Tidemark 2025 Vertical SaaS Report

Live from Schenectady, New York, it's the Metrics Brothers, Growth and CAC.

And I'm Growth, better known as Ray Reich, founder and CEO of Benchmarkit.

And I'm CAC, better known as Dave Kellogg, EIR at Balderson Capital Independent Consultants, and the author of Kellogg.

And together we are the Metrics Brothers.

And we go together like gravity and acceleration.

Ah, are you saying we need to move fast today, like 9.8 meters per second squared?

No, Growth.

Let's keep our feet planted here squarely on Earth and talk about vertical SaaS.

Well, gravity will help us do that, but why discuss acceleration when talking about vertical SaaS?

It does seem odd, but because in a recent benchmark report from Tidemark, among other things, they use some pretty fancy language like control points and not one, but 3 different types of gravity to highlight the advantages of vertical SaaS companies.

Ah, yes. That 2025 Tidemark Vertical and SMB SaaS Benchmark Report. Strange bedfellows, maybe.

Yeah, that's the one. Kind of ostensibly a shotgun marriage between SMB and verticals, but we'll see. That's the report.

Okay. Well, before we take off, let's hear a word from our sponsor. The Metrics Brothers is proudly sponsored by Benchmarkit, the B2B AI and software industry's largest, broadest, and most contextualized benchmarking index. Dave Kellogg and Ray Groth Wright have put the Metrics Brothers podcast on hiatus for the remainder of 2026. All episodes we have ever recorded are still available on your favorite podcasting app. You can reach Dave at Kellogg and Ray on LinkedIn at Ray Reich. Thank you so much for listening to the Metrics Brothers podcast.

So, Ray, before you dive in, let me start with a quick overview of the report. It's the Tidemark Vertical and SMB SaaS Benchmark Report published in about November of 2025. There's no date on the COVID sheet, but when I Google it, I find it on Matt Harney's SaaS Letter, and I think it was the November-somethingth edition, and he called it recent. It's written by Dave Yuan, who I think you know, Andrew Walsh, and Alia from Tidemark Capital. It's a 60-side report with an N of 200+. They don't give us the precise number. They just say more than 200. It covers a really broad range of industries. If you look at some of the kind of respondee stats, it goes 70-15-15, US, Europe, other. So it's 70% US, kind of 30% non-US, and that split 50-50. between Europe and other. And then, in terms of capital raised, and I think this is important, it's 20-20-20-30-10. Okay, I know that's hard, but 20-20-20-30-10, meaning 20% bootstrap, 20% $1 to $5 million, 20% $5 to $20 million, 30% $20 to $100 million, and 10% $100 million plus. So, this is 90% are less than $100 million. 70% are less than $20 million.

You know, Dave, I was actually surprised because I thought they were segmenting it by ARR or revenue size. And it took me a couple of minutes to realize this is one of the first reports I've seen segmented by capital raised. Have you seen that before?

I haven't.

I was initially thrown by that as well, Ray. The telltale was they put zero and then they put parentheses bootstrapped and that it wouldn't have said that. Right. That was the clue that it was about capital raised. Because you wouldn't call a zero ARR company bootstrapped unless it was bootstrapped. So yeah, it was a little bit confusing. And no, it's unusual, not necessarily bad, to be honest. I'm happy to see it. But yeah, I think it's quite easy. And this will be a general criticism of the report. There's no footnotes. There's no little extra data that says, here's the exact question we asked, or here's exactly what this means. They kind of leave it up to the reader to notice stuff like Hey, wait a minute. And they do say in the subtext there, uh, represent a healthy mix of funding stages. So they're kind of cluing you in. But if you're just skipping through this thing fast, you'd easily think that was ARR size.

Yeah, well, because I, I do know David, and David, you know, he spent 16 years at TCV, so pretty good track record, been on the boards of a lot of great companies such as Toast, etc. Um, they partnered with 26 other firms to syndicate the research, so pretty broad distribution. And the first year they actually conducted this research and published it was 2024. And one thing I did like about the report was they called out that only 17% of the participants this year were repeats from 2024. So very different segments and cohorts of customers or companies, I should say.

So I wouldn't say I'm super familiar with TCV, but I've known them over the years, Ray. And I would say that they were kind of the original growth stage venture capital firm, right? TCV standing for Technology Crossover Ventures. And the crossover was literally between kind of public and private or between early stage and late stage. So interesting firm with a long history, and I'll let you keep going from here on their report.

