By David Yuan, General Partner at TCV
My colleague John Burke, TCV Executive Advisor Tim Barash and I recently hosted an offsite focused on a couple of emerging trends that we believe are dramatically expanding the opportunity set and economic strength of vertical and SMB SaaS companies. We call these trends “SaaS as a Platform” and “SaaS as a Network.”
“SaaS as a Platform” recognizes the power of vertical/SMB SaaS to leverage end to end workflows to build “rails” to their merchant’s customers, suppliers and employees. There’s massive economic capture, customer delight, retention benefit, and data insights that are garnered in monetizing these rails through financial services, employee services, and supplier services.
“SaaS as a Network” takes that evolution one step forward. When a SaaS provider starts serving a high enough density of merchants, they can leverage that strength to build two-sided market places with the merchant’s customers (more on consumer networks–see my talk with ZipRecruiter CEO), suppliers, and employees. Now that SaaS vendor has now created a marketplace that can enjoy powerful network effects that rival consumer businesses like Airbnb, Facebook, and Apple. In addition, because marketplaces models tend to extract a take rate on GMV, for that SaaS vendor, the TAM and unit economics explode (in a really good way).
We believe SaaS as a Platform and SaaS as a Network offer a step function expansion of the SaaS business model, and is one of the most important themes in software investing.
To this end, we’ve invested in a number of companies, including Avetta, CCC, GoDaddy, Grupa Pracuj, Klook, LegalZoom, SiteMinder, Toast, and Xero, that we believe are starting to benefit from these trends.
We’re super excited about these trends and my colleague John Burke will be publishing more on this topic! 5/16/19 Update: