Who has the better advantage — horizontal or vertical startups? 🤔

↳ here's the pros and the cons of each ⬇️

In case you aren't familiar with these terms...

1️⃣ Vertical startups

↳ a product built for a specific type of company

↳ this could be in a specific industry, size, business model

↳ could also be built around a specific role (i.e. software for accountants)

Some examples: Procore Technologies, Toast, Convoy Inc

✅ Pros

↳ positioning and messaging is way easier because you have the "who" question answered by default

↳ choosing distribution channels can be determined by asking your target customer where they hang out

↳ it's easier to be customer-centric because you have a specific customer in mind

↳ you likely are facing less competition because you've narrowed the playing field

❌ Cons

↳ you need a founder that actually deeply understands the industry

↳ your TAM will potentially be smaller because you've limited it to one industry

↳ as a consequence, it may be harder to raise money from investors

↳ there are fewer well known big winners to people on LinkedIn

2️⃣ Horizontal startups

↳ product is built for a specific use case

↳ this use case shows up in a variety of different company types

↳ each person using the product is in widely different context but facing the same underlying problem solved by your product

Some examples:

Miro, 1Password, Stripe

✅ Pros

↳ your founder doesn't need to have 10 years in an industry to get started

↳ your TAM is theoretically larger because you can combine multiple massive markets

↳ your fundraising story is more exciting to investors

↳ people on LinkedIn know all the big names from this group

❌ Cons

↳ much harder to position because each group will use their own unique language and terminology

↳ relies on viral growth mechanisms that can reach many groups at once

↳ much harder to stay customer centric because every segment you're trying to reach is very different

↳ you face DIFFERENT competition in each segment you target