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.

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“SaaS as a Network” takes that evolution one step forward. When a SaaS provider starts serving a high enough density of merchantsthey 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).

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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. 

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To this end, we’ve invested in a number of companies, including AvettaCCCGoDaddy, Grupa Pracuj, Klook, LegalZoom, SiteMinder, Toast, and Xero, that we believe are starting to benefit from these trends.

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We’re super excited about these trends and my colleague John Burke will be publishing more on this topic! 5/16/19 Update:

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The views and opinions expressed in the post above are that of the author and do not necessarily reflect those of TCMI, Inc. or its affiliates (“TCV”). This post is not an offer to sell or the solicitation of an offer to purchase an interest in any private fund managed or sponsored by TCV or any of the securities of any company discussed. This post is intended solely for prospective portfolio companies and their agents regarding TCV’s potential financing capabilities. Executive Advisors are typically independent consultants who are not employees of TCV but have a strategic relationship with TCV and/or provide valuable advice or services to TCV or its portfolio companies. The TCV portfolio companies identified above, if any, are not necessarily representative of all TCV investments, and no assumption should be made that the investments identified were or will be profitable. For a complete list of TCV investments, please visit www.tcv.com/all-companies/. For additional important disclaimers regarding this document, please see “Informational Purposes Only” in the Terms of Use for TCV’s website, available at http://www.tcv.com/terms-of-use/.