What’s Changed: The Cloud at Hyperspeed. The World in Flux. with Coupa CEO Rob Bernshteyn

Okay, so if you guys are ready, we're right at the hour. So I will turn my mic and my camera off, but obviously if you guys need anything, just say, "Hey, Amelia," and I will come back. People will be able to submit questions via chat and the Q&A, Jason. So just let me know if you need help with that once you get to Q&A. But you will essentially, I'll give you a countdown. You'll see it turn green. It'll say that it's now live. You can just give it like a few seconds and then take it from there, if that sounds good.

Awesome.

Okay, so we'll go live in 5, 4, 3, 2, 1.

Good morning, everybody. Super excited for the next session at SAS Enterprise with one of my favorite CEOs and one of, I think, one of the most interesting cloud companies, Coupa. And I'm glad to have Rob back at SaaS or in general. He was kind enough to come a couple of years ago when Coupa was still on fire. Maybe it recently IPO'd. I don't know the timing, but I'm super glad to have Rob back now because Coupa to me, in the crazy world we're in, is at a very interesting intersection. And there are what we've talked about as COVID beneficiaries, folks that have benefited from these crazy times, and Coupa is one of them. Coupa is growing quickly and its stock price has done just fine and it has benefited. But at the same time, Coupa is the market leader in managing spend management and managing procurement and managing supply chains. And those are areas that are deeply impacted by the economy, deeply impacted. It's hard not to to walk downtown with your mask on to see what's happening in healthcare all over the place, in financial services. And so Coupa is super interesting because it's benefiting as a software player, but yet it has this insight into the economy, the economy of software and the economy of the real world that I can't think of another vendor that has. So I'm super excited to talk with Rob and down at the bottom on the Zoom, hit Q&A. We will save time for questions. We had a few already come in, but click there. I'll remind you at the end so we can chat. And I can let Rob talk a little bit about Coupa and then we can chat about it. But managing almost $2 trillion of spend across basically all segments of our economy, right, which we'll chat about. Coming up on $500 million in revenue, whatever the exact number is, no forward-looking statements in this presentation, but what's super interesting to make sure we talk about even here is that, you know, Coupa has redefined a category and now has more revenue in this category than ever existed. So what does that mean for the cloud? How do you change a category? And again, we've been talking about digital transformation for 20 years, since probably, Rob, since you and I started in software, but So much has changed, right? So I want to dig into a bunch of things on the slide, but what are you seeing? What's changed the most since March 15th? What's just, what's unexpected, what's expected, what are the number one things that have just shocked you or have been pulled forward years that you weren't expecting?

Well, I think as everyone is saying, Jason M. Lemkin, and again, thank you for having me on, there has just been a greater energy and focus in what was already happening, which is the move to you know, digital, right? I think in our case it's even more interesting because when you're in times of hypergrowth, folks tend to focus a little bit more on revenue than they do on profitability and they do on operational efficiency, frankly. And our value proposition at Coupa has always been to help companies become more operationally efficient, to help them unlock all of their potential so they could pursue all of their missions and visions. And obviously we're doing that now for hundreds and hundreds of companies around the world. So it's an opportunity to engage in the same dialogue we've been having now for well over a decade, but the ears are perking up even more because they know that they need to move to a digital method of driving their operational efficiency, understanding how they're managing their spending as it pertains to everything they need for their business, how they're thinking about supplier risk, how they're thinking about their inventory levels, their sourcing activities, and so much more. So it's really, really exciting for us to kind of have a greater emphasis into an area that we know is so important anyhow.

And what's— it's interesting because it's different for different vendors. Since March 15th, was there a trigger point where maybe I had a project that I was talking to Cooper, and I might— it might be a 2021, 2022, 2023 long-term deployment because you have many enterprise customers. Was there a particular drama issue, shelter issue, a wedge issue that got projects pulled forward years?

Well, interestingly enough, it was actually a bit of the opposite in the first month or so. And I mentioned that on the last earnings call. There was almost a deer-in-headlights moment amongst all of our, you know, the vast majority, I would say, of our prospects around the world, whereas we don't know what's going to happen. So, we actually need your help. You know, we need to get PPE equipment. We need to get things in to sort it out so that—

Oh yeah.

—come back in 2, 3 weeks. You could do that. And it was really rewarding for us here at Coupa. We have this robust community of existing customers and they came together on our platform to source personal protective equipment for their organization. So we were less oriented toward how do we close more and more business during that first month and more oriented toward how do we help this community kind of make sure that they're a going concern, which was very real in some industries for sure.

Yeah, we've all been through like 4 phases since March, haven't we? So I hadn't fully— I did hear that when you said it before, but I didn't think through it. There were vendors where the end of March into April were crazy, right? Even Zoom, Zoom the next day, right? Zoom the next day exploded. But even Slack, it took a while for folks to figure out we needed to Slack more, right? And then Slack took off. So you had this, the chief procurement officers, CIOs, and others just needed to like just survive, right, for that first month? And then what was— has there been like 4 waves? What are the next couple of waves that you've seen across your partners and customers?

Well, the most interesting thing for us is that we've taken dozens of customers live since this hit, right? Because it's one thing to sell new prospects, and of course we're focused on that, we're doing just fine there. But when you think about the existing in-flight projects, when suddenly these people are operating from home and they've never operated in a virtual environment, and to take large global deployments live and have them see them start running massive amounts of spend through our system, seeing them control spend. Now we have a whole bunch of customers who didn't have control over their spend. They literally couldn't stop the company from spending money in certain places, right? We're able to help them do that on their mobile phone, on, you know, through our integrated email capabilities within, uh, offered via Coupa. So that was very, very rewarding and powerful. And then of course we reemerged and we started looking at how we can drive, you know, our global reach and expansion. And obviously we're well into that now, you know, months after the crisis started.

