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CEO North America > CEO Interviews > Building the next billion-dollar software company

Building the next billion-dollar software company

in CEO Interviews
Building the next billion-dollar software company
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CEO Rob Bernshteyn leads the data transformation at Coupa, and knows they can still surprise their customer community.

It was perhaps inevitable that Rob Bernshteyn would end up leading a software company whose mission is to help companies get more value from every dollar they spend.

Bernshteyn came to the U.S. from Russia with his parents at the age of seven. The family had just $1,000 when they landed at JFK. He understood how high the stakes were when at age 14, he took in his first round of venture capital: A $2,000 check from his parents to fund his first acquisition, the inventory of a failing competitor to his fledgling baseball card trading business.

Getting all that new inventory in one fell swoop allowed he and his partner to put together value-added card sets they could sell at a premium.

Bernshteyn used that as a springboard to becoming the youngest-ever MLB certified dealer of baseball memorabilia, and the return he earned on his parents’ investment put him through college at SUNY Albany.

During his third year studying Information Systems there, he won a coveted internship at Andersen Consulting, where he was introduced to the world of enterprise software—and to corporate waste. “Throughout my career, I’ve continually been surprised by how the same people who pinch pennies when it comes to personal purchases spend liberally when working with company funds. I first saw this behavior during that summer internship,” he says.

“I couldn’t believe what was going on. It really struck a chord. I remember telling my parents all about it. I also remember telling them that I wanted to spend my career trying to fix big problems in the business world using information technology. That was the first time I thought about the spend management space.”

Experiences with wasteful spending and inefficient corporate buying processes cropped up again and again as Bernshteyn worked his way through a series of roles in the enterprise software industry: First as an SAP Systems Integration Consultant at Accenture, then as a Consultant at McKinsey working on B2B ecommerce projects, followed by stints as Director of Product Management at Siebel Systems, an early CRM vendor, and Vice President of Global Product Marketing and Management at SuccessFactors, a cloud provider of HCM software.

These experiences never ceased to rankle, so after SuccessFactors went public in 2007 and Bernshteyn was looking for his next opportunity, Coupa, then a startup working on an open-source project to make a more consumer-like procurement application, caught his interest.

With Netsuite, Salesforce and Workday taking ERP, CRM and HRM, respectively, to the cloud, indirect spending was the only core operational function still stuck on legacy, on-premise systems.

Previous attempts to automate aspects of it with ERP extensions and point solutions had limited success because they were designed for back office power users—not for a mobile world where employees were increasingly expecting business buying to be as easy as shopping on Amazon.

Bernshteyn quickly grasped the potential of Coupa. “Their technology platform choices were good, as was the idea to make the process easier, but they were still thinking about procurement as a separate business process,” he said. “That has always seemed limited to me. You need to be able to see all your pre-approved spending (procurement), expensed spending and invoiced spending together. I knew if we could take their cloud procurement platform and build expenses and invoicing onto it, and then add some power tools, we would have the makings of a comprehensive platform to attack the corporate spend problem.”

A steady growth trajectory

Since Bernshteyn took the helm in 2009, the company has been on a steady trajectory of expanding both its platform and its sales, fueled by five rounds of venture funding, followed by one of the most successful IPOs of 2016.

The company has expanded into Europe, Asia and Latin America, landing customers across diverse industry segments. Partnerships with Accenture, KPMG and Deloitte, as well as boutique consultancy firms have been instrumental. “We wouldn’t really be anywhere near where we are today if it wasn’t for these alliances,” says Bernshteyn.

Also instrumental: Eight acquisitions of companies making power applications to enhance the procurement-expenses-invoicing transactional core.

These include expense management applications Xpenser and TripScanner; procurement collaboration platform ZenPurchase; contract collaboration platform Contractually; InvoiceSmash, to digitize invoices; Riskopy for supplier risk management; Spend360, a machine learning application for analyzing spend data; Deep Relevance, an artificial intelligence fraud detection application, and most recently, Trade Extensions, an advanced sourcing platform.

Additionally, the CoupaLink program provides integrations to strategic partners that further extend the platform’s capabilities, such as Nvoicepay (payment automation); Sabre (travel booking), and Avalara (tax planning) to name a few. Coupa itself is Oracle and SAP certified to integrate onto those ERP systems as a strategic front end. That makes it particularly useful for companies running multiple ERPs, as it can sit on top of several such systems.

Coupa ended 2016 with revenues of $133.8 million, a nearly 60% increase in a year, a performance nearly identical to the prior year. It ended the second quarter of 2017 with total revenues of US$44.6 million, an increase of 43% from the same period last year; subscription services revenues of US$39.8 million, an increase of 43% from the same period last year, and operating cash flow of US$16.3 million.

Fierce determination

There’s more to the company’s success than just savvy fundraising, acquisitions and partnerships. Bernshteyn is fiercely determined to avoid the failures of early enterprise software deployments that degenerated into finger pointing between customers and vendors, often resulting in multi-million-dollar software packages turning into shelfware.

