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Every six months or so, I take a look at how the public markets are valuing next-generation software companies. There’s been quite a bit of volatility over the last five years, and this update is no exception. As of mid-June, the public markets value software companies at all-time highs.

The chart above shows the total enterprise value (TEV)/forward revenue multiple for the basket of public software companies. Just a quick reminder on these metrics. Enterprise value equals market capitalization plus debt minus cash and short-term equivalents. Forward revenue is the sum of the projected revenues over the next 12 months.

Just a few months ago, we partnered with Mattermost and led the Series A. We believe that open source applications will be an important part of the future of software because of their security, lower costs of customer acquisition and the flexibility they offer customers.

Today, Mattermost is announcing a $50M Series B from Y Combinator Continuity and Battery. I’m thrilled to partner with Ali Rowghani from Y Combinator and Neeraj Agarwal from Battery for the next leg of the journey. They both share the same vision of open source application software changing the enterprise landscape.

Over the last decade or so, I’ve compiled a metrics sheet to summarise a SaaS business. While no living document like this is ever perfect, this is currently the best board-level summary of the overall health of a business I have found. I’m sharing it so that others may benefit and improve it. If you have suggestions, please email me.

Google Sheet: Theory SaaS Metrics Template

Direct Download: Theory SaaS Metrics Template (xlsx)

Next week, on the 27th of June, Redpoint will host Office Hours with Guillaume Cabane. Guillaume is an exceptional marketer. He built the highly successful growth practices at Segment and Drift. He stands out because of his persistence at the cutting edge. I remember when he told me of how he used the Clearbit Reveal API to change the content of conversations in Drift pop-ups to meaningfully improve conversion. He’s always at the vanguard of using technology to drive awareness and demand for SaaS products.

Yesterday, Salesforce announced it would acquire Tableau for $15.7B. Tableau sells data visualization software and the team has built an incredible business. We analyzed the S-1 in 2014. The company has grown since its public offering to generate about $1.1B in revenue, growing at 29%. Let’s put this acquisition in context.

First, it’s the third business intelligence related acquisition in the past month. Google announced the Looker acquisition last week. SiSense acquired Periscope Data. And now Salesforce is merging with Tableau. This wave of consolidation in the BI world suggests this is a key area of competition amongst the biggest software companies in the world over the next decade. Collectively, these acquirers have spent $18.4B on these three businesses.

You’ve found product market fit. You’ve hired a team, including some managers. Your initial, small customer base is very happy. You’ve discovered an initial channel of customer acquisition that’s working. You’ve raised a meaningful round of capital. And then, right then, product innovation decelerates to zero.

The fast pace that characterized the past 12-18 months, when you would germinate an idea and write the code in less than a few days, has evaporated. Suddenly, the product and engineering teams are bogged down. Every innovation requires a Herculean effort to achieve.

Today, Looker is announcing they are joining Google Cloud. During the past seven years, Looker has evolved to become the business intelligence platform for the modern business, that sits atop the next-generation data warehouses like BigQuery, Snowflake and RedShift.

Throughout the journey, the long term vision has always remained the same: to become the single data layer across an enterprise. And over the last seven years, Looker has taken the first big steps to seeing it through by working with hundreds of customers to empower them with data.

Imagine a hypothetical startup with 10 account executives that is growing quickly. This startup has two AEs that outperform meaningfully, six that are at typical quota attainment, and two that are underperforming. Where should your sales enablement team focus their time?

This is the team’s performance last year. They generated 8.6M in bookings on 10M in quota capacity (which is really good). Most teams aim for 70-75% attainment.

In 2013, Scott Berkun authored a book called The Year Without Pants. Scott shared his experience working remotely for Wordpress. After I read the book, I wrote:

In the coming years, video conferencing and online meetings will become much more prevalent as stories like the ones Scott shares are told and retold. If you’re looking to understand how a fully distributed team used chat and video conferencing to build a world changing product, reading The Year Without Pants is a great way to answer those questions.

Before you raise your next round, ask yourself this question. Are there any key people you need to hire? Essential executives, critical engineers, important managers or anyone else? Your common stock value, or 409a valuation will increase the second you receive a term sheet. And the strike price of any new options will increase with the 409a valuation.

Let’s take a step back. When you hire someone, you’ll grant them a salary and options. An option is the right to buy shares of the business at some future point in time. The strike price of the option is equal to the value of the common stock, which is set by the company’s board periodically, based on a report by an independent appraiser, the 409a valuation.