For like a big Coupa customer, pick one if you want or don't, or just an example, but before March 15th, what was a typical deployment to be fully into production? Not an agile company, but maybe an old school type. Would it be a year? Would it take a year from really, you know, signing and fully going live and just How do you, if it was or whatever it was, how do you compress that into weeks? Like, how do you manage the team? How do you do the internal change management and the external? Because we're not necessarily wired that way until March, were we? That's right.

That's right. Well, the average is roughly 6 to 9 months for enterprise customers. Our mid-market customers, you know, 4, maybe 5 weeks. So it's not bad. But you know what happened is that we gained a lot of efficiency ourselves in working with our customers remotely. You don't have the time. Well, we'll meet you on Thursday, we're going to fly in, we're all going to get into a room. Well, it's Monday, let's just do it right now, right? So you get the systems integrator on the Zoom session, you have the pros— the existing customer on the Zoom session, you have my Coupa colleague on the Zoom session. We're sharing, as you are sharing this slide, the configuration setup and literally walking through it. So in many ways, uh, we stand to gain an advantage in the efficiency with which we can work together, as long as we can overcome the kind of change management required for some folks, as you say, to be a little bit more tech savvy and and kind of be willing to work in this way, and we're seeing that happening without a doubt.

Where do you think, it's just, it's hard to, there's so much change, it's hard to even predict, but in some ways it's great that you can now deploy customers over Zoom, right? It's so much more efficient, you don't have to get on an airplane, you don't have to book the hotel and all this, but some things are lost and some things are just different. Has enterprise buying changed? Do you think you will swing back into the middle? Can we live this dream where we never have to get on get on jets again?

Where do you think we'll be on the other side of COVID You know, it's hard to predict that, Jason, of course, and probably it's somewhere in the middle. I don't think it'll be an extreme one way or the other if I had to predict. But what I will tell you that will be consistent is that enterprise software is really about driving change management, driving change, right? And one of our core values at Coupa is focus on results. In other words, identify exactly what it is that you're attempting to achieve after you're live, a year after you're live, and then focus everything in an around that. So limitations like the inability to travel or advantages like the ability to get on a virtual session like this are just the methods of getting to that result. As long as we keep people oriented toward that outcome, I think we're in fine shape, and that's how we think about this approach. That's good. Now let's—

I want to talk about this because you have some great data, and this— I worry about supply chains. I try not to worry in the world, but there's a lot going on, right? It's— you want to remain positive, but You know, I look back at some of the first SaaStr blog posts in 2012, and I wrote one in 2012. I was walking downtown University in Palo Alto, and the last retail store reopened. But it was 4 years. Downtown Palo Alto, it's a fairly gentrified community. There's a lot of money, a lot of tech money, but it took 4 years for the last retail, what's now West Elm, to reopen. 4 years, right? So I'm worried about this. What are you seeing? And this one is interesting. 43% of companies were worried about the ability to fulfill orders, right? At the beginning of COVID you could— you still can't get a webcam, right? You couldn't get a monitor. I mean, we were worried. There were some groceries you couldn't get at the beginning of this, right? So tell us what you've learned being at the center of this.

Well, first of all, retail, brick-and-mortar retail, absolutely is in trouble. And frankly, brick-and-mortar retail to some extent has been in trouble well before this pandemic. When we're looking at our Business Spend Index, if your viewers go to spendindex.com, they can see the data on that. I mean, We've been looking at retail for 3, 4 quarters and it's been trending down. We've seen a lot of very interesting data that I can share with you around the downward trend. But when you think about global supply chains, right, and this kind of massive globalization dynamic we've had in the world for the last, you know, 6, 7, 8 years, right, we're kind of getting into, let's call it, globalization 2.0, which begins to balance global with local, okay? And is, as this slide says, you know, is there some fragility in our supply chain? Yes. But I would argue that fragility is really in this, in the area of information technology, information access, rather than in physical access, because the goods and services exist. And as soon as there's demand, supply gets there. You look at PPE, there was a massive demand, and within 3, 4 weeks, there was massive supply. The challenge wasn't, the challenge wasn't there. The challenge was having the information at your fingertips to hot swap suppliers, get access to things you need at the right time, make commitments contractually to people to know that you will fulfill your obligations. That's the world in which we play in at Coupa. So that was what makes it so interesting. And we've got customers literally hot swapping suppliers, moving them into certain areas where they never even thought they'd be buying from, creating contingency plans for categories of spend. You need information technology for that, and that's what's exciting about many of the things we're doing and seeing, uh, in our customer community. Well, that's interesting.

Yeah, I was following, you know, after right when we got into this wonderful pandemic, yeah, how Coupa was at the center of getting PPE and identifying this, right? But I didn't fully understand why, like I didn't, other than it's a great thing to do, but I didn't, I guess, I mean, it took a while for bank, but the supply got there, right, within a relatively short period of time, relatively speaking, but it needed help, it needed liquidity, it needed connection. And I guess Amazon works again, right? We can still get Amazon products to our home. So I guess, I guess, I guess we don't need to worry as much. The market will solve this no matter what global turmoil there is in the short term, as long as technology can connect us, I guess is the learning. Yeah, absolutely.

