Lesson 1: The goal of every vertical software company should be to find a path to market leadershipįor an aspiring vertical software business, market leadership is the prize.
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With the benefit of watching from the sidelines, we’ve tried to capture a decade of lessons on how to build industry-defining vertical software companies. Today, every industry runs on software, making the vertical software opportunity more valuable than ever before. In vertical markets, one or two vendors often dominate and capture most of the value. By focusing on a vertical market, these companies are able to trade market size for market share and in some cases achieve 50%+ market penetration. What we came to learn through investments like Shopify, Procore, Toast, ServiceTitan, Mindbody, nCino, Disco, and many others, is that vertical software companies could grow to be much larger than we expected.
At Bessemer, we are more confident than ever about the continued proliferation of software in every industry and we look forward to backing the next great vertical software founders doing so. Accordingly, we have updated this piece to reflect the changing face of vertical SaaS, deeper insights into pricing and packaging, and the emerging importance of B2B payments in vertical SaaS in a new Bonus Law. Since then, we have seen vertical SaaS continue to evolve-especially as new forms of monetization arise and augment the traditional software-based model. A few years ago, we published the initial version of our vertical SaaS manifesto.
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