Differences between horizontal and vertical market software
90% of business acquisitions fail.
But there are exceptions.
Mark Leonard of Constellation Software has built an empire buying 500+ vertical market software (VMS) .
And turned $25 million into $40 billion.
What are these magical niche software businesses...
Software falls into two buckets::
Horizontal software - can be used across industries
Vertical software - built for a specific industry
- Scheduling for bowling alleys
- Invoicing for magicians
- CRM for dentists
- Focus on a category
- More competition
- Big addressable market
- Big upside, exit potential
- Expensive to acquire customers
- Expensive to compete on features
This is where VC & big tech thrive.
- Focus on a category in an industry
- Don't have to invest as much in features
- Cheaper to acquire customers
- Less competition
- Smaller market
- Lower upside
This is where bootstrappers & holdcos thrive.
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