#135: Vertical SaaS Investor Shares Proven Paths to Scale Up Big – Dave Yuan

Mar 14, 2025

Dave Yuan, founder of Tidemark Capital and investor in successful vertical SaaS companies like Toast and ServiceTitan, shares invaluable insights on scaling strategies. He discusses the significance of control points in thriving markets and the evolving landscape shaped by AI. Dave emphasizes the importance of community among founders, innovative growth frameworks, and adapting to challenges posed by new technologies. He urges vertical SaaS entrepreneurs to harness AI thoughtfully to enhance their offerings and stay competitive.

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ANECDOTE

Toast's Expansion Strategy

Toast started with a point-of-sale system and mandatory embedded payments, improving customer experience and data collection.
They expanded to back-office functions like supplier management and front-office features like online ordering and loyalty.

ANECDOTE

CCC's Supplier Extension

CCC initially sold claims management software to auto insurers.
They leveraged this to offer estimating software to auto repair shops, aligning estimates with payers and expanding their offerings.

INSIGHT

Marketplaces in Vertical SaaS

Marketplaces are more common in European and Australian vertical SaaS businesses, sometimes preceding software development.
Australian marketplaces often vertically integrate to offer software, increasing their moat against US competition.

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Dave Yuan is the founder of Tidemark, an active growth equity investor focusing on vertical SaaS companies with outsized advantages that can become “control points” in their markets and grow very big. Dave and Tidemark have invested in successful companies like Toast, ServiceTitan, Karbon and Dutchie.

In this episode, Dave shares some of the most useful strategic growth frameworks for vertical SaaS companies to grow through winning market share, expanding with additional products, and even extending through an industry ecosystem serving new markets. We also talk about the impact of AI on established vertical SaaS players and how it’s both an opportunity and a thre

Tidemark supports the global community of practical vertical SaaS founders by publishing their strategic growth frameworks, their annual Vertical SaaS Benchmarketing Report, and they host the annual Vertical SaaS Collective Live conference for founders.

Quote from Dave Yuan, founder at Tidemark

“Vertical SaaS founders should not be asleep with AI. You can wave it off, view it as a toy, and say that no one’s going to trust that outcome or use it. That may have been the case, but things are changing really quickly.

“Lots of smart people are making it better every month, and you have a massive opportunity to improve it with your data and workflow.

“Jump into it to control your destiny. Don’t get caught sleeping without AI in your product in a useful way.”

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