Vertical Software Creates Value

Shaan Puri discusses how focusing on vertical-specific software solutions can be an incredibly valuable business strategy, even though it might seem less exciting than horizontal solutions that serve all industries.

Key Points:

• Vertical vs Horizontal Software Strategy:

  • Horizontal software (like Slack) can serve any company across industries
  • Vertical software focuses on specific industry needs (golf clubs, healthcare, transit)
  • Vertical solutions often have high retention because they're essential to industry operations

• Benefits of Vertical Software:

  • Customers rarely churn once they adopt the solution
  • Reliable monthly recurring revenue
  • Each vertical has specific needs that require tailored solutions
  • Examples include:
    • Golf club management (tee times, memberships)
    • Healthcare software
    • Public transit software
    • Law firm software

• Business Success Principles:

  • Success comes from taking simple principles everyone agrees with
  • Key is maintaining discipline and focus for decades
  • Similar to Warren Buffett's approach of:
    • Finding simple principles
    • Actually sticking to them
    • Executing consistently for long periods

• Market Performance:

  • Example company grew from $1.2B in sales to $3B
  • Market cap expanded from $5B to $31B
  • Shows potential for massive returns in "unsexy" vertical software

• Acquisition Strategy:

  • Focus on buying and consolidating vertical market software
  • Conduct 10-20 acquisitions per year
  • Use market cap growth to fund further acquisitions