Information technology, access to the right data at the right time to make the right decisions and collaborate amongst the supply chain. And it's very exciting to see some of the largest companies in the world really reorienting themselves to fully modernizing their supply chain, their business spend management approach. I mean, it couldn't be more exciting for us, obviously.

You know, I want to hit some of the data next, but on this last point in this slide, this is something I think about a lot. I mean, did we know that the cloud would be this strong after March, that there would be this boost? I mean, it's crazy, right? I mean, Coupa's on fire, but you talk about retail, look at Shopify. I mean, Shopify is a $120 billion company today. It's crazy, right? And the growth vector is insane, right? It's the maximum output of this trend that we've seen. If we're in shelter, if we're in this world through the end of next year, can we have this divergence? Can we have a cloud on, can cloud remain on fire when one out of three people are essentially unemployed in the country? Like how long can we remain divergent? Do you have any insights here?

Well, it's a tough question. You know, it's interestingly Shopify and Amazon, I mean, these are our customers. You know, Amazon runs tens of billions, they manage through Coupa. So we're close to these customers, but the same value proposition that existed before this crisis exists now, which is being seen as a higher priority, right? The ability to get greater speed, the ability to have information at your fingertips, the ability to embed, Jason, best practices into your deployments. Just about every CIO I talk to tells me, hey, we're gonna go with Coupa, but hey, promise me you're gonna deploy this in a way that's gonna be, quote unquote, vanilla or best practice so that my team doesn't sort of start doing a whole bunch of end rounds that are gonna make us un-upgradable and slow us down. They want agility, they want access to community information, hopefully we'll talk about. So I think there are a lot of dynamics that are really tailwinds for us in pushing cloud faster into the world at large, and obviously these are big, big markets we're all playing in, and I'm sure many of your viewers are playing in. So the opportunity is now really to accelerate our efforts, no doubt.

It's interesting the CIOs wanting this best practices, right? They want— they don't want custom, they have this sort of on-prem scars, right, of some hack, some bit of corner code written that, or weird workflow. I should have known Amazon was a customer. I didn't know it, but my mistake. But boy, you must learn a lot from Amazon, right? Amazon must be like the Walmart of today where they're an amazing customer, but they school you a bit. So what is like, for an Amazon, what do all your other customers benefit from? Like, what are some, that vanillaism, that, like, what are some things you've you've learned from really those mega customers like Amazon, and how does that benefit the other— like, how have they leveled you up?

Sure, sure. Well, look, the beauty of enterprise software, as I think every one of you viewers knows, is can you have minimal code that supports the massive amount of use cases, as many use cases as possible? That's the dream. That's the dream, right? That's the dream. So what we learn from our largest customers, Amazon being one and others, is how to support massive complexity in the simplest way possible. And what we learned from some of our smaller customers is how to keep things very intuitive and user-centric, but at the same time abstract them from some of the complexity that they may never need to use and make everything configurable. So we're constantly learning about scale and stretching from the— our platform from the larger enterprise, and we're consistently saying— staying very, very true to usability and user-centricity that we're picking up from the smaller growing companies. And that's a beautiful marriage to have on one platform.

Yeah, um, so related to this, this is something I wanted to learn from you, um, in the enterprise is like brands. And you and I chatted right before we went live. I asked you about competition. I had some fun talking about Ariba, which, you know, we're in 2020. Coupa isn't really an Ariba 2.0, but maybe in the early days there was some truth to that. I just had a lot of experience there and And you said, I don't spend some— now that we're big enough, now that we're actually larger than this category used to be, I don't spend as much time thinking about competition. And I think one reason is you have this trusted brand, right? You become— every deal is hard. You have to prove yourself to Amazon and Shopify, but you are this brand. I've all, you know, there's, there's, there's suites and there's best of breed, right? Which we thought about. But, but do, do folks want even more from trusted brands? Now in 2020 and even more after March 15th? And what does that mean, like versus going more horizontal? And where do we want to invest more in trusted brands?

Well, it's interesting, I'm looking at this slide, you say do enterprises want more from vendors? You know, in some sense, I would push back on the term vendors, because I don't consider our company, any one of my colleagues working here, anything that we offer, we're not a vendor. When I think of vendors, I think of hot dogs at a baseball park.

I would have hated it myself as the CEO, you're right, but—

Right, well, so, but it plays into— But CIOs might I still use the term. It plays into your question. Well, look, it's a term that's grounded in a business that used to be a products business. It smells of commoditization, and the reality is that what customers really want is they want trusted advisors, they want partners, they want people to bring best-in-class technology, embedded best practices, and they want folks that are focused on value creation with them and measurable success. That's what they want more than ever, and that's what they deserve, they've always deserved, they just didn't have the chance to get that in the first run of this thing, you know, in enterprise software in the '90s and maybe well into, you know, the new millennium. So when you develop trust, and I believe trust is built on transparency, you have to actually see measurably that we're delivering value for you. If a third party came in and said, okay, there's a relationship between Coupa and one of their customers and here's what's happening, they will be able to point to measurable value, X amount saved, or X user adoption, or X spend categories under management, or X improvement in operational efficiency, whatever that may be. And once that's established, of course, of course those customers are inclined to want to tap into subscribing, right, to more what we call value as a service from those partners of theirs, and we consider ourselves to be that type of partner for them. So we've benefited from that, and I hope we'll continue to benefit from that because we take every one of our customers very, very seriously. We want to keep them forever. We want to continue to drive more and more value for them.

