Formation and Access- 10x Your Take Rate!
We are seeing a new control point pattern we call “Formation and Access,” which may be the most disruptive pattern we’ve seen in Vertical SaaS since the introduction of embedded payments.
At Tidemark, we are trying to open-source our thinking to help founders win; however, as investors, we can't give everything away publicly. This essay is part of a series of content written specifically for founders and operators. If that's you, you can request access to the full essay here or at the end of the preview below.
We are seeing a new control point pattern we call “Formation and Access,” which may be the most disruptive pattern we’ve seen in Vertical SaaS since the introduction of embedded payments.
Formation refers to helping entrepreneurs start a business in a new field or spin out of large existing organizations to create their own standalone ventures. Starting a business is incredibly challenging. Daunting barriers like regulation and competition mean many people want to start something, but don’t know how to get their project off the ground. This is where a new breed of Vertical SaaS Vendors (VSVs) comes in, acting as accelerants by breaking down the barriers for merchants looking to found a company.
Access is about solving key constraints in the new business by providing access to the key resources and relationships. Unlocking the right door for a founder can increase the speed of formation or increase the likelihood of the newly formed business succeeding. Access includes giving these new startups an advantageous position from which to reach customers, suppliers, and licensors. Doing so balances the scales against large players.
If you can help with both, you can charge a merchant a lot of money! We see that Formation and Access VSVs are earning 10x the take rates of traditional VSVs. This new breed is using this 10x economic rocket fuel to quickly take share and threaten to disrupt the incumbent vendor landscape. However, these Formation and Access VSVs need to resolve a couple of critical (perhaps existential) value proposition flaws to take advantage of this early momentum and build long-term sustainable platforms.
This essay will explain why we are excited about this idea and the potential pitfalls that founders pursuing it should be wary of.
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 with the button below!
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