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In 2013 with 40 employees, Stripe adopted email transparency, a policy that makes most emails public to everyone in the company. They posted an update in late 2014 about the success of email transparency with 164 employees. At first blush, it may seem radical to funnel emails of 164 other people to everyone’s already overflowing inbox. But it works brilliantly because it creates a policy around Institutional Memory, something very few companies do well.

Every morning, it seems like a startup raises a massive growth round. In fact, the data proves the point. In 2014, there were 251 working days and 211 $40M+ growth rounds - just about one per day.

In contrast to the frenetic private market, there were 15 US IT venture-backed IPOs with offerings greater than $40M last year, slightly more one IPO per month in 2014. Private market rounds were 14x as common as IPOs in 2014, compared to the 2004-2007 era, when IPOs were about as equally common as large private financings. As Bill Gurley wrote, “These large, high-priced private financings are the defining characteristic of this particular technology cycle.”

Like most things in a startup, a sales commission plan should evolve as the company scales. For example, as Mark Roberge, CRO of Hubspot, wrote in The Sales Acceleration Formula, Hubspot adopted three different sales compensation plans throughout its early evolution which embody the three key ingredients of a sales compensation plan.

Hubspot’s first sales plan paid $2 of commission for every $1 of MRR an account executive booked. When the company decided to focus on revenue retention, the sales team adopted a new sales model. Account executives were divided into quartiles by customer retention. The top quartile received $4 of commission for $1 of MRR; the next quartile received $3, and so on. Hubspot’s third sales model paid $2 for every $1 of MRR, but not immediately. 50% of the commission was paid in the first month, 25% in the sixth month, 25% in the twelfth month - provided of course, the customer was still subscribed.

Whether implicitly or explicitly, it’s critical for a startup to map out accounts to understand the purchasing dynamics of a buyer. When sales teams start selling, their goal should be to create the sales playbook. The playbook all begins with understanding the key dynamics among the five players in the sales process. These are the five people:

The Proponent of the Sale champions the sales. The Salesperson must equip this champion with all the tools to convince the other stakeholders to pursue the transaction.

If you want to understand how to build a great SaaS sales organization, you should read Mark Roberge’s The Sales Acceleration Formula. It’s the single best book on the topic.

Mark is the Chief Revenue Office at Hubspot, a company which has created tremendous success by perfecting the inbound marketing plus sales model. The book is invaluable for every founder, CEO and member of the management team because it not only explains how the Hubspot sales team is structured, but why the structure came to be.

In 2.5 years, Adobe has transformed its business from a software license business into a SaaS business. It’s been a remarkable transition, and one not talked about very much in the SaaS world. Transitions from licensed software to SaaS are rare. The travel and expense management behemoth, Concur, recently acquired by SAP for $8.3B, is another great example that made the transition first from CD-ROM packaged software, then to enterprise license software and then to SaaS.

Leads are the lifeblood of every SaaS company. As a SaaS startup grows, the limiting factor of the business quickly becomes demand generation. Can the marketing team generate enough leads for the inside sales team to attain their monthly quota? The Marketing team’s mandate is to generate these leads in a cost-effective way and develop a portfolio of lead-generation mechanisms. Ideally, these generate inbound leads, who often convert at 2-3x the rate of outbound leads. Below are the five marketing channels I’ve observed at SaaS companies.

Over the last 15 months, the typical high growth public SaaS company’s multiple has halved. The chart above plots the average enterprise value to forward revenue multiple for established SaaS companies and high growth SaaS companies. High growth companies peaked in February last year at about 22x forward revenues and have fallen to 11x on March 1, 2015. Established companies dropped similarly from 6.6x to 4.5x.

The chart above shows the same figures per company. Drops are common across the board. The only companies with increases in multiples are Constant Contact (CTCT), BazaarVoice (BV), Qualys (QLYS), and ProofPoint (PFPT), none of which are High Growth companies, by this analysis’ definition. (The Box chart is empty because they’ve only just gone public.)

Every SaaS company should be focused on mitigating churn because greater retention enables a business to grow far more rapidly, to reduce the cost of customer acquisition, and to slash the amount of capital required for the business to grow.

But there’s one additional reason to focus on churn: predictability. The more dollar churn a business creates, the less predictable its performance - and vice versa.

Let’s paint the picture for a hypothetical startup which generated $2M in revenue last year and forecasts growing to $5M this year for 150% annual growth. The chart above plots the Carry Over Revenue for the company as a function of annual dollar churn rate.

In a recent survey, 40% of VCs pointed to SaaS as the startup sector most likely to be impacted by a market correction. There’s no question that the early stage SaaS founders are benefiting from substantial multiple expansion and pre-money valuation increases. But I was curious about how widespread aggressive investments are in software companies. As the data below shows, the seed and Series A markets have been relatively stable, but Series B rounds have seen a dramatic acceleration recently.