Yeah, it's interesting, you know, like, um, I think at Salesforce, depending on how you look at it, CRM is either their fourth or third largest category now. It's pretty crazy, isn't it? Sure is, sure is.

Well, look, you know, understanding every component of your customer, how you market to them, how you sell to them, how you service them, how you interact with them on the web, is super important, but I argue it's just as important to understand your entire supply base and how you buy from them, how much you spend with them, how you can collaborate with them, whether or not you can mitigate risk when they have risk. So we're really operating on the exact opposite side of the equation, you know, we're helping people, companies who spend money, do it in the most operationally efficient and thoughtful way.

And now, so you're— so, and related to this and At the bottom point, when I listened to the last analyst call, you said inbound demand is up from your base, right? So your customers want more and more from you, from a trusted vendor. A related question, because it's like, so you're coming up on $500 million in revenue whenever it exactly— I don't know exactly, ARR doesn't really matter for this, but how far can you see? Can you see? You obviously can see to a billion. You can see it right behind you going across the bridge, but can you see 10x? Can you see the $5 billion now, as crazy as that might have sounded a couple of years ago? How far can you see and like what do you see? Like what do you see? What do customers want? How is the product going to change? Like what do you see? What's the furthest you can see and what do you see?

Well, I appreciate that question, Jason. So what I see is a $50 billion plus total addressable market. And what I typically ask are two very, very simple questions of any prospect I interact with, frankly anyone I interact with, whether it's over Zoom or before, kind of in the physical world. Do you think, number one, your company is doing a great job in managing the spending that it's involved in for all the things and services that you need? You think it's done really, really well? I've rarely, rarely gotten an answer that says, oh yeah, we're, we're great, we know everything about how we spend money, we have control over it, it's compliant. Okay, and then I ask a second question: do you think you're employing information technology in a way that's comprehensive and fully integrated and user-centric and deployed quickly that addresses some of the challenges described? And the answer is always no. So just about every company in the world can really stand to improve the way that they do their business spending and the way they manage their business spending. So I see a huge, huge opportunity, and I think this is in many ways early innings for this category. We're proud to do our part in trying to lead, uh, a focus into this area and then fulfill that leadership with a real brand promise and real measurable outcomes for every one of our customers. I think that is why, you know, we've seen more sort of inbound interest and more capabilities and additional features and functions and modules that we can deliver for our customer base, of course.

A couple things, this is more a tactical point, and I want to make sure we get a couple things on the data you have, but this is a bit of a mystery to me. I should know the answer to this, but I don't, right? Why are payments so hot now? I understand the innovation of Stripe of 2 lines of code back in the day, right? But why you're seeing this? Why is this all coming together now? And why couldn't payments be as hot 5 years ago? And I put hot in quotes, right? But what's so much more valuable today than it was, or what's changed in technology? Because I'm missing a bit of why now?

Well, first of all, he's saying the value proposition has been there for a long time. It's been there for a long time. The question is, has the value proposition been fulfilled? That's true. Yeah, that's part of it. Why now? Why now? Well, look at what's happening in the consumer world. The value proposition has been there a long time too, but it's only now starting to be fulfilled with Square and Apple Pay and Google Pay. Now, if you look at B2B payments, my gosh, first of all, it's much bigger. There's a lot more money flowing there. But secondarily, the technology, the capabilities there are really archaic, old-school technology, a lot of manual, a lot of paper in the United States, right? Nearly half the is paper-based checks. I mean, are we— what are we kidding ourselves? These systems are rigid. You have monthly batch jobs running out of incumbent solutions. There's no ability to collaborate with your supply base around payment rails, around dynamic discounting, around, you know, virtual credit card payments, transfers. Yeah, cross-border is still super old school and complex. So there's just so much we could do here. You could have third parties enter to do supply chain finance. I mean, We're in the very early innings of a huge market and it requires leadership and requires incredible tech. You know, some of the approaches that have been taken in the past year have largely been driven by banks. You know, the approach we're taking is partnering with banks, but we're bringing what we're really good at to the equation, right? A highly scalable, robust transactional platform, what we know about usability and how important user-centricity is to that problem, and we're starting to really get somewhere. You know, we have As I mentioned the last earnings call, you know, nearly 100 customers leveraging components of CoupaPay, and that's growing. It's really exciting.

And just, you know, if you look at what's happened with Shopify and how big payments have gone there, if you look at the very low end adjacent to you, like Bill.com didn't used to have any payments revenue, right? And then it became like one of their key drivers of growth, right? So what do you see a few years out here in the enterprise? Like how core is this? It's obviously core to Coupa, but how big is this? Is this flip around and become one of the one of the most essential parts of what we're doing in terms of managing this business-to-business commerce, or are we just, you know, in 5 years will this just be massive?

You know, it's hard to make a detailed prediction. You know, the way we like to do our business is do it very organically. You know, our customers are asking for these capabilities of us. We didn't come up, wake up, and say we're going to do payment. Our customers said we're doing procure to okay to pay through your platform. How about we do procure to pay? Right, actually the last mile, right? Yeah, let's do the last mile. Let's, let's, and take, pick off a bunch of use cases that we're struggling with. So we see a big opportunity here. We're going to co-develop with our customer community. We're going to take the same approach we've taken with every other modules, a set of modules we've deployed, and we'll see where it goes. But the likelihood of us, uh, being able to, uh, you know, capture a real meaningful portion of this market, uh, based on what everyone is saying, I think that's objectively looking at this appears to be quite, quite high, right?

