Vertical Software Rollup

A strategy of acquiring and consolidating vertical-specific software companies that serve niche industries with reliable, recurring revenue. The approach focuses on buying software companies that are the dominant solution within specific industry verticals.

Key Points:

• Target Vertical Software Companies:

  • Focus on industry-specific software (vs horizontal solutions like Slack)
  • Examples:
    • Golf club management software (tee times, memberships, bookings)
    • Healthcare software
    • Public transit software
    • Law firm software

• Acquisition Strategy:

  • Make 10-20 acquisitions per year
  • Focus on companies that are:
    • Industry leaders in their vertical
    • Have reliable monthly recurring revenue
    • Low customer churn
    • Strong profit margins (mentioned 20%)

• Business Model Advantages:

  • Customers tend to:
    • Pay reliably every month
    • Rarely switch providers
    • Willing to pay for best-in-class solution
  • Software has high margins and low incremental costs

• Key Challenge:

  • Finding and maintaining good operators after acquiring companies
  • Need to maintain quality of operations after previous owner exits
  • Solution: Pull operators from personal networks who have proven track records