The Long View

Market Structure Drives Strategy

A small market does not mean a small opportunity. Finance your business correctly, and bring on the right thought partners like Tidemark to help you expand and extend; your opportunity might be bigger than you think!

When considering market sizes, the knee-jerk reaction is to think that bigger is better. For new founders, I’ll often see a slide in their pitch deck showing some gazillion-dollar TAM, and “all they need to do is capture 1% of that” to have a billion-dollar outcome. From there, they’ll wipe their hands of the whole market-sizing affair and get back to work.

The wily Vertical SaaS founder, the one who knows what they are doing, understands that the market drives the strategy. Understanding merchant fragmentation and total location volume is critical because this will dictate everything from what type of capital you need to raise to your eventual expand and extend product roadmap.

Vertical SaaS is a technology category that hosts many different business models, and which strategy is correct depends on your end market. Some markets are big, like restaurants, and some are small, like auto insurance. Size and structure matter for how you build your business and what capital providers you partner with. 

To be clear, you can build wonderful companies anywhere on the above map, but how you do so will be very different. 

The market size can be viewed as a two-by-two grid, with one axis representing the total number of available locations and the other representing ARPU. 

The important thing is that venture-scale businesses can be built in everything but the lower-left quadrant. We have invested in companies in every other group. But knowing where you are is crucial.

We are trying to open-source our thinking to help founders win; however, as investors, we can't give everything away in public. If you're an operator or founder, you can request access to the rest of this piece here or below, giving you case studies on companies that succeeded in which quadrant, how to do the math to figure out your TAM, and principles for success.

Dave Yuan

Founder and Partner, Tidemark

April 2024

The information presented in this post is for illustrative purposes only and is not an offer to sell or the solicitation of an offer to purchase an interest in any private fund managed or sponsored by Tidemark or any of the securities of any company discussed. Tidemark portfolio companies identified above are not necessarily representative of all Tidemark investments, and no assumption should be made that the investments identified were or will be profitable. For additional important disclaimers regarding this post, please see “ Purpose of the Site; Not Investment Advice; No Recommendations” and “Regulatory Disclosures” in the Terms of Use for Tidemark’s website, available at Terms of Use (

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