Yep. Now this next slide is something I picked out of your, I think of your investor report, because it's just interesting to me, you know, as a founder, what is, what do you, how you, fiscal discipline is super interesting, right? I mean, your turnaround, you probably can't believe all the unicorns you read about on TechCrunch each day that are raising $400 million, and you don't even want to know what the bottom line looks like because it doesn't matter, right? I mean, Coupa is a generation, you know, we're generations ago in terms of thinking about this. And then you look at weird things like Zoom. You know what Zoom's burn rate was the year before its IPO? You know what it was? I don't. Zero. It wasn't minus $1 or like— Eric literally said to the marketing team, you can spend every dollar we have. But it's the funniest thing. It's like $414 million in revenue and like $414 million of losses. And it's literally a zero. Like, it's the fun— you can get it, right? You can imagine that conversation. Here's your allowance. But what is this? What's 50 is the new 40, and when should software be profitable? I mean, we're supposed— it's supposed— shouldn't it be really profitable? You need like, you need like, you know, the X number of engineers and everyone can buy it. But what is— what does this all mean? What are you— what are you saying about this 50 is the new 40?

Well, first off, let me say I love how Eric thinks, and I think similarly in the sense that there need to be guardrails on your business. The idea of spending at all costs And by the way, we've had some pressure as a public company, certain quarters where people say, well, why don't you just press further, further in sales and marketing and just grow, grow, grow.

Press on the gas.

And then you'd have the other side as soon as there's a little bit of downturn, hey, why don't you accelerate the pace to profitability? Look, we all know in software as a service, what really matters is cash flow. Cash flow is what matters. That's what fuels the business. So we have put guardrails on the business now for 45% quarters we've had guardrails on the business. Very, very careful and thoughtful growth, not overextending ourselves, but at the same time careful management of sales and marketing efficiency, and then getting scale into the model on the bottom line. And that's— those are the guardrails we've had every quarter for 45 quarters. And just as Eric does it, here's what it's going to be for the next quarter. We got 12 weeks, go. Then we see what exactly happens. We distill that. We look at all the metrics by business unit by geography, by product line, and then we unlock the investment we're gonna have for the next quarter, go and do it over and over again. And when you do that for as many quarters as we've done, you get into this situation where you can have this kind of, uh, you know, rule of 50 dynamic that, uh, my colleague and CFO came up with, I think, when he became, uh, 50 years old. Uh, but, uh, but we are operating at this, this level now, and it's, it's, it's exciting.

And is it Is there a benefit at 50? Is 50 too much? I mean, obviously you're a proponent of it because you put it out, but where, how do you set that guard? Like, what is too efficient versus too inefficient when you're able to be efficient?

Like, how do you think about it? Well, I think you have to combine backwards-looking metrics. So when you just complete a quarter, you look at all your backwards-looking metrics and then you combine them with all your leading indicators as an executive, which is What does the pipeline look like? What does our talent look like? Where are we in terms of stage of pipeline? Where do we want to make investments geographically? When are we launching the next product release? And then use your gut to fine-tune exactly how you're going to run out at the following quarter. So you have the guardrails, but you also don't hamstring yourself as an executive. Otherwise, you could automate the job of the CEO in that area, and that's, uh, probably not the best way to do it, right?

Good. Um, Let me skip— oops, we had this slide, maybe we lost one on the different segments. I want to talk about some of these points, but we might have taken some of this out, but tell me what you're seeing across different industries because you do have some data on this. So one of the most interesting things from some Coupa data I've seen is like, I pull up, I read the Wall Street Journal, I read the New York Times, it seems like many banks are doing very well in this crazy environment, right? But like Coupa shows, financial services under a lot of pressure, healthcare, right? It's hard to get a handle on what's happening in healthcare. Some hospitals are all at the edge of bankruptcy, right? On the other hand, other segments of healthcare are on fire, right? They're literally on fire. So walk me through some of the data you see of different segments, and maybe some things that are counterintuitive that you're seeing in different parts of the economy.

Well, I think one of the biggest things that I think most people now understand is that given the amount of liquidity liquidity in the market, it's very hard to gauge the extent to which financial services firms are doing well and healthcare, et cetera. So, you have to kind of have that context in mind. But I really do, you know, it's very difficult to answer that question in 2 soundbites. I really do urge your audience to go to spendindex.com.

Here's what we've done. We had a slide on it here. I think I just lost it, but that, yes, it is a great, it is a great one.

Let me tell you what we've done there, because we have created an index that is a real leading indicator. Let me tell you why. We're looking at things like what are the approval cycle times in the, in the current quarter. In other words, did it take longer for people to approve something before they even bought it, before they even ordered it, before anything happens? We have a leading indicator in terms of how long by industry folks are thinking through purchases. That's, that's never been seen before in an aggregate level with nearly $2 trillion worth of data. We're looking at rejection levels. What percent of things are getting rejected? You never see that in the GDP. Now, if there's an increase in rejection levels, of course there's a likelihood that that industry has concerns. We're looking at average spend per employee at companies, and we put that into an index to give leading indicators. Now, we launch this every quarter, and when we backwards tested this to 2016 against the GDP, we saw a very real and meaningful correlation. So we think this could be a real, uh, enabler for people to get a sense for things. But if you look at the last one, what we shared at the last earnings call, of course, significant retail slowdown, slowdown across the board, frankly, but much more so pronounced in retail. When you look at financial services, slowdown there as well, whether that's seen or not in stock prices. So I'd urge people to go to spendindex.com. We're sharing this openly. We just want to be a good corporate citizen. We're not gaining anything from sharing this other than maybe a little bit more awareness about Coupa. So I'd urge you folks to check it out.

