VSaaS Principles
What truths guide vertical software success?
The Core Truth
You CAN monopolize your vertical. Most founders aim for 30% market share. The winners aim for 100%.
The trade-off: Smaller TAM, but you OWN it. A $100M market you dominate beats a $10B market where you're noise.
9 Keys to Monopolizing Your Industry
From Luke Sophinos's research on what every scaled VSaaS follows:
Foundation Keys (1-5)
| # | Key | Principle |
|---|---|---|
| 1 | You CAN Monopolize | Target 100% market share, not 30%. Trade TAM for market dominance. |
| 2 | Platform Law | Become your industry's ERP or get displaced by whoever does. |
| 3 | Beyond Software | Software alone isn't a moat (AI commoditized it). Own the app store, community, switching costs. |
| 4 | Shrink Your ICP | Dominate a VERY SMALL segment. Monopolize it. Then expand sequentially. |
| 5 | Hire From Industry | Customer-facing roles need domain scars. Pair SaaS sellers with "Industry Engineers." |
Scale Keys (6-9)
| # | Key | Principle |
|---|---|---|
| 6 | Payments Is Holy Grail | Capture % of industry spend. Toast gets 83% of revenue from payments, not software. |
| 7 | Embed Beyond Payments | LMS, payroll, lending, ads, compliance—multiple revenue layers in one platform. |
| 8 | Vertical AI Is THE Opportunity | Industry data behind login screens is an oil field. Public AI can't access it. |
| 9 | Retention Is Lifeblood | Switching costs and sticky features determine everything. |
The ICP Monopoly Sequence
1. Define VERY SMALL ICP
↓
2. Make them the happiest customers possible
↓
3. Monopolize that segment (aim for 80%+)
↓
4. Expand to adjacent segment
↓
5. Repeat until you own the vertical
Example progression: Trade schools → Beauty schools → All vocational → Professional education
Strategic Alignment Matrix
Before building, score your opportunity:
| Dimension | Question | Score 1-5 |
|---|---|---|
| Product Fit | Does this solve a hair-on-fire problem? | |
| TAM Ownership | Can you realistically get to 50%+ share? | |
| CAC Payback | Can you recover acquisition cost in under 12 months? | |
| Win Rate | Are you winning 30%+ of competitive deals? |
Threshold: If any dimension scores below 3, fix it before scaling.
The Pattern
Every scaled VSaaS player—Toast, ServiceTitan, Vacasa, Duck Creek—follows the same sequence:
Start with workflow
↓
Own payments
↓
Embed everything
↓
Compound with AI
Context
- VSaaS Platform — The tech stack that enables this
- VSaaS Protocols — How to implement
- Vertical Integration — The business model
- Principles — First-principle truths