The Exchanges

Q Yeah. Go back to that for a second. When you, when you scroll on this list, what is one or two industries that you're like, whoa, this, there's something here and I need to dig in and why?

A Yeah. So I've broken these down, um, actually into like individual scorecards. So there's a couple that I really like here. So the first one that I love that I think is dying for a vertical SaaS business is machine shops. So, um, why is machine shops interesting? Well, going back to that list, it's two hundred sixty two billion or two hundred forty billion. In revenue. There's 22,000 of them, and it's beautifully segmented, right? So the higher this number is, the better. Um, out of, this is basically a score, so I'm taking all thousand industries, and you know, this is up at the top, 7763. So if I actually look at machine shops, it checks a ton of my boxes, because it's highly fragmented, there's a healthy amount of small businesses to go after, mid-markets to go after, and a few enterprise. And the average machine shop is doing two million a year in revenue, right? There's 17,000 of them. Uh, so this looks like a perfect place, uh, to build a vertical SaaS company right now. It's got a beautiful market size, beautiful segmentation. And then I have a couple on the list here that kind of things I look at after that initial piece that we'll go into.

AI assessment note: “the first one that I love that I think is dying for a vertical SaaS business is machine shops.”

Q different types of vertical SAS businesses, how to think about wedges, which is like a wedge product, which is something I really would love for you to get into. Um, how to think about picking a market for your vertical SaaS. And maybe I'd, I'd also just love you to go through pricing. Like, how do you think about pricing your vertical SaaS? So where do you want to start?

A Yeah. So let's, I, let's start on, um, How to dive in and actually start one of these things. And so I think it's much more of a, I think vertical SaaS is much more of a science than an art. I think people believe starting a software business is this artistic thing where you got to come up with some crazy big idea and, you know, you got to hold it close to the vest and you can't tell anybody about it and you got to raise millions and millions of dollars. I think it's a very like mathematical scientific approach in vertical software. And so I'd love to just walk everybody kind of through How I, how I think about that, uh, as a place to start and that'll lead well into wedge products and we can give examples of wedge products and, you know, how to actually get in the door at some of these businesses. How does that sound?

AI assessment note: “let's start on, um, How to dive in and actually start one of these”

Q And what do you say to people who are like, wow, he's right. There is an opportunity in machine shops, but I live in Tribeca, and I've never even visited a machine shop in my entire life. I don't know anything about it. Is there still an opportunity for people?

A Yeah. So look, I didn't know anything about trade schools. Um, I went to traditional education. Like I had family that went through the trade school route, but I, you know, I lived in California. I was like the tech guy. Right. I started a bit my business in college and, you know, obviously if you have the domain expertise and you spent a bunch of time in machine shops, right. You're going to be, uh, a step ahead of someone who hasn't, but And there's a correlation with successful outcomes and actually, actually having the industry expertise, but it's not a requisite at all. So, you know, we've built one of the biggest vertical SaaS businesses in the country for trade schools, and it's, I didn't know anything about trade schools until I started a decade ago.

AI assessment note: “having the industry expertise, but it's not a requisite at all”

Q I like it. We're running out of time, but I, I have to ask one, one more piece to the scorecard, uh, because I know people are in the comment section are going to be like, you got to ask this. Pricing. How do you think of it? Do you have a framework for thinking about how you price these things?

A Yeah. So, you know, pricing I think is like the least thought about thing in software and, and which is crazy. It should probably like be one of the most thought about things in software. Um, My approach is pretty, pretty basic, but I think it works. So my approach is I understand how much does the thing cost that I'm solving, right? And once I figure out how much the thing costs, I shouldn't say cost, how much are they paying for the thing that I'm solving today, right? Um, and then I can look at actually coming up with some sort of pricing model. So let me go, I'll give you a concrete example. So we came up with a retention tool. Um, we kept hearing from all of our end customers that like student retention was a problem. Like all their, they had a bunch of students that were dropping out of, you know, their, their trucking, you know, school. Um, and so we said, okay, we're going to build a tool that like analyzes all of their academic data and their attendance and, and basically floats up a risk score that tells you which students are at risk in real time. And then we're going to automatically text those students. Um, who are like trending in the wrong direction and, and try to motivate them via text, you know, with resources and ways to get back on track. Right? So then we said, okay, well, how much is it is tuition for a school? Well, it's 20,000 dollars.

AI assessment note: “I understand how much does the thing cost that I'm solving”