Yeah, it is interesting because on one of the earlier pages, I think it's page 5, they do say that their average investment is $30 million to $100 million. So it really tells you it's that growth equity funding. But let's go to slide 13, starting on slide 13. And one of the narratives that they provided in this report was that the control point predicts the performance of a vertical SaaS company. And when you look at this slide, it talks about what is a control point. And a control point is things— actually, I just think they're a system of record. And they divide them into 5 categories, Dave. They have commerce front office, 29% of the respondents, back office, was 23%, things like accounting platforms. Employee management was 14%, and fintech was 9%. But then they have this other category, which is 25%. But it was interesting. Before I go into it more, I thought the way that they define control point, I think I might think of this as a system of record.

Yeah. Or even more simply, I might just think of it as your first product, like the category of your first product. Look, on this report, I think it's a pretty good benchmark report. I have some quibbles with the language. There's a lot of $2 words in here and a lot of almost unnecessary concepts. And I think— but my 2 criticisms are one, I never really— I read this thing like 3 times before I understood what the control point was, and I'm not convinced it's necessary lingo. And I do have to point out, Ray, that slide 13 just cracked me up because they have the, once again, some fancy language, the VSKP framework. Right? Ooh, the Vertical SaaS Knowledge Project framework, which provides a 3-step formula on the route to category leadership. And the first step is, and I kid you not, win.

That's a really good strategy, Dave.

I think winning is step one is just an outstanding strategy if you want to win a market. And then it's expand. So, go multi-product and then it's extend through the value chain. I know we'll drill into this later, but I just thought it was absolutely freaking hilarious that a 3-point framework on how to win. Step 1 is win. Yeah.

Well, so I guess we would consider then a company like Salesforce as a control point in the CRM category.

Well, they certainly won. They followed step 1. But I would define the control point for Salesforce to be SFA, right? The category they entered in was an SFA. If I were to apply this to Salesforce, It would be go win in your beachhead market, which for them was SFA, Salesforce Automation, then expand Service Cloud, which I ran for a while, which was now bigger than Sales Cloud, by the way. So, they landed in SFA. They extended to customer service. I'm sorry, expanded through customer service and then extended through the value chain, extending offerings to key stakeholders throughout the value chain. Again, a lot of MBA words in here. And I'm not even sure it's a good idea. In Salesforce's case, I can give you at least one example of it because the idea is own a market, SFA, extend your product line. These are not exactly breakthrough slash revolutionary ideas, right? But like, hey, win in your core market, expand to adjacent markets, and then figure out how to sell to your customers' customers, right? Or customers' suppliers, which is what their extend thing is. And just as a simple example, in Service Cloud, we sold a product that was a customer deflection portal. So, we were now directly in front of our customers' customers, right? We didn't technically sell it to them, right? The customer bought it from us. But I'm just pretty dubious on step 3 here. Look, you could build one hell of a SaaS company on step 1 alone. Step 2 is what Thomas Otter calls the second album problem, which I love. Because it's a very hard problem, right? A lot of bands, one-hit wonder bands, never get a second album. And then number 3, I just think it's kind of a reach.

Well, speaking of nice fancy words, right? We always talk about in enterprise software, hey, you have to have some defensibility and you need to have your moats. But on slide 14, they decided to call that something a little bit different. Dave, you want to talk about why we talked about gravity at the beginning?

Yeah, yeah. So, this is the slide where they talk about gravity and they say, look, to win the category, you have to, quote, now occupy the control point. And the control point is the most important system, the last to be thrown out. Again, I don't love these definitions because it's really, in my mind, the primary market. By the way, Ray, examples would help here. They do have links. I didn't read their essay on control points. Maybe that article has— examples in it, but particularly in the third point on the prior slide, I just needed more examples to understand what they were talking about. But back to gravity, basically, you want workflow gravity. You want to be the systems that others integrate into. That to me is like the definition of the system of record. You want data gravity. You want to hold the most critical data. That is also part of the definition of a system of record in my mind. And then you want account ownership gravity. I actually thought this was kind of an interesting point. Which is you want to sell to the highest-ranking individual in your customer org. So, for example, at Host Analytics, we sold— now Planful— we sold to the VP of FP&A, which is technically speaking not the senior-most person in finance, who's the CFO. It didn't really hurt us that much. Now, you can argue Anaplan did a better job talking to CFOs. Adaptive Insights certainly didn't. So, I don't know, but I do think it's an interesting point. Are you like BlackLine didn't? There's a lot of people who never get to that top-level buyer.

Yeah.

