Dancing with Vertical GTM Motions

Thoughts on when you should verticalize, and when you should move horizontally again

Earlier today, I shared a blog post announcing Alloy Automation’s expansion beyond commerce. It’s a big step for us, after spending nearly three years in that ecosystem.

Externally, it looks like we just repositioned the whole company; internally, we’ve always had our eyes on a consistent north star. Though we’ve become known for building commerce infrastructure, we originally started out with the much broader vision of disrupting integration work.

Like many founders, we narrowed down our Total Addressable Market (initially the billions of dollars spent on integration engineering as a whole) down to the more immediate Serviceable Obtainable Market. While we were clear on this being our short term pursuit, the unfortunate byproduct of marketing Alloy as commerce software was that we had to constantly balance the perception disconnect between our team and the market.

So why choose a vertical go-to-market?

Verticalization leads to focus, and a focused go-to-market has major benefits:

• Razor sharp messaging & outbounding - Clarity in who (ie what user and persona types) you’re selling to makes it easier to find channels to reach them through and reverse engineer marketing campaigns

• Discipline in the team - Setting boundaries within a vertical alleviates confusion around what is or isn’t impactful to work on, making it easier to cut work that doesn’t matter

• Faster feedback loops - Quicker engineering and more support resources means quicker feedback cycles to evolve with

• Customer trust - Word of mouth spreads faster in a smaller pond and within a more homogenous customer demographic

Above all, you get the benefit of building a brand more quickly than otherwise. Your company can become iconic in a smaller ecosystem by delivering above and beyond the competitors who are more horizontal.

How to choose the first vertical

We often say we stumbled into commerce with Alloy. In reality, it was one of a handful of use cases we were tinkering around with, and when the pandemic hit, the commerce opportunity became too hard to ignore. We only had two employees, so it was easy to move quickly with a decision. If I were to approach it more methodically today, I’d consider the following, in order of importance:

• Pull - Segment your website visitors by industry or research your waitlist of emails; you might see some patterns. Ideally you’ve already put out a tool or enough collateral that prospective users have started to message you with their use cases.

• Timing - Do some rough math on which industry / use case could make you the most money most quickly. This is how you may prioritize subsequent verticals as well.

• Rolodex - Figure out who in your network is deep in a specific vertical. The biggest unfair advantage in a vertical GTM comes down to your command of partnerships, and ultimately key relationships, in a smaller bubble.

It’s really like finding micro-PMF, where the market piece is severely pared down.

When to move on from your first vertical

The hardest part of going down this path though, is knowing when to get back on the main road. In the early days of building Alloy, I asked some folks this question and heard things like:

• “You’ll want to capture X% of the market” - Not particularly helpful, because market sizing is already an art in itself and trying to concretely understand your progress in a specific vertical is nearly impossible unless you have million dollar contracts in a 50-company market.

• “You’ll run out of fresh leads at some point” - A bit of a red herring, because if you’ve drained the pool of leads so fast you probably weren’t going after a worthy market in the first place.

Without many clear frameworks, we forged ahead anyway. At one point, a few things started happening in tandem:

1. Customers began asking for ERP, accounting, and other finance-related integrations. Industries don’t usually live in isolation; lines blur and cross-pollination can start happening organically.

2. Companies approached us for our thoughts on ‘integration platforms like Alloy, but not in commerce.’ They often had needs we could very easily fulfill, and we had to explain over and over that we could still serve them despite our marketing around commerce use cases. Sales was fighting restrictive marketing upstream.

We felt pigeonholed by our branding. Even friends mistakenly thought of us as commerce SaaS. Making the decision to broaden focus was easy, but with a much larger team, it took more work to execute this time (compared to when we were verticalizing). We spent about a quarter reworking internal frameworks for product marketing and revamping our entire website. See our frontend team’s excellent work below.

It’s a lot of hassle to return to a horizontal approach. A lot of companies can just ride a vertical all the way to IPO. Ultimately, deciding when and how to “unverticalize” depends on how strong the signals are for your company. Some broadly applicable considerations:

• Team composition - How industry-specialized your team is, ie are their skillsets translatable to new types of ICP’s?

• Product scalability - Data & integrations aside, can your platform fulfill the needs of other verticals?

• Customer & partner referrals - Would your users happily introduce you to friends in other spaces?

• Diversification - Is your current market shrinking, or do you want to make sure your eggs are not all in one basket?

• Undeniable opportunities - If you spot a wave, just ride it

If you’ve been working through any of this recently, I wish you the best of luck! And of course, reach out if I’m missing anything or if you have questions about applying these learnings to your own situation.