His answer is to deliver what he calls Value as a Service—an approach in which value-added outcomes take precedence over software features.

In this model, both vendor and customer agree to a set of measurable results before partnering, and hold each other mutually accountable for achieving them. That’s possible for both because the cloud gives both parties visibility into the same transactional data set, and because unlike other enterprise business processes, the value equation for spend management is crystal clear.

“In the simplest terms, if you buy a pen through the spend management system for the pre-negotiated, discounted price of $0.80, versus going to the store and buying it for $1.00, your company saves $0.20. If you go buy it for $1.00, your company loses $0.20,” says Bernshteyn. “We can quantify results, and tie them directly to the bottom line.”

And Coupa does. Performance benchmarks and actionable recommendations are built directly into the relevant areas of the platform, so that customers can see how they are performing against any number of goals. The company also uses aggregated, anonymized platform data to show customers how their performance stacks up against other, similar customers using the platform. For example, you could learn that while your company approves a purchase order in 10 days, similar sized companies can do it in just 24 hours, or that most companies the size of yours have 90 percent of their spending backed by purchase orders.

Should you want to improve upon your performance in a given area, Coupa this year began offering prescriptive recommendations for improvement within the platform. “With Coupa Community Intelligence, we are leveraging the supremacy of a true cloud platform and the power of our customer community to help individual customers optimize the way they spend,” says Bernshteyn. “Our innovations in this area can help them significantly improve decision making, accelerate the pace of business, and reduce risk in ways never before possible in our industry.”

Bernshteyn sees this as one of the key differentiators for Coupa going forward.

Usability for all

What won the hearts and minds of early customers though, was the company’s commitment to user-centricity.

Whereas earlier procurement, expense and invoicing systems were designed to meet the needs of administrators in those functional areas, Bernshteyn recognized that facilitating mass adoption was the key to success.

Everyone in a company interacts with these systems, whether that’s to buy what they need to do their job, to submit their expenses, or to make sure the vendors that support them get paid. If the system presents too many obstacles, people go around it, resulting in “maverick spending” that defeats negotiated pricing, thwarts corporate compliance efforts and gives an incomplete picture of the company’s spending.

To combat that, “We started by thinking first about the different people that would use the system, and we created personas for all of them,” says Bernshteyn. “The technology still has all the features and functions, but there are different experiences oriented toward different people at different times. It’s about hiding the complexity, and presenting only that which matters to each person to be able to complete a particular task.”

One often-overlooked persona they included: The vendor. Before Coupa, the industry standard was for customers to force their vendors to set up accounts in their system, where they were then charged for the privilege of submitting invoices. Coupa’s Open Business Network, which now includes more than three million vendors, lets buyers and suppliers transact for free, in any manner they like, including e-mail. That’s removed a significant hurdle to vendor adoption.

“People in procurement departments realized the value of our user-centric approach when they started seeing it, and that is how we won some of our earliest customers,” he says.

Collaboration with key customers, and optimizing the experience for every possible user persona, have now become hallmarks of the Coupa approach to product development, even as they acquire companies and add new functionality. The focus now is to use data and technologies such as geolocation and voice to eliminate the need for user interaction as much as possible. “We want to make it so that people are only asked to interact with the technology when they can add some value. Whatever the system can do on their behalf, it should do without asking,” he says. “The best user interface is no user interface.”

All about the data

The user-centric focus has indeed resulted in widespread adoption by employees at customer companies, with more than $550 billion in cumulative spend under management that has flowed through the Coupa platform. And, where there’s spend, there’s data, and that’s what Coupa is betting on to cement its place in the enterprise.

“What’s exciting is that $250 billion of that $550 billion in spending has happened just in the last year, which means that we are accelerating adoption as companies use our platform,” says Bernshteyn.

That’s a lot of data about companies’ spending that Coupa is already using to give procurement and finance visibility and insights they never had previously. “If you manage your different spending processes in different systems, or in Excel sheets—and many companies still do–you can never get a complete, structured data set, which means it’s extremely difficult to generate meaningful reports, insights, or recommendations on how to operate more efficiently in the future,” says Bernshteyn. “That’s what we deliver.”

By augmenting Coupa’s platform data with external supplier and risk data, and by adding machine learning and deep learning capabilities to normalize, categorize, harmonize and analyze different data sets, Bernshteyn believes Coupa will become an indispensable tool for reducing risk, optimizing spend, and making data-driven financial decisions, all in real time. “If (companies) really want to modernize the way they spend money and the way they maximize every dollar that they are spending, we think we are the only real long-term viable solution”

Bernshteyn believes that in the current, hyper-competitive global markets, increasing revenues has become really hard for companies. “But, their own spending is something they can have a better control over and if they do, they can be much more profitable and they can run more efficiently. We help companies do exactly that.”

It seems like a mission he was born to accomplish.

Tags: CEOChief Executive OfficerCoupaInterviewRob Bernshteyn

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