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As Fred Wilson wrote over the weekend, Janet Yellen, the Chair of the Board of Governors of the Federal Reserve System (the Fed), indicated last week that the Fed would likely increase the federal funds rate, which has hovered around zero for the last seven years - since the collapse of Lehman.

In the last 35 years, the federal funds rate has varied from as high as 16% in 1981 to as low as 0.09%. throughout those cycles, venture capital has flourished from a cottage industry into $100B per year asset class. VCs are on track to invest as much capital this year as during the height of the dot com era. But, is there any observable relationship between the federal funds rate and the startup ecosystem?

When deciding to open source software, one of the key questions teams must answer is the license under which they will distribute their software. There are a wide variety of different alternatives. But, the three most common are GPL, Apache and MIT. I was curious if there was any relationship between type of license used by startup commercializing open source software, and their ability to raise capital, and exit.

There’s a “new” $4B startup today. A consumer hardware company called FitBit started trading on the Nasdaq this morning and it’s an impressive success story. We’ve examined the tremendous revenue growth GoPro experienced in a previous post. Impressively, FitBit is growing faster.

As the chart above shows, FitBit grew from $14M to $76M to $271M to $745M in revenue in four years, generating astounding growth rate of 170% per year. Of late, FitBit ’s growth rate has begun to outpace GoPro’s growth rate.

Open Source Software started the movement in the late 1990s. Since then, open source software has transformed the software industry. Today, many infrastructure software startups employ open source strategies to market their software and win dominant market share.

Open source is a disruptive distribution strategy. It allows potential users and buyers of a software to try it, evaluate it, and understand exactly how it works because the source code is freely available. Open source companies market to developers exactly how developers would like to be marketed to - with code.

Financial discipline is a hallmark of great companies. It’s what enables businesses to build exceptional go to market models, weather difficult times, and ultimately succeed. Sometimes, financial discipline in startups is imposed by financial markets, like in 2008 when the total amount of venture capital investment plummeted after Lehman imploded. Other times, financial discipline is imposed by founders and management teams. The tweet above is from Lew Cirne, founder and CEO of New Relic, a $1.5B market cap company serving developers, who deliberately raised small arounds at the outset of the company to impose financial discipline on his business. In other words, Lew valued patience with unit economics.

Compensation structures are one of the most interesting questions facing customer success organizations in software startups. How should customer success leaders structure their team’s compensation in order to align the objectives of individual customer success managers with those of the larger business?

At the Customer Success Summit, Boaz Maor, VP of Customer Success at Mashery presented his rubric for answering this question. I have copied his table below.

At Mashery, customer success managers are evaluated on five different objectives: product adoption, program expansion, value to customer/ROI, strength of the relationship, non-monetary value, and monetary value. Each field has a corresponding weight, used to calculate the ultimate bonus for the CSM.

As I prepared the S-1 analysis for ServiceNow, the third largest public SaaS company in the world, I came across a section in their latest annual report called Key Factors Affecting Our Performance in which the company describes the two ways they evaluate churn. One is common, but another is unusual. Below I’ve quoted their definitions.

Upsell rate. To grow our business it is important for us to generate additional sales from existing customers, which we refer to as our upsell rate. We calculate our upsell rate as the annualized contract value, or ACV, of upsells, net of losses during the period, divided by our total ACV signed during the period. The upsell rate was 36%, 31% and 30% for the years ended December 31, 2014, 2013 and 2012, respectively. Our upsells are primarily derived by an increase in the number of seat licenses purchased by our customers and are also derived from the addition of other subscription services.

Worth $11.5B, ServiceNow is the third public SaaS company, after Salesforce and LinkedIn. Based in San Diego, ServiceNow employs roughly 3000 people, and sells a system of record for IT operations teams to manage IT assets, facilities, and human resources. ServiceNow’s software allows clients to develop custom applications for their own needs, often with the help of the company’s professional services team.

The role of the marketing team within SaaS has stretched from simply engendering awareness and creating interest, to guiding customers much deeper into the funnel. Steve Patrizi created the schematic above that illustrates the idea beautifully.

In traditional go-to-market models, marketing teams fill the very top part of the funnel. When a potential customer enters the consideration phase of the buyer journey, the marketing team transitions the lead to his sales account executive, who educates the customer from the consideration stage through purchase.

We may have been talking about SaaS companies for more than a decade, but we’re still just at the beginning. The legacy software companies including Oracle, Microsoft, SAP and and IBM control 83% of the market cap of software businesses, representing $830B in market cap. The largest SaaS company, Salesforce, is just about half the size of SAP, and Microsoft is 8x bigger.