emails to Coupa. We have a whole T&E module around this. More efficiency, more analytics. This guy closes the most deals, but he also travels 10 times as much so we can get sales efficiency metrics. Tighter integration with Salesforce.com.
We also have supplier contracts offering -- we're taking them out of the filing cabinets and into the cloud and telling them what they need to do to refresh contracts. We're going to do more in budgeting -- alert folks when they're getting near budgets. More on mobile. One more thing that will be huge? This community of suppliers. We have 300,000 suppliers and companies rating them -- we'll have a Yelp.com for enterprise suppliers.
The beauty is that it's all integrated on one platform. Because of ease-of-use, you get adoption; because of adoption, you get spend management; because of spend management, you get savings. There's also the revenue improvement argument -- getting goods and services to people to make them more productive. Scientists who have to wait a month to get a microscope. You need things to do your job, and if it slows you down, it slows down the company.
ZD: And what of small- and medium-sized businesses? You sell to both the enterprise and SMB markets.
RB: They're interested in workflow and all those similar things, but a 10-person company would be interested in us if they have a large amount of spend. They're not looking for approval, just a repository for spend.
Once you're up to 75 or 80 people -- like the Boys & Girls Clubs of America -- you need something like this. The price point is very approachable for these folks. We'll integrate with QuickBooks. The cost of customer acquisition is relatively high if you take an enterprise effort and go after SMBs. We have a group of sales people dedicated to going after SMBs.
The lowest common denominator, though, is the employee. I've worked at small companies and large companies, and at the end of the day, I just need to buy something. We build everything around the end user's process, and the company benefits because they see everything around that spend, and they optimize that.