Insight
Sophinos: Vertical SaaS delivers enduring businesses despite lower VC-style growth
“There's so much opportunity for still today in 20, 24 to not go build the shiny, sexy thing with limitless, you know, market size and, Hone in and focus on one industry, you know, one type of business and build software tailored for them and build really great…”
Insight
Sophinos: Vertical SaaS founders must pick an industry before a product idea
“I'm a big believer in picking a industry and not a, an idea. So you don't come up with an idea at all. That's not the first step. That's not even the 10th step. So you have to focus on an industry.”
Insight
Sophinos: Founders do not need preexisting domain expertise to build vertical SaaS
“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…”
Opinion
Luke Sophinos: AI cannot yet accurately map detailed industry workflows
“I think AI isn't going to do a great job yet on like, what is every single step of the workflow for a, you know, a bank.”
Insight
Sophinos: Buy blue-collar workers lunch to get permission to shadow their workflows
“Just show up at machine shops and say, I'll buy everybody, I'll buy you guys lunch today. I know I probably look like a crazy person, but I'll buy you guys lunch today. If you just let me shadow the operation for today, go validate it.”
Insight
Sophinos: Launching vertical SaaS is a scientific, mathematical process
“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 any…”
Insight
Sophinos: Vertical SaaS startups should enter through SMBs before moving upstream
“As a software company, it's so much easier to get into SMBs. They require less. You can get in with a smaller feature set or maybe even one feature, and then you can add to that capability, kind of grow up a little bit, you know take the punches and develop ki…”
Insight
Sophinos: B2B software must increase revenue, cut costs, stop churn, or maintain compliance
“One of my core beliefs in software is you have to build software that either increases revenue Decrease costs or prevents customer churn. And then depending on the industry, a fourth one would be maintains compliance.”
Assertion Not checkable as stated
Sophinos: Trade schools and niche industries still rely heavily on paper in 2024
“The third thing you see, and I promise you, and people fight me on this, but I promise you see paper processes still. And I, it's 20, 24. I know you're going to be like, Luke, you're out of your mind. I don't believe you. We still see at trade schools, a bunch…”
Insight
Sophinos: Every major vertical SaaS company eventually owns the customer's financial transactions
“Every single big industry specific software company owns the transaction.”
Disclosure
Sophinos: Price new vertical SaaS products at 50% of the customer's ROI
“I probably try to start at 50%, and then I, like, listen to the market feedback, and I adjust either up or down based on that.”
Assertion Partly supported
Sophinos: US surgical hospitals generate nearly $1T across 2,500 companies
“The biggest industry in the U S right now is, is general medical and surgical hospitals. They're doing nearly a trillion in revenue and there's 2500 companies.”
Assertion Partly supported
Sophinos: The 17,000 US machine shops are prime targets for vertical SaaS
“And the average machine shop is doing two million a year in revenue, right? There's 17,000 of them.”
Insight
Sophinos: Sizing vertical SaaS requires mapping end-to-end operations
“And as you actually visualize the end to end operations of the businesses within the industry, this is how you start to actually identify is there, where is the software opportunity and how big is that software opportunity?”