Yeah, everyone go to that because it's pretty awesome. Spendindex.com, and I'm on it on my iPad. I had a screenshot in here, but I think maybe, maybe we took it out because it was backwards looking. But let me just ask you one or two questions because it is great. Everyone should check this out. It is great to see this data. And granted, there's a little bit of a lag. It's not up to the minute, right? It takes you— you've got to get that data. So it's through Q1. But one, one that surprised me is high tech was down. How you define high tech, right? That was down in Q1. So what is When the cloud's on fire, but in the Spend Index, high-tech's down. What are we seeing there? Should I see something? Is there a story behind the story there?

Well, you see what you see, which is— well, you see what you see in that Q1 report. When you look at the index purchases for hardware and software in the first quarter of the year, when you look at time to approve, when you look at number of rejections, we look at average spend per employee. Was, uh, was down. And that's just, that's just a reality of what happened there, right? Now, whether or not that's measured in the stock prices of many of these companies, you know, probably not. But again, you could argue that, uh, the current liquidity environment and the longer-term opportunity in the digitization area is very, very real. Look, investors are looking for places where they're going to get yield. They're not going to get it in US Treasuries, right? So they're looking for places to get yield. They're look— they're looking for longer-term bets. And there's no question many things my colleagues and I, like Eric and others are doing, have the opportunity to really stand the test of time and develop into very, very meaningful long-term businesses. That's what we're doing here.

Yeah, I want to chat about your book next, but on the spend index, the Q1, just remind me, Q1 is calendar Q1, right? So Q1 is through March. This retail one, this plummets dramatic, right? Even through Q1. So that trend, you can see it in Q4, right? Retail was already off deeply in Q4, and then Q1 is down boy, it's just epic, right? It's almost a step function. It's almost a step function here, right? Absolutely.

Step function. And look, if we have to make predictions, I think they're pretty, uh, uh, pretty obvious, right? We're gonna see real bankruptcies in retail. We're gonna see a lot of consolidation. We're gonna see brands get rolled up. I mean, it's gonna happen. It's already beginning to happen, uh, because look, folks aren't going to the mall and they're buying it, you know, in, in those stores. So the ones, the retailers that are quick enough and nimble enough to get to consumers directly to figure out different innovative ways to manage their supply chain, uh, will stand the test of time. But, uh, it's a, it's a real struggle in retail, no question about it.

Yeah, I would literally encourage everyone listening now, or watch the thousands that'll watch this later, go to spendindex.com. It's fascinating. Um, Coupa has a massive— it has almost $2 trillion of spend thrown through the platform. So if nothing else, this is a fascinating data point that you can segment across financial services, healthcare, high-tech, manufacturing, retail. And it's a slice, but you may see right now a story that is worrisome of our economy, right? There is some optimism in this. I mean, health, actually health and life sciences outperforms more than I would expect from the press. Because, you know, our hospitals not taking ordinary patients and our dentists at a lay level, I felt like that's under more pressure than the spend index suggests. But outside of that, it's worrisome. It's a bunch of more worrisome trends And maybe we're all ballooned by, by the massive liquidity injections, the trillions of dollars in the economy, the planes flying nowhere, and the extra unemployment checks. But the real signals underneath our economy are very worrisome on these charts. Yes, perhaps.

I'm looking forward to next quarter's release. We're actually going to start slicing by category of spend. So what are the categories folks are spending on? Where are they increasing, decreasing as part of large enterprises? So we'll have more robust data, greater fidelity of data as we go. And Hopefully it'll help folks understand what's going on in the world, frankly.

Yeah, all right, so I'm going to post this on SaaS or after the next one's out because it's super fascinating. Okay, so book. So you got a book, book, book. Is it out? I should know. I'm going to buy 100 copies, 50 copies. Tell us about the book.

Well, this is really a book that is the next step from Value as a Service, a book that I did about 3 years ago. And this is really about breaking the silos of traditional enterprise software, which was always deployed, you know, one customer at a time with one set of data and never being able to see anything across, never being able to take anonymized, sanitized, aggregated data. We're beginning to take that data, distill insights from it, and push that back into individual customer environments so that we could be smarter together as a customer community. So I look at this book as really, you know, I don't have a PhD, Jason, I ended with my MBA. This is kind of my hypothesis or thesis or dissertation if you'd like, and it's really a position paper on where we see enterprise software going, which is the breakdown of those silos so that we could be smarter together as enterprises and customers through the use of information technology. We're on the very bleeding edge of that with what we're doing here at Coupa, and every day we discover more and more interesting use cases that we could employ for our customers to take advantage of, and I'm happy to share anything you'd like about that.

Well, that's interesting, this communities. So, um, FastTrack is a community, right? I mean, it's, uh, I, I never knew much about community before this. I'm still learning. There's a lot of talk about communities, right? And how that, you know, customer, you know, vendors, technology solution, I mean, people build communities, communities are out there, it's communities around. What is What do you mean by communities? What are you seeing? What have you learned at Coupa or in general? What does this mean?

There's so much, but I would give you the metaphor that I love, which is Waze. You know, I was very proud that NOM endorsed this book after having kind of thought through our concept of community intelligence here.

That's a space you didn't imagine community would exist, right? On maps, but it sure does.

