Entrepreneurship and Vertical SaaS - Annual Meeting Highlights

Introduction

• Speaker: Mark Peter Davis, Managing Partner of Interplay
• Mission: Help entrepreneurs advance society
• Context: Segment from the annual meeting to update investors/limited partners (LPs)
• Panel Discussion: With founders from portfolio companies
  • Founders: Todd (Co-founder and CEO of Broadloom), Chad (Co-founder and CTO of Pepper)
  • Topic: Vertical SaaS (Software as a Service)

Panelist Introductions

• Chad from Pepper
  • Business: Software for the food distribution market
  • Background: Former Product Manager at Uber Eats
  • Market Size: Trillion-dollar food distribution industry
  • Pain Points: Complex supply chain, inefficient processes
• Todd from Broadloom
  • Business: Vertical SaaS for the flooring industry (website, CRM, ERP, payment processing)
  • Scale: 4,000 local flooring stores
  • Background: Formerly at Google and in ad tech
  • Market Shift: Pivot from ad tech to vertical SaaS

Understanding Vertical SaaS

• Definition: SaaS solutions tailored for specific industries (e.g., food distribution, flooring)
• Market Approach: Companies often discover inefficiencies and choose to target a specific vertical
• Pain Points Observed: Outdated processes, lack of technology adoption

Why Vertical SaaS?

• General Tech Trends: Cycle of bundling/unbundling in tech
• Unique Selling Points:
  • Easier customer service and acquisition
  • Focused marketing and sales to one customer type
  • Improved industry-specific solutions (e.g., inventory, regulatory compliance)

Business Playbook

• Software Focus: Initial market entry with software
• Expansion: Participation in the broader market GDP
  • Common methods: Payment processing, integrating deeper into suppliers/manufacturers

Market Expansion Examples

• Pepper: Partnering with food brands for new product launches
• Broadloom: Digitizing flooring industry; deeper partnerships with manufacturers
• Common Tactics:
  • SaaS-enabled marketplaces
  • Leveraging data and partnerships for more efficient distribution

Investor Perspective

• Value Proposition: Vertical SaaS offers diversified exposure to entire industries
• Economic Cycles: Balancing recurring software revenue and transactional revenue in volatile markets

AI in Vertical SaaS

• Industry Readiness: Varies by industry, generally slower adoption
• Internal vs. External:
  • Internal: Efficiency improvements (e.g., onboarding, support)
  • External: Enhanced customer-facing tools (e.g., AI-driven order management)
• Benefits: Reduced operational costs, improved customer support, faster product delivery

Customer Service in Vertical SaaS

• Importance: High net retention and customer satisfaction critical
• Support Strategy: Focus on specialized support teams; no outsourcing
• Efficiency Gains: AI tools enabling higher customer service capacity

Conclusion

• Insightful Journey: Vertical SaaS offers substantial growth and efficiencies
• Continued Partnership: Ongoing investment and support for portfolio companies
• Forward Outlook: Excitement about future advancements and market opportunities