It takes a lot to shell-shock the doctor. It’s a crazy, crazy world and companies get overvalued all the time (take Facebook, for example). But 1B for a Procurement play best suited for the SMB market that only recently added basic sourcing (which qualifies as level 1 in the forthcoming 5-level sourcing model), basic finance support, and globalization support? A 5X multiple would be generous — and this is definitely closer to the 15X multiple that Spend Matters estimates.
There are some who would argue that Coupa was past it’s prime when it started – the doctor had a conversation yesterday with someone who thought focussed Procurement platforms should have been over in 2006 (which is when they saturated the early adopter market). But since the true measure of maturity is when the technology starts to saturate the leader majority, the actual date the doctor would give for Procurement platform maturity is circa 2010-2011. Coupa doesn’t have anything that hasn’t been available from multiple vendors since at least then.
What Coupa does it make it faster (with instant start-up), better (through unprecedented ease of use), and cheaper (through SaaS and economies of scale). But it’s not unique, it’s not new, and while it is a Ferrari compared to the ERP Yugo, it’s still just Procurement with some Sourcing, Finance, and a solid technology stack. And it’s trying to lead a very competitive market. They may have grown faster than their peers (but they also raised 80M to do it when many companies only had a fraction of that to work with at any time), but hungry, hungry hippos come along everyday. And now that they are global, they have to take on the European heavyweights and newcomers (like Basware and b-Pack, which can now offer end-to-end Source-to-Pay as a result of the recent Selectica/Iasta acquisition, and both of these providers have Finance offerings as well — Basware actually started in Finance). And they more they crack open the market, the more companies that are going to be grasping at their coat tails, forcing them to be faster, better, and cheaper still — which at some point is going to erode their margins and affect their profitability.
Don’t get the doctor wrong, he has loved Coupa since Procurement Independence Day, and he even dedicated a full EP to them (which includes the hits It’s Coupa Time, The Coupa Store, and the unforgettable Davie and the Coupa Factory), but 1B is just crazy. It’s placing unreal expectations on Coupa and the Market as a whole, and setting them up for a huge acquisition that could make them the new Titanic of the space. And we all know what happened to the Titanic …