Vertical software: a founder’s guide to success

This article was written in 2017. For our latest and updated iteration please read, “10 lessons from a decade of investing in vertical software.”

Brian Feinstein
Bessemer Venture Partners


A few years ago Bessemer published “The Industry Software Revolution”, a white-paper showcasing the fundamentals of and future opportunities in vertical software. Since then, the vertical software industry has continued to mature from a little-known underdog to a fast growing segment in the entrepreneurial ecosystem. In the past half decade, the market size for vertical SaaS businesses has nearly tripled to support numerous $1B+ businesses and a new wave of cloud players that’s kept us busy. To date, Bessemer has one of the largest vertical software portfolios in the venture business with 25+ investments across education, real estate, construction, healthcare and more.

The prize for vertical software founders continues to get bigger. The industry has more than tripled since 2010.

Today, we’re publishing an updated report to reflect our continued enthusiasm for what is often considered a “small and sleepy” market. This time, we’ve built on learnings from past portfolio companies to provide a framework for new founders looking to build enduring vertical software.

Here’s a taste of what you’ll find inside:

1. Why build vertical software? There are many reasons but we think this is a no-brainer due for three reasons. First, the total market cap for vertical software is big and getting bigger (now at $150B, with a “B”). Next, vertical software companies benefit from winner-take-most dynamics in their industries. Take Veeva, for example, which has eclipsed 60% market share in pharmaceutical CRM software. In vertical software, buyers buy what their peers are buying — enabling an early leader to pull away from the pack. Lastly, we think the exit opportunities for vertical SaaS have become more attractive in the past decade thanks to growing PE interest in software and an expansion in public vertical software multiples.

2. How to build a successful vertical software business?

  • Choose your markets wisely. The #1 reason we pass on vertical software companies is because we lack confidence in the total addressable market (TAM). Our advice to founders is to choose your market wisely and run towards areas where you have domain expertise and a shot at building a $100M+ ARR business.
  • Execute flawlessly. We lay out best practices in customer led development, scaling a sales and marketing team, and vertical software benchmarking data from amazing companies in and outside Bessemer’s portfolio.
  • Pursue multiple acts. The best vertical software founders capitalize on their market leadership to pursue “multiple acts” after they get to meaningful scale with their core product. We lay out a few of the second acts we’ve seen in the past, including M&A, cross-sale of complementary products, marketplace development, and integrated payments.

3. Where are the future opportunities? We’ve mapped out the market of incumbents and new cloud entrants across the largest industries in the world.

If you end up building the next vertical category killer, please contact us first at