Neo4j's CTO explains why companies must choose between horizontal and vertical strategies and stick with it. He warns against chasing niche opportunities that pull resources from your core product, require different expertise, and put you in competition with customers. Only consider vertical expansion once you've reached roughly $100 million ARR.
Chapters
The first one is work out whether your value prop is horizontal, have conviction in that, or vertical. And it's really easy to get tempted into doing more than just one. So speaking as a horizontal company, literally every week, this happened to me earlier this week, someone said, well, Neo4j is so great. I can see how I can just through the visualization tool, just easily be able to take my domain, and this was something in finance and trading and being able to look at companies and ownership and so on. And, hey, can we do— I'd love to do some kind of co-investment. I'll throw you some money. We'll build a new product. This is very, very tempting. And of course, it's great to get feedback, right? So I love that sort of feedback. Sometimes feedback leads to more incremental changes that are in the direction of your vision and where you want to take things. In this case, that feedback was leaning towards something that could be a huge distraction, right, from a horizontal opportunity. A, I could end up competing with my customers. B, if I end up taking this on and, you know, building some kind of, you know, narrow solution in a single space, then there's an opportunity cost and that takes me away from any energies that I might spend building the horizontal stack. And then furthermore, like if you look outside of product, while something may look trivial to build inside a product, it's always not right. Then you end up having to market it. It's a different value prop, different price points, different market. You're going to need people who are experts in finance and so on and so forth. So, so we fought the urge to go vertical. But there is one case where it's actually been important to do so to a degree is our motion's been very developer first, but then a developer will find the technology, bring it into a project, and inside of that project, you need, you end up needing to talk to the business or people in IT who are talking to the business. So while I'd strongly advise, you know, either staying in a horizontal lane or staying in a vertical lane, And, you know, if you have conviction in the horizontal opportunity, then there's no need to dally with, you know, other opportunities. Or likewise, you have conviction in your vertical opportunity and someone's pulling you sideways to do something in a different domain, different industry. There's probably a stage where that makes sense. But I'd say that stage is probably post-$100 million ARR. Again, depending on the, on the domain and on the TAM.
