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At Google, we tested everything. User interfaces, advertising targeting models, even hiring practices. One product team tested 41 different shades of blue to ensure maximum click through rate; but the company is now testing black links. That’s one enormous advantage of A/B testing - all the sacred cows must prove their beatitude to maintain their divinity.

As Looker founder Lloyd Tabb explained to me, it doesn’t work for early stage SaaS companies. There’s a key ingredient to AB testing that most SaaS companies don’t have, something that Google profited tremendously from. Huge amounts of user traffic. The image above is a screenshot from A/B Testing marketshare leader Optimizely.

The highest correlated factor to post-money valuations for Series A SaaS companies isn’t revenue or revenue growth, but negative churn. Revenue growth correlates to post-money with a 0.18 R^2. Revenue correlates at 0.3 R^2. Negative churn, or account expansion, correlates at 0.54 R^2.

Initially, I found that result astounding, because all of the public market research and valuation work focuses instead of multiples of revenue. But the more I reflected on it, the more logical it is, especially for an early stage company. Here’s why:

Half of innovation is invention. Creating an elegant, disruptive, and new experience is one of the greatest attractions of founding a company. A product that can change the way people view the world and interact with it – who doesn’t want to build that? Most start ups have no problem focusing time and attention on iterating, improving and perfecting product.

It’s in the other half of the innovation equation that startups often underinvest: go to market. If you build a disruptive product in the woods and no one is around, does anyone buy it?

Just how real is the sudden importance and profitability for SaaS companies? The median publicly traded SaaS company has improved net margin from -25% to -8.8% in less than two years, after a nearly four-year trend of negative growth in net margin. The initial spike in 2014 occurs two quarters after the first SaaS correction and the second occurs in late 2015.

Examining the trend by quartile, we see that the 75th percentile companies operate at breakeven. Companies in the 25th percentile and 50th percentile have been pushing profitability further and further into the red, only to reverse the trend beginning in 2014 after the first SaaS correction. So, it is the companies whose profitability has historically been worst who have been changing the way they operate.

The notion of channel sales in SaaS companies is becoming more common than in has been in the last few years, and for some businesses like Intacct, channel partnerships drive more than 50% of sales.

Channels used to be about software customization, delivery and support. Most SaaS has little customization, manages all the delivery and are better suited to handling the support. Plus, value-added resellers charged buyers on a per-project basis which doesn’t align neatly with the recurring subscription intrinsic to SaaS. So there hasn’t been a great fit.

In the past week, Oracle acquired two vertical SaaS companies. OPower is an Arlington Virginia based company that employs approximately 600 people. The company analyzes utility consumption patterns and helps homeowners reduce their energy consumption. Textura provides collaboration tools for the construction industry and is based in Illinois. Oracle paid $663 million, net of cash for Textura and $532 million for OPower.

These two acquisitions form a notable moment in time for the evolution of the vertical software industry. They establish benchmarks for valuing these companies at M&A. Both of these businesses had been public for at least 12 months, so the valuations aren’t coming out of the blue. Below, the table shows a comparison of the key operating metrics of each business and the ultimate acquisition multiple.

It is an election year. The Federal Reserve has changed its interest rate hike plan. Venture financing has slowed by upwards of 15% in the first quarter. Q1 GDP growth fell to 0.5% from 1.4% in Q4. How much have all these factors impacted SaaS companies? Are buyers purchasing less software?

Each quarter, publicly traded companies release two key figures: revenue per share and earnings-per-share. Wall Street analysts forecast these figures based upon company plans and their own research. The difference between the median Wall Street estimate and the actual figure provided by the company is called revenue/earnings surprise.

In ServiceNow’s Q1 Investor presentation are the first semblances of SaaS metrics in public company reporting. If you sift through the 40+ public SaaS businesses, you won’t find mention of annual recurring revenue, churn, account expansion, or cash collection cycles in most of them - even though these are the the metrics the management teams employ to evaluate and steer their businesses.

ServiceNow hasn’t published metrics on ARR or payback period, which for most public investors are still esoteric terms. Instead they frame their growth in three parts, familiar to SaaS operators everywhere: land + expand + retain. The image above shows Q1’s triptych of new customer additions, expansion as a percentage of new quarterly bookings and quarterly dollar revenue retention.

As the overall venture market environment evolves in 2016, so too does the SaaS and Software segment. The number of Series A, B, C, and D investments in software companies stabilized at roughly 170 per quarter from mid-2013 through mid-2015, before falling 17% in Q4 2015 to a two year low. In Q1 2016, SaaS rounds increased a modest 10%. The SaaS fundraising has slowed in parallel to the rest of the market. But early 2016 pace still exceeds the best quarters of 2010-2012.

It’s hard to read Boys in the Boat before I sleep. The stories of the 8 rowers awaiting the coxswain’s call at the starting line of a boat race remind me of the races I competed in with so many wonderful friends and oarsmen. Imagining those races - and in particular, placing second at nationals, the adrenaline surges and my heartbeat accelerates, resurfacing all those memories and moments.

Daniel James Brown, the author of the book, captures the most important element of rowing in a conversation between George Pocock, the legendary racing shell craftsman, and Joe Rantz, one of the members of the gold-medal crew, early in Joe’s rowing career. They chatted one evening after practice in the loft above the boathouse where Pockock built his iconic racing shells.