Tips For Starting A Vertical Marketplace

So do you have any tips for maybe early-stage marketplace founders that are building like vertical marketplaces that might be helpful?

Yeah, it's such an important and like, it's a great question because vertical marketplaces are just kind of viewed as a very niche and they can be, or you can use that, you can use that sort of belief at a shallow level from others as a competitive advantage. But the first thing you want to do is, uh, the vertical you go after, you just want to make sure that it's a big TAM. Um, you know, I think the secret that Slice operated with for a long time— it's no longer a secret, so I'll say it— is that restaurants are a vertical. And that's not true. Restaurants, that's an industry. It's a big industry, but it's not a vertical because the way a full-service restaurant operates couldn't be more different than the way a pizza shop operates. These are like 2 very different businesses. Um, you know, think of, you know, a really great restaurant that you go to, that you sit down, that has table service and management. That's not how a pizza shop operates. The only thing these 2 businesses have in common is that they both make food. That's it. They just couldn't be more different. So the restaurant industry is not a vertical, it's an industry. Verticals are, you know, specific sort of, uh, themed, like-minded businesses and operators who share a lot of similarities. And so when I look at, um, the restaurant industry, you've got verticals and then you've got even more than that, sub-verticals. So, uh, there's 3 segments of the restaurant industry. There's the QSR space, which is quick service, that's more like McDonald's and Chipotle and whatnot. There's limited service, which is defined as any restaurant where you pay first and you eat after. So you have to pay first and then you eat after. And then there's full service, which is you eat first and then you pay after. I know that sounds odd, but that's just the way that they're segmented. And now like, okay, these are 3 very important segments within the limited service restaurant segment. What I realized is that pizza by far is over 50% of the category, and then everyone else is kind of 50% combined. So when you look at pizza as a vertical, it's $47 billion in revenue. I mean, that's a massive TAM. I don't need to— I don't I don't need to really— in our example, I didn't need to sort of defend our TAM to anybody. And so for me, it became a very important sort of secret that we operated under because everyone kind of looked at us and they were like, what are these people doing just signing on pizza shops? This is irrelevant. This is a small niche business. The reason why I tell this story is because People can call whatever you're doing as a vertical niche all they want, but it's your job to make sure it is not niche. Unless you want to build a lifestyle business, something small, then that's perfectly fine. But, you know, if you look at— I'll, I'll use a, an analogy. If you look at coffee shops, that's a vertical. It's massive. It's not niche. If you went and built a company there, people will call it niche. And I'd be more than happy to accept that because I would know that it's a massive, massive industry and you can build something probably really powerful. I don't know if that answers the question, but that's kind of how I think about vertical marketplaces.

I mean, that's great. I think we definitely need to hear that here. We have a lot of conversation with founders in the community that are, I would say, building vertical marketplaces and getting a lot of kind of pushback or having to defend, as you say, that they're kind of TAM within specifically when fundraising.

So yeah, and the other thing you have to keep in mind is the moment you decide to be very vertical, that means you're deciding also to be incredibly integrated. So you've got to go far into the value chain. The last thing, I mean, you cannot be shallow and vertical because horizontals are shallow and they're just going to eat your lunch because they're providing a similar service to you. They're just doing it more broadly. They have scale, they can use their scale against you. So, so that's That's the counter. But if you're vertical, you can go deeper in the value chain where, you know, in our case, for example, um, I don't know, a Grubhub can't provide pizza boxes because that's only a tiny segment of their TAM and it's just not how their business is designed. Um, so yeah, the other, the other really, you know, sort of valuable and like powerful thing about a vertical play is you can go really deep, and that's very exciting, and that becomes a moat over time. Whereas horizontals, again, typically just tend to be— I'll be honest, like, over time they become a little bit of a commoditized, you know, homogeneous experience.