Venture capitalists have been in love with vertical software-as-a-service businesses over the last decade, with several companies reaching billion dollar valuations, going public, or getting acquired.
This has traditionally made it more difficult for founders building vertical SaaS products in important real economy sectors, such as childcare or landscaping, to raise significant venture capital as many investors might have dismissed them because their TAM was “too small.” While MindBody was one of the early vertical SaaS companies to integrate payments as a key and differentiating product feature, they are not alone as a handful of successful and scaling vertical SaaS companies have followed suit. Let’s take a look at Toast, which is a management software and point of sale system for US restaurants and was recently valued at $1.4 billion. Like MindBody, Toast offers both SaaS and payments processing and the impact on their TAM as a result is significant.