Exactly. And with Waze, where truly smarter together as we travel from A to B because we're leveraging immediate access to data, and that data requires almost no friction, in some cases zero friction, to collect, aggregate, and distill insights that can be pushed back to the individual driver. They could find their way through. The exact same concept applies to everything happening in business processes. Best practices for how many people you should have in your workflow, Jason M. Lemkin. I mean, you know, there's companies out there 60 people in their workflow to approve something that's $200. If they knew how far outlier they are in real time, they could fine-tune that, right? They're paying, they're overpaying, they're overpaying for categories of spend all over the place. They're exposing themselves to risky suppliers and not leveraging community insights to figure out which suppliers they should be considering working with. I mean, the list goes on and on of all these use cases where we could truly be smarter together. And proudly, as a platform, we're enabling that for our customers You know, so with every release of our product, we're turning on more and more of these community intelligence capabilities that allow them to, to be smarter together. Okay, so good.

So the book, in large part, is it share a lot of learnings about how to build this community among your customer and partner base?

Well, first of all, it frames what it actually means to have a community intelligence environment. What are the components to that? It explains why the time is now to strike, particularly if you have early-stage companies that are watching this why now is the time to really build up a platform that can have to stand the test of time in leveraging cross-company committee insights. And then it shows a whole host of use cases and case studies of what we've experienced so far and asks the reader, as I did with Value as a Service, to comment on what they're seeing, push back on some of the hypotheses in the book, and so that we can learn together as a community of readers, frankly, of the book.

As well. Okay, it's great. Well, let's— everyone, let's— I'm gonna, I'm gonna do a deep dive. I think this, I think community for business software is super powerful, right? It's just, it's so important, and it's something we're just learning today, right? Just like payments, maybe everything in enterprise sometimes is 4 to 5 years later than consumer. Uh, maybe, maybe payments is there, um, and maybe community is there too, right? Waze, Waze, Waze hit this 5 years ago, but we need to, we need to learn this, right, as leaders. So Let's all read this, and Rob, if you want, we maybe, maybe in a couple, whenever you want, we could do a deep dive on community on the podcast to 130,000 people, because I think this is a great topic on its own, right? Just how to building this community thing, because, all right, this is a great book. Let's all read it, and I will share some learnings on it on SaaStr in a bit. Let's make sure we have, there's more I want to talk about. Let's make sure we have a few minutes of questions before we, before we end. Actually, hold Hold on. How we doing on— there was— let me make sure I grab— apologies for one second. There was one very specific I wanted to hit and then we'll go into the Zoom. And these are specific to procurement, but I think these are good ones to hit for Rob. What are the 3 pain points for chief procurement officers excluding just generating savings and reducing supply chain? What are the top pain points in 2020 for CPOs?

One of the biggest pain points is ensuring that the CFO, the CEO, and the CIO become their truly connected colleagues in solving many of the challenges that they've been thinking about for a number of decades. You know, if you go to a CPO conference of any kind, the conversation is typically, how do we get a seat at the table? How is it that the whole organization doesn't understand all the value that we can offer? Now is just the time to strike to showcase that value, and that value is in every possible way, of course from savings, which is very obvious, but it extends to supplier risk mitigation, which is obvious, right? And all the way through managing the entire integrated way with which a business manages its spend through information technology. So now is the time to strike. Look, if we have a phenomenal CPO and we use our own platform, But if my CPO, you know, kind of pinged me on Zoom, email, or walked into my office and said, look, hey, I need a budget of X because I'm going to make sure we're going to mitigate our supply risk, I'm going to save us this much money, I'm going to give us a platform that's going to help us be modern and scale into the future, why in the world would I not support them if they were a trusted advisor? And so that's the opportunity here.

Yeah, the next one, it's a bit of a layup or even a commercial, but I always love to hear what a CEO has to to say, which is, uh, what— which new Coupa product or feature are you most excited about?

Well, the most exciting one for me is Community Intelligence, which is a set of capabilities that we discuss in the book, but they're in the entire fabric of the product set. So they appear, for example, in expense management, which we don't talk about as often, but we have hundreds of customers using Coupa Expense Management. We are mitigating fraud and expense management. We're using the dataset of our aggregated customer base and serving up individuals that are highest likely to be doing fraudulent activities so you can investigate. Rather than rigid kind of, you know, policies or a free-for-all, we found a way to use technology to be prescriptive, which is the P in Coupa, prescriptive to individual controllers and people responsible for spending in the company, leveraging community intelligence. And that's just one example of of many capabilities leveraging community intelligence within Coupa.

This one from Nikhil, you probably don't know the answer, although it'd be wonderful if you did. I know Coupa works with many hospitality companies. In how many quarters do you think bars and restaurants, hotels, airports will rebound? If you knew that, I mean, you'd be, you could probably be on CNBC any night everywhere, any night anyway, but do you have any insights or do you have a model? Do you even have an operating model? Like when will these hyper-impacted hospitality businesses recover?

Well, I love the second part of the question, Jason, because of course I'm not a fortune teller. In fact, the big unknown is when some of these things will happen, but we have a very clear scenario-based model for V, U, and L, and then we execute accordingly based on where things work out, right?

So, V, V I get. Are we past V or is there still a chance for V?

Well, depends on how far you step back and looking at the— How wide the V is. But I think where, I think, I think I think in many ways you're right, we are pretty much past V. I think that's a fair assessment in my view.

Yeah. This one will take you back, but let's just at least do one and have some fun, right? Because we did chat about this before we started. What were the biggest challenges early on when Coupa was a startup procurement folks hadn't quite heard of, you didn't have the brand, and were replacing or competing with solutions like Ariba?

