One vSaaS Breakdown:
You all asked for it :-), so here it is…
The Vertical SaaS Bible Launches TODAY !!!
(To Linear Subscribers Only)
Hi Friends,
For those of you that don’t know me, I’m Luke. Thanks for being here.
I'm a Vertical Software Founder, Operator, and Investor and love writing this newsletter every week.
I currently serve as the CEO of CourseKey, one of the largest vertical software businesses for Trade Schools in the United States. We are an operating system for the industry that 300+ enterprises like Paul Mitchell and Lincoln Tech (NASDAQ: LINC), use to run their business.
I’m also a vertical SaaS Advisor at Atomic.vc - the pioneer of the venture studio model and creators of HIMS & HERS (NASDAQ: HIMS) as well as OpenStore, among many others. I support talented folks at Atomic in creating and scaling new vSaaS companies.
I'm an early-stage investor in 15+ vertical software companies including Joy (vSaaS for Weddings), Gemist (vSaaS for Jewelry Stores), Supermove (vSaaS for Moving Companies) and Betr, to name a few.
I'm also an aging Thiel Fellow, class of 2016 :-)!
But enough of the credibility stuff!
Most importantly, I’ve built my vertical SaaS business brick by brick over the last decade and have the battle scars to prove it.
From our founding in my college dorm room, to a high-flying Series B stage vc-backed company with nearly 100 employees, to enduring the SaaS Crash of 2021 and cutting 50% of headcount, and now focused on growing efficiently and profitability with the ambition of owning the Trade School software vertical.
I’ve seen a lot on this journey. I’ve had <1 week of cash. I’ve done big layoffs, I’ve made multiple phone calls to make payroll, I’ve walked into meetings where the outcome was life or death. Quite frankly, I’ve made every mistake in the book over the last decade.
But through the help of so many others, the team and I have persevered to build something special.
Today, I’m packaging all of these experiences into one place…
It’s called The Vertical SaaS Bible.
It's jam packed with the stuff they don't teach you in school. The things that I've learned the hard way so (hopefully) you don't have to. It’s a library for you to enjoy.
What’s included?
1k+ industries ranked by revenue and segmentation
500+ SaaS investors
50+ founding and operating playbooks
50+ vSaaS company case studies
And more…
Maybe, just maybe, it will help you build, operate, or invest in the next great Vertical Software company.
Thanks for checking it out. I hope you enjoy it…
With gratitude,
Luke Sophinos
One Biz Story
Is Vertical SaaS a Zero Sum Game?
The market share that public vertical SaaS companies capture is SIGNIFCANTLY stronger than horizontal peers.
It has to be when you’re going after one industry.
Does that make it zero sum?
What do you think?
One ‘How To’:
How To Sell Your Vertical SaaS Business
So you want to sell your vSaaS business?
First let's talk about buyers, the type of buyer will help you determine who is a good fit. There are typically four types of buyers:
#1. Growth Equity
#2. Private Equity
#3. Strategic
#4. Entrepreneur
#1. Growth Equity Firms are typically looking for…
$8M+ ARR (some go as low as $5M)
20%+ YoY Growth
100%+ Net $ Retention
80%+ Gross Logo Retention
Profitability or very close to it
They are looking for growth opportunities - roll Ups, platform plays, adding payments, etc.
#2. Private Equity Firms are typically looking for...
$10M+ of ARR, most really play bigger today though, in the $20M+ ARR range
10%+ Growth Rate
100%+ Net Dollar Retention
80%+ Gross Logo Retention
Profitable
They are looking for cost reduction opportunities, international expansion, etc.
#3. Strategics
Strategics wan't products/SaaS that complement their own OR they just want to buy revenue and/or teams.
There is no rule around metrics here, many aren't profitable. It's all dependent on what the strategic is aiming to achieve.
#4. Entrepreneurs
These are folks that are typically aiming to buy a smaller SaaS business and scale it. It's a good fit for bootstrappers who've built a biz <$2M ARR & profitable.
Some folks specialize in flipping it to a GE/PE/strategic OR they just want a cash flowing asset.
Once you identify which bucket you're aiming to sell to, there is a few ways to go about selling...
#1. Hire a banker
Bankers are expensive, & take fees in the 2-5% range, often with a $1M floor.
Bankers are great if you've got an asset everyone wants, as they can play different bids off one another & drive up the price.
That's not the reality for most, so be careful here.
#2. Go out on your own
It's worth mapping out a list of buyers that would be a good fit for your biz, mapping out strong connections ie. folks you know whose business they bought, and sending them a quarterly update.
The goal here is to get them to bite when you're not selling!
#3. Cozy up to a strategic
Build the integration, create a moat around your product so it isn't worth them building it, get really close with Corp Dev.
Do it with their competitors too. Tell one you're thinking about selling, get an LOI, then leverage it to get other offers.
#4. Leverage an online marketplace
For smaller SaaS companies this is a good approach. Theres a whole host of online SaaS marketplaces where you can list your biz for sale.
I'm an investor in acquire.com and have heard a bunch of success stories from folks taking this path.
This is all pretty high level, and I could write a book on my experience here.
But at a thousand foot view, this is what I've seen work.
Best of luck! You've got this...
Have a product or service that would be great for our audience of vertical SaaS founders/operators/investors? Reply to this email or shoot us a note at ls@lukesophinos.com
The "verticalsaasbible.com link is broken on every site you have and the latest podcast you did with Houk