Contact: Scott Denne
Wall Street’s recent generosity toward software IPOs hasn’t gone unnoticed as a slew of such companies are looking to debut. Apptio and The Trade Desk recently set a range for their offerings and now Coupa has moved toward an IPO by unveiling its prospectus. The spend management vendor’s accelerating growth replicates a story that has played well lately and could enable it to top the valuation from its venture rounds.
Coupa offers cloud-based spend management software and an integrated (and free) portal for suppliers. The company believes that integrating supplier capabilities into the portal will help create a network effect to draw more buyers onto the software and vice versa. It still has massive sales and marketing costs, although there are signs that this strategy is beginning to work. Revenue rose 65% in 2015 to $83m and, more importantly, accelerated to 75% growth in the first half of this year. Coupa’s sales and marketing expense was 70% of its total revenue for the first half of last year, but dropped to 58% this year. Its net loss was $46m for the year.
Accelerating revenue has been a theme among SaaS IPOs. Talend, with 20% growth last year, fetches 8.5x trailing revenue on the strength of 34% and 38% year-over-year growth in the two most recent quarters. Twilio, which increased revenue 88% in 2015 from 78% the previous year, commands a 20x multiple. Coupa will be challenged to hit the heights of Twilio when it prices, although moving past Talend seems possible. Coupa and Talend have similar costs and the former’s higher growth should be enough to take it to 9x or beyond, giving it a valuation of approximately $1bn.
Consumer sentiment favors continued liberal multiples. According to 451 Research’s VoCUL survey in August, 17% of people are more confident in the US stock market than they were 90 days ago. That’s up from 14% in the same survey the previous month and just 5% from a year ago.
