Strategy and positioning · Answered by Golden Section from more than 400 B2B software companies observed
Generally no. An adjacent industry is a different customer culture and behaves like a new startup: new buyers, new messaging, new references and often a product pulled two ways at once. The exception is a workflow whose practitioners see themselves as peers regardless of industry, such as a corporate practice area found in many industries; then the practice area is your vertical. Otherwise, win the first vertical before looking sideways, and score any candidate the way the vertical specific play does, on the factors that must go right and the probability that they will. Test the best one with a small team and a fixed budget before moving the company. Vertical software sells into high-trust markets where trust grows slowly, so a new industry takes years to earn what you already have. Next step: estimate your share of the current vertical.
Default to staying in the vertical. Consider another industry only when the primary users there see themselves as peers of your current users, the core vertical is won with durable retention, and the product and pain carry over. Run it as a bounded test with its own team, budget and revenue line before committing the roadmap.
| Metric | Value | What it means | Source |
|---|---|---|---|
| Verticals to pursue | 1–2 | chosen from 4–5 scored product and market combinationsscored 1–5 per factor, adjusted for the number of factors that must go well; favor high-probability, low-complexity options | Golden Section playbookVertical Specific |
| Exit multiple | 4.0x base case; 5.5–5.8x with genuine vertical focus | enterprise value ÷ revenue for a $15–20M revenue vertical software companydiluting focus risks the premium | Golden Section, publishedInvesting in Software addendum, September 2026 |
| Vertical vs horizontal growth | about 32% vs about 12% | annual revenue growthFebruary 2026 market data in our SaaSpocalypse report | Golden Section, publishedNavigating the SaaSpocalypse |
| Net revenue retention | 105%+ | revenue from a cohort a year later ÷ its starting revenueBalanced Path benchmark; the core should clear it before you look sideways | Golden Section, publishedThe Balanced Path |
| When another industry can work | only when the primary users see themselves as peers across industries | condition for selling outside the first industrythe test for whether a second industry is really the same vertical | Golden Section operating viewGolden Section operating view |
Our mistakes list puts it bluntly: adjacent markets are the equivalent of a new startup, so keep building the one you have. The vertical specific play explains the mechanism. Focus is what lets customer feedback turn into a better product, and when several verticals needing different things are crammed into one product, the fixed cost of competing in each compounds into technical debt. Its warning sign is a crushing backlog with deadlines nobody can meet.
There is a value cost too. Buyers pay a premium for genuine vertical focus, and a second industry that is half built can turn a focused company into a broad one in the buyer's model. The pre-sale value levers play notes that new initiatives launched to tell a bigger story tend to arrive at diligence with fresh cost and no revenue.
Most companies have more room in their first vertical than they think: segments not yet served, modules customers have asked for, services, price. Run the customer segmentation work again before looking sideways. When an adjacent industry does make sense, test it cheaply first; the Sales Triad play's call sprint shows within weeks whether the new buyer recognizes the problem in your words.
All figures are invented. A veterinary practice software company at $7M in annual revenue has seen growth slow from 35% to 22% and is weighing a move into dental. Its share check shows about 9% of addressable practices, with multi-site groups barely served. Scoring both options, dental needs an insurance claims workflow, carries no references and depends on several things going right; multi-site veterinary needs an inventory module that forty customers have already requested. The company builds the module and points sales at multi-site groups, and sets aside two weeks of founder calls into dental to keep the option informed.
The real exception is a workflow, not an industry. One Golden Section portfolio company serves a corporate practice area that exists in many industries; its vertical is the practice area, and that works only because the practitioners who use it see themselves as peers whatever industry they sit in. A regulatory filing several industries share can work the same way, provided the users identify with each other. Moving into a different customer culture is otherwise a bad idea. A company whose first vertical is small may have to expand earlier; do it deliberately, with its own team and revenue line.
From the Golden Section mistakes list, each paired with the play that prevents it.
Treating an adjacent market as cheap growth ignores that it behaves like a new startup.
Splitting sales and product effort across two industries weakens the push in both.
A product stretched to fit two industries becomes harder to sell to either.
In the order we would run them. Each is on its own page, most with a free Excel template.
Frames expansion inside the go-to-market strategy rather than as a separate bet.
Scores candidate industries on pain, market and probability of success.
Finds the room left inside the current vertical before you look outside it.
Tests a new industry's response to your message in weeks, before any product spend.
Sales & marketing plays Choosing verticals is the first decision in the go-to-market sequence, and these plays revisit it as the company grows.
Score four or five candidates on the same factors you used to pick your first vertical, from 1 to 5, and adjust for how many things must go right. Estimate the contract value and win rate you would need and the demos that implies. It is worth pursuing when it scores high, reuses the product with little custom work, and the target segments cover a meaningful share of their market. Ask what a post-mortem would say if it failed.
Rarely. It can be when your vertical is really a workflow, such as a practice area present in many industries, and its practitioners see themselves as peers across those industries. Even then, the first market should be won and the move run as its own business at first, with its own team, budget and revenue line, so a weak start does not drag down the core.
No. We do not use a share-of-vertical trigger, because share is not the question. The question is whether the new customers are the same people doing the same work and see themselves that way. If they are not, the answer stays no at any share, and the better move is to go deeper into the vertical you have.
Entering a second vertical can be a structural change worth funding with minority growth equity, but only once the first is won. Capital raised to escape a stalled core usually funds two weak businesses instead of one strong one.
Growth equity →Reviewed by Dougal Cameron, CEO & Co-Founder on 2026-10-22. Golden Section observations are labeled separately from external benchmarks and illustrative arithmetic.