Coupa Launches US$50 Million Ventures Fund
Operational resilience and agility. Following the events of the last twelve months, companies have focused on these strategic areas like never before. Some, as we’ve noted, have started to wonder whether this trend will continue post-pandemic—or will we go back to the same old supply chain? Not if Coupa Software has its way.
Last week, the company launched Coupa Ventures, a global fund that will invest US$50mn in early- and growth-stage companies that target business spend inefficiencies. “Coupa Ventures enables us to invest in a future where businesses and their suppliers can harness the power of their spend to constantly adapt, transform, and innovate”, said Rob Bernshteyn, Coupa’s Chairman and CEO.
What’s Business Spend Management (BSM)?
Let’s be honest, it doesn’t sound particularly sexy—it sounds like a subsection of the finance department. But business spend management, together with ERP (enterprise resource planning), CRM (customer relationship management) and HCM (human capital management) make up the core operating process of any company out there. When companies spend money, sign contracts, analyse supplier costs, take inventory or budget for the future, that’s BSM. Overall, business spend management is made up of three main areas: procuring materials, managing invoice, and handling expenses. Essentially, it’s the engine of the entire operation.
Why Change It Up?
According to Coupa, the next wave of BSM is now. It wasn’t always this way: in March of 2016, advisory giant Gartner claimed that BSM was dead. At that time, the firm was partly right. Companies couldn’t handle trillions of bits of data by themselves—and they were sinking as the waves of big data swept over their heads.
But recent developments have meant that BSM isn’t fated to die just yet. “The key to optimisation is data—and not just any data”, Coupa stated. The company has supported community intelligence, in which machine learning uses anonymised data from hundreds or thousands of client companies to suggest better spend tactics. This way, companies can get better insight into their suppliers, track supply chain disruptions, and investigate procurement alternatives.
This network effect is part of what makes Coupa Ventures so exciting. Said Eric Christopher, co-founder and CEO of Zylo, “We’re excited to join an expansive ecosystem of customers, suppliers, and partners”.
First Companies in the Ventures Portfolio
- Zylo, a leading SaaS management platform that helps companies manage cloud-based applications, offers visibility into what software is being used, how much is present, and how a company can optimise its software investments.
- SourceDay, a leading supply chain performance solution, bridges the gap between a company’s enterprise resource planning (ERP) and its supply chain network.
At SourceDay, Coupa’s investment is heralded as a chance for the company to really take off. “The investment from Coupa Ventures will...enable our joint customers to save money and leverage supplier performance as a competitive edge”, said Tom Kieley, SourceDay CEO. “We’re honoured to expand our relationship with the Coupa ecosystem”.
Looking ahead, Coupa will capitalise on community intelligence to help its partners make smarter spending decisions. “[Organisations will] place bets on which investments will quickly pay off to accelerate their growth and resilience in the post-pandemic economy”, said J.J. Freitag, senior vice president of Corporate Development at Coupa. “[And] we’re looking to back the best ideas across Europe and beyond to help businesses build back even stronger”.
Xcel Energy Achieves Record-Low Procurement Costs
New data shows that in 2017, Xcel Energy’s Colorado all-source competitive solicitation (ASCS) secured even lower prices than previously reported. In a February 2021 presentation, the company revealed a US$0.017/kWh bid for wind, a US$0.023/kWh bid for solar, and a US$0.03/kWh bid for solar-plus-storage. To put that into perspective, Colorado’s average January residential electricity prices came to US$0.126/kWh.
To Mark Dyson, co-author of the Rocky Mountain Institute’s paper on next-gen procurement, “[ASCSs are] a once-in-a-generation opportunity [to avoid] squandering capital and locking in customer costs for decades to come”.
What Is an ASCS?
As opposed to single-source requests for proposals (RFPs), all-source competitive solutions (ASCSs) take into account any and all bids that match a utility’s criteria. Companies traditionally use single-source RFPs. Why? Prices used to be well-known for hydropower, fossil fuels, and nuclear generation. But recently, companies have struggled to determine how much they should pay for emerging energy technologies.
In an ASCS, a utility company such as Xcel Energy Colorado will evaluate metrics of resource and asset ownership from several—in this case, hundreds—of bidders. By doing so, companies can get a good idea of an energy source’s median market price and evaluate the costs and benefits of various supplier combinations. Sometimes ASCSs work extraordinarily well: in its initial 30-day report, Xcel called the bids “unprecedented”. Four years before, in the company’s 2013 ASCS, it had received 55 bids; in 2017, it received a total of 417.
Should Companies Use ASCSs?
With its competitive bidding process, Xcel sourced 1,131 MW of wind generation, 707 MW of solar, 275 MW of storage, and 383 MW natural gas generation. Other companies may follow suit, as ASCSs deliver some of the best pricing and availability data on emerging sources of energy. The upshot: in the future, utility companies can use ASCSs to determine how to supplement traditional sources with new technologies.
This isn’t to say that ASCSs will solve every procurement problem. Common sense dictates that ASCSs will take much more time to run than their single-sourcing counterparts. Yet as utility companies look to procure efficient, effective modes of energy not just for this year but for the next five or ten years into the future, ASCSs start looking—dare we say—pretty powerful.
Regardless of whether companies use an ASCS or stick with single-sourcing, executives must note that interest in ASCSs has increased. According to Lawrence Berkeley National Laboratory (LBNL), between 2011 and 2019, 11 out of the 16 ASCSs launched post-2017. In other words, even if you don’t take advantage, your competitors might.
Regulation Going Forward
As more companies consider alternatives to single-source RFPs, regulators have a critical role to play. Dean Koujak, Director of Guidehouse Energy’s Sustainability and Infrastructure, explained to regulators in February that independent evaluators protect clarity, quality, and transparency. Single-source RFPs were simple; ASCSs will be a bit more complex.
Yet if regulators manage to keep energy sourcing open and equitable, ASCSs may be the future of energy procurement. “The power sector may invest US$300bn to US$750bn in the next decade on electricity resources”, said RMI’s Mark Dyson. They might as well invest it in the right bid.