Well, I can give you a very, very long list of challenges, but I think the biggest is to get folks to give us a chance, okay? If you look at some articles that came out in 2009 when I was raising money, you know, our first raise that I was involved in was, you know, was $15.5 million post, right? It was, I think, $7 million raised, $15.5 million post. It was getting folks to try it. So we did things like we said, look, give us a year annual subscription. If we don't deliver this quantifiable value to you within 12 months, you could cancel and we'll give you your money back. You know, that was a big, big risk to take in 2009 and 2010, but we delivered for these customers and they became fans and they became highly referenceable and they gave us a chance to go to the next customer, next customer, and grow our ACV and grow our renewal rate. So it was very, very hard during the days, of course, but that built the foundation and the right culture, I think, in this company, because we don't take anything for granted here.

Did any material number of customers really ask for their money back?

No, not even that material. None asked for the money back.

I love them. I personally love the money-back guarantee hack. It's always one that asks for their money back, and it doesn't matter because if you don't keep the customer for life, it doesn't matter if you give one year of revenue back, right? Even though it's stressful, it doesn't matter.

But you know, Jason, the beauty of it is even if let's say they were to ask at the end of the year, if you're objectively looking at data that said you paid us, you know, on a mid-market customer, you paid $100,000 a year, well, we've saved you $700,000 this year. I mean, isn't it a little egregious for you to ask for your money back? I mean, isn't it obvious we delivered value for you? Aren't we not a values a service partner for you. So frankly, we didn't have that, but that doesn't mean it wasn't easy to get those deployments, to configure the product, to build new features, to do what it took to get it done. I mean, no question, very hard.

Let me ask just one related early question, and then we can wrap up with a few more current questions. But one of the reasons in the early days that I got very, very— from afar, I was interested in Coupa is back at Adobe Sign, EchoSign, I would meet with a lot of folks, and mostly on the contract side, We would deal with sell-side, of course, in the early days, but there'd be a lot of buy-side conversations, a lot of them. And we would go in and we built an Ariba connector early. It was very hard to do because it wasn't an open platform. But, and I mean this in no disrespect to anyone at SAP, but I never heard so many complaints. Okay, people would just complain about Ariba. And people complain, like, I mean, obviously you're biased, but it kind of lit up the hair on the back of my neck because I hadn't heard this. When you're selling in those early days and you don't have the brand, Can you, looking back on it without bias, how do you leverage those complaints? Like, how do you turn those into an asset? Do you bash the competitor? Do you not? Does that create a bigger wedge than if they're happy? Like, and maybe you didn't see it, but I just heard this again and again at so many, you know, Global 2000 companies I would meet, it would be their least favorite vendor.

Well, look, to be frank, we did some bashing early on, and I'm not sure whether it was right or wrong, but that bashing wasn't grounded in logic. It was grounded in facts, you know, when you talk to a customer that's getting 4% of their spend running through an incumbent system, you know, the bar is not that high to get them to 8, 9, 10, 50. It's not that high, right? It's not that high, but it's a matter of bringing that to the forefront. I mean, bringing facts to the forefront that everybody could look at so they can make the right choices, and you know, those are early day things you have to do, but obviously now, you know, thankfully we're well beyond that, right?

Alright, maybe the last one or the penultimate one. So we, maybe this will be the last one. In this, but this is probably more from a founder perspective, they think about in these, in these uncertain times, some deals go more quickly, but some go more slowly. Any, any tips you've learned to accelerate closing of deals in this shelter area?

Yeah, I think it's in the shelter area, but I think it's more broadly. What I noticed now, you know, we work with so many different, I've had the chance to work with so many hundreds of of sales professionals in my career, certainly hundreds of KUPA as well over this time. What you find is folks tend to pivot a little bit more towards being a bit aggressive. In other words, look, we're great, we're the best, you know, 9 out of 10 people use us. I don't love that. And then you have the other extreme, which is they're a little bit overly passive. In other words, they chase balls. Yeah, let me give you 15 references, 50 references, let me show you a customer exactly like you, what else can I do for you? And our mindset at KUPA is you don't want to be too aggressive and you don't want to be too passive, you want to be assertive. Focus on the facts, become a trusted advisor, get vision lock on what it is you're attempting to achieve in working with us, and if we agree to that vision lock, perhaps I'm the right player to help you achieve it. If I'm not, you can go find another player to help you achieve it. So we try to be very, very assertive in our dealings and always, Jason, always grounded in integrity, you know, that's very, very important to me. I never wanted an environment where the salesperson would sell something and then they'd be afraid to sort of interact with that prospect. That's horrible. We want a lifetime relationship with this customer. They should be proud of what they've done and they should know they have now thousands of people behind them. They're going to deliver for that customer. So this is value as a service. It's a different way of thinking about the traditional products-based business into the business that it is today. I mean, SaaS, right? You know, this is what it's about, I think.

Yeah, no churn and burn deals, right? No. They're the worst. Okay, well, Rob, this was incredible. Thanks for giving us the full 50 minutes. I love spendindex.com, go to it, we'll talk more about it on SaaStr. Spendindex.com, you will, there'll be another quarter of data coming out shortly, right? I assume. But you will see things that are fascinating, that are data-driven, which I love. So check that out. And also Smarter Together, this community in B2B, I think is super powerful for the next 5 years. So hopefully we can continue the conversation there, but grab your copy. And Rob, again, this was wonderful, and thanks for taking the time out.

Yeah, don't mention it. Cheers.