RevOps versus CRO, right? We can get lots of examples, but certainly as a general rule, it's better to be selling to the top dog, if you will.

Yeah.

One of the things I was surprised that they didn't really double-click on at all was traditionally vertical SaaS is considered to be a more defensible category than horizontal SaaS because of things like domain-specific knowledge and workflows. You know, those industry-specific downstream, upstream workflows, and even unique insights into industry regulatory and compliance capabilities. To me, those are all kind of moats created by vertical SaaS that they really didn't talk much about.

Yeah. I mean, again, Ray, this is kind of a strange report to me. It's kind of half opinion piece, half benchmark study. And I'm going to share your view on vertical SaaS, which is vertical SaaS. It's about 2 things. One, it's about vertical, right? Like, oh, we're Veeva. We've built a CRM for pharma companies because they have different requirements. And then, By the way, their expand would be, we've expanded into document management with Viva Vault because I think it's called Viva Vault because people, pharma companies have a lot of very critical documents, right? So, but they— so to me, vertical SaaS is about 2 things. One, vertical knowledge as captured in the software, including compliance and other requirements like you stated. And then 2, there's usually an all-in-one component, which is what they're talking about here, which is sure you could go build a best-of-breed system. But I've got all the components integrated and integrated just for you because you're in this vertical. So, to me, vertical SaaS has both of those elements. It's kind of just for you. We know your vertical and it's, oh, lots of piece parts you could assemble from somebody else, but we've done that work for you.

Totally agreed. Well, let's move on to the next topic, which is another— I almost thought it's a little bit of a non sequitur for a vertical SaaS. An SMB benchmark report, but it's that it starts on page 26, and it basically says going multi-product drives growth. Well, that's true in any SaaS, you know, right? Whether it's horizontal, like we talked about Salesforce, or in vertical SaaS. But let's just talk about some of their data points. So on page 28, they say that multi-product companies increase their target addressable market, and. It basically said with a single product, it's 7,500 companies as the TAM and multi-product was 80,000 companies. And initially I'm like, wow, that's pretty good. It's almost 11x bigger, but I didn't see where the example came from, who those additional 72,500 companies were. So I kind of put that in a yellow cautionary tale was because I don't know how they calculated that expanded TAM, Dave.

Yeah, I think it was just self-reported. I think, again, they're not helping us because they're not providing the detail, the footnotes, the questions. But as I understood this, I think they just asked people, how many companies are in your TAM? And those who self-reported as multi-product self-reported a lot more logos than those that weren't. I think that's what they've done. And look, Ray, there should be no surprise here. I mean, that one, the depth of the uplift is a lot. It's not obvious to me why it's 10 times greater. But saying that the multi-product TAM is twice as big as the single product TAM, right? It kind of makes sense. It's also inherently apples and oranges here because they're comparing companies in different verticals. But look, intuitively, if you have more products in the bag, your TAM got bigger. So that makes sense to me. Again, it's nice to see some of these intuitive things validated with data. But rarely in this report do I go, oh my God, huge insight. Here's something I didn't expect.

Yeah.

Yeah.

Well, I'm going to give you a couple of things you may not have expected. So this is page 30. It was a benchmark chart and I love benchmark charts. First of all, it says, hey, multi-product companies and, um, at median are growing at 60% versus 50% for single-product companies. I'm like, okay, inherently that makes sense. Right next to it, they have NRR. Okay. Multi-product companies, 110% NRR. 105% for single product. Also, I would expect that, right? If you're selling a cross-sell or upsell, you're going to be expanding existing customers. So NRR would be higher.

I expected it to be a lot bigger than the 5% gap, but keep going.

Yeah. But here's the 2 counterintuitive things that, you know, if I was a benchmark company, I'm not sure if I would even include this. But one thing it says is that GRR, gross revenue retention, is lower for a multi-product company. It's 90% versus a single product company is 92%. And when I saw that, that just, it didn't make sense to me, Dave.

Yeah, it didn't make sense to me. Yeah. I mean, they have a paragraph on it that is a little bit, again, kind of jargony. You know, this could indicate that churn dynamics are more tied to control point stickiness than product graph. First, I don't really know what that means. And can you, you know, can you say that in plain English, please? But second, no, it's completely counterintuitive and completely beside the point. The whole purpose of being multi-product in my mind is that you have more stuff to sell people so you can expand existing accounts and hopefully get more than a 5% uplift in median NRR. And on GRR, it's that you should be able to limit kind of the bleeding that when somebody says, oh, I want to buy fewer seats of product 1, you can whip out a card and go, wait, I've got product 2 and 3 to sell you so I can increase the value of your account because most people would leverage measure GRR at the account level, right? That they're not going to measure product churn when they're talking about GRR. If you stop product 1 and buy product 2, then I have something, you know, that would keep your GRR flat, just say it was the same bill. So this is totally counterintuitive. I don't know what to make of it.

