Vertical SaaS: Market Structure and Investment Strategy

Today CJ hosts Dave Yuan, the founder and partner at Tidemark — a legend in the world of vertical SaaS. Dave has been investing, advising, and building technology companies for over 20 years. Before founding Tidemark, Dave spent 15 years as a general partner at Technology Crossover Ventures (TCV), where he was fortunate to invest in and help 25 companies scale and win. Twelve companies have gone public, and eight have been acquired. Today’s conversation covers key heuristics, what’s wrong with classical vertical SaaS strategies, and the importance of thinking multi-product early on. This is a master class in how vertical SaaS companies come to dominate a market and a deep dive into the metrics they stay close to along the way.

As mentioned during the episode, Tidemark is launching its first annual Vertical and SMB SaaS Benchmark survey. You can complete the survey here if you’re a vertical SaaS or SMB/horizontal leader (https://www.surveymonkey.com/r/DXPNVWM). It is completely anonymous and takes ~10 minutes to complete. If you’re interested, the Tidemark team can walk you through your results compared to your peers. Survey participation also helps provide valuable insights in support of the broader vertical SaaS ecosystem and benefits your fellow operators.
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SPONSORS: Maxio | Tropic | Thoropass

Maxio is the only billing and financial operations platform that was purpose built for B2B SaaS. They're helping SaaS finance teams automate billing and revenue recognition, manage collections and payments, and put together investor grade reporting packages. 🚀 Request a demo at www.maxio.com/runthenumbers for 10% off your first year.

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Thoropass provides complete compliance management, continuous monitoring, and security audits through intuitive software and expert guidance – allowing you to do business with confidence. Learn more: https://bit.ly/Thoropass 🔒
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LINKS:
Tidemark's 2024 SMB and Vertical SaaS Benchmarks Survey: https://www.surveymonkey.com/r/DXPNVWM
If you liked this episode, check out Alex Clayton of Meritech on Run the Numbers: https://podcasts.apple.com/us/podcast/a-saas-metrics-deep-dive-with-alex-clayton/id1704418764?i=1000638155836
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FOLLOW US ON X:
@cjgustafson222 (CJ)
@davelyuan (Dave)
@tidemark_vskp (Tidemark)
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TIMESTAMPS:
(00:00) Intro + Sponsors: Maxio | Tropic
(04:26) Understanding Vertical SaaS
(07:16) Dave’s Investing Strategy
(09:55) Understanding Control Points in Vertical SaaS
(12:40) Sponsor: Thoropass
(19:24) The Journey to Multi-Product
(22:35) Debunking the Layer Cake Model in Vertical SaaS
(27:19) Exploring Multiplayer vs Marketplace in Vertical SaaS
(28:53) Marketplaces
(32:11) Challenges Faced by Marketplaces
(34:00) Vertical SaaS Companies: Obstacles and Opportunities
(36:01) Vertical Integration
(40:16) Key Metrics 
(48:58) Fair Harbor case study: A Vertical SaaS Success

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