Market Structure Drives Strategy

When considering market sizes, the knee-jerk reaction is to think that bigger is better. For new founders, I’ll often see a slide in their pitch deck showing some gazillion-dollar TAM, and “all they need to do is capture 1% of that” to have a billion-dollar outcome. From there, they’ll wipe their hands of the whole market-sizing affair and get back to work.

The wily Vertical SaaS founder, the one who knows what they are doing, understands that the market drives the strategy. Understanding merchant fragmentation and total location volume is critical because this will dictate everything from what type of capital you need to raise to your eventual expand and extend product roadmap.

Vertical SaaS is a technology category that hosts many different business models, and which strategy is correct depends on your end market. Some markets are big, like restaurants, and some are small, like auto insurance. Size and structure matter for how you build your business and what capital providers you partner with.