There was one other bar chart on the same slide, which I was, it really blew me away. The average revenue per account, the median, was $15,000 for a multi-product company. And it was $26,900 for a multi-product company. Now, I know this is probably based upon the actual sample and the profile of the companies and the 2 different samples, but this was like, why include that? Because it didn't make sense. You're basically saying single product companies are about 70% bigger. Yeah.

I mean, first you included because you found it, right? Because there's a little overtone of why didn't they cherry pick this out of the results? Which I'm like, whoa, right? You know, they should report it because they found it. Like, why did they find it? And I think it's— I think they found it because they asked the wrong question, which is what they really should be asking here. Again, we don't know what the questions are, but what they should have been asking is, hey, Mr. Multi-Product Company, what's your ARPA right now? And what was it when you only had 3 products, when you only had 2, when you only had 1, right? Because then it's interesting to see, oh, what going from single product to multi-product did for me. My current ARPA is $25K, let's just say. Before it was $12K. So I've doubled it. And then you would look at those. You might actually look at the uplift ratio from going, you know, single product to multi-product. So, I can't explain this data, but it's a little counterintuitive, but it's not crazy because these people might be selling totally different solutions in totally different industries, right? And it's kind of randomized as to who's single product versus multi-product.

Yeah, exactly. In fact, I saw that the largest segment of respondents, I think 13%, were practice management. And I know Tidemark, and I know they invested in a dental practice management platform. And that explains— that's probably going to be a much lower cost product, right?

Yeah. And for whatever it's worth, Ray, just to quibble with you, I think the largest segment was actually other, um, because the largest named segment was healthcare at 9, construction at 7, retail at 6. But if you look at the bottom of that chart, it goes 31% in other, which is itself kind of a problem with the taxonomy, right? Like, wait a minute, how could, you know, so other is the number one respondent. I hate to quibble there.

You're right on that. Okay, let's move on to pages 31 and 32. And it's where they talk about fintech is the number one expansion vector between those 5. And I'm like, Well, what is fintech, right? Because I know it is a category. And they said 45% of companies expand into fintech as their second product. And then when I really started doing more research, I'm like, oh, they're primarily talking about payments because 87% of these fintech products or product companies actually are payment companies. And that did jump quite a bit. So now I'm like, okay, this makes sense because I think of Shopify, and Shopify has 25% of their revenue from subscriptions and 75% from GMV payment-related data.

Yeah, as usual, I find their language cumbersome here. And Ray, I should give us the 20-minute warning mark. We're at 21 minutes. We only got a few to wrap up. I found slide 32 a little bizarre because you're correct, 87% of people say they have a fintech product. Right. By the way, with multiple responses allowed. But the headline says payments dominate expansion. And I just don't know how you can conclude that because, like, I need to know whether you started with payments or not, right? Like, is it an expansion vector or not? The question ostensibly does not appear to be about what was your first expansion product, right? What space did you expand into, right? Is everyone moving to Texas? What state are you moving to, right? I need to know what state you started out in.

Right.

Right. Because we're comparing Texas to Rhode Island. There was a lot of people there to begin with. It wasn't about the migration. So I have a quibble with this thing on this one. But, but yeah, the language to me of calling that fintech, I just find bizarre. I think they mean Office of CFO Products is what they mean by fintech.

Yeah, I saw where they had some things like lending credit cards, merchant system of record, but it was a little unclear. But let's go to the last topic I wanted to cover, and that's on page 47. And they jumped to AI adoption in vertical SaaS. And it said, you know, 55% have AI in their product and 30% more say they will be adding AI going into next year. So that's 85%. And then they talked about AI attach rates, Dave, and they said that increased from 22% to 59%. And I was trying to understand what attach rate meant, but I think what it ended up being was that 59% of their customers were using the AI product or functionality in their product, and that dramatically increased.

Yeah. So, this is a misuse of the term attach rate, in my opinion. I always think of attach rates as really simple, Ray. Imagine stapling the order for the second product to the first product, literally attaching it. So, I've got a PO coming in for product 1 and I staple an order for product 2 on there. And then it's basically how many of the orders arrive with staples in them, right? Would be the attach rate if you only had product 1 and product 2. So here they're talking about usage. So again, it's a little sloppy. Look, I'm not surprised. The prior slide is kind of like an AI IQ test. Do you have AI in your product now or do you plan to within 12 months? I mean, boy, I'd love to talk to the 15% who's saying no, right? Like, what are you guys thinking or why can't you execute?

Yeah.

And then they talk about attach rates, and I think they mix it up. I think they're just saying a lot of people are using some of the AI features. That's great. And then they talk about how fast you build these things on the next slide. And what was it? It was 82% were built in less than 12 months, and 70% were built in less than 6 months. So these quote-unquote AI products to me sound very much like kind of thin AI layers built atop As you'll see in a minute, OpenAI. So more than half of the respondents saying they're using OpenAI underneath their AI product.

Yeah. So, and then the last thing on pages 52 and 53, they talk about how companies with an AI product grew faster, 61% at median versus 53%. But what they didn't really tell me was exactly how they were all charging for the AI product. And then I did, I was like, no, wait a minute, they are charging. as a SaaS subscription or a transaction fee or an employee per month or part of a premium tier or free. 19% were free, but it didn't tell me how they were charging impacted that growth rate. And I'd like to have seen that, Dave. Yeah.

I mean, the problem with this chart on slide 53, I have a couple of problems with it. But one, people are allowed to check multiple boxes. So they're summing to more than 100%, which is always potentially confusing. They probably just said, what's your primary pricing model? And then it would sum to 100. I think the distinctions between the models are all overlapped, right? SaaS subscription versus employee per month. Well, shit, a lot of SaaS subscriptions are priced per employee per month. So, I don't know how to do that, or at least per user per month, right? Part of premium tier versus in the SaaS subscription. Again, so somebody buys platinum, I guess I'm going to put that premium tier, but it's also their SaaS subscription. So, as usual here, I need to see the question to understand it, but I feel a lack of rigor. And the thing that slams that home for me is the headline of this chart goes, the end of free AI and the emergence of pricing models, right? It's a pretty dramatic conclusion. And if you cut through all the garbage, free went from 24% to 19%. So still there's plenty of free out there and there wasn't that much free to begin with. So it just completely undermines the headline.

Yeah. Well, Dave, let's wrap up. You want to summarize your perspective on the report?

Sure, Ray. Like, not my favorite report. I don't love it. I think it's a little bit of a mix of an opinion piece and a benchmark report. I kind of like elements of their framework. I just think they need to tighten it up a little bit. I don't love the fancy language or the kind of unnecessary new metaphors. But to wrap up my view on this overall, like, I love vertical SaaS. I love adding AI to vertical SaaS. And I also love native AI vertical apps. So, my view on this is I kind of like where they're coming from, which is a vertical SaaS place. I like where they're going, which is how do we bring AI into the equation? I'm less in love with the middle in between.

Yeah. And the last thing I will say, and this probably isn't fair because I do this for a living every day, so I have my own biases, but I want the data that I collect to create their narrative. I don't want the narrative to be first and I throw in a little bit of data to try to support the narrative. So that was my perspective.

That's actually a really good insight, Ray. I agree with you. That's a good rule of thumb. Let the narrative emerge from the data rather than trying to impose. And as soon as you show up with a few frameworks, you're kind of imposing your framework on the data. And that's how you end up with some of these conclusions. Like you've already decided that free AI is going away and the data just doesn't happen to say it. So you say it anyway, you know, it's crazy.

Yeah, exactly right. Hey, we're recording this just right before Christmas. It's going to be coming out before New Year's. So Merry Christmas and happy holidays, Dave.

Take care to you and everyone in the audience as well. Take care, everybody.

The Metrics Brothers AI, SaaS, and More is a production of The Metrics Brothers Growth and CAC and a member of the Benchmarkit Podcast Network. By accessing this podcast, you acknowledge that The Metrics Brothers make no warranty, guarantee, or representation as to the accuracy or sufficiency of the information provided or the humor content of the jokes told. Ray. Information, opinions, and recommendations presented are, according to our spouses, probably wrong and provided for information purposes only. This podcast should not be considered professional or, for that matter, unprofessional advice. We disclaim any and all liability for any direct, indirect, indirect, misdirect, incidental, special, ordinary, consequential, inconsequential, or other damages arising out of any use of, or God help you, reliance upon the information presented here. Ray Grothreich is based in New York City and available on X at Ray Reich. Dave Kellogg is based in Silicon Valley and available on X at Kelblog. Schedectity, which is French for unspellable, is not our actual production location. Thanks for listening.