Why Are Vertical Software Founders Struggling to Raise?

A Y Combinator partner says vertical software founders are struggling to raise a Series A even at five to ten million in annual revenue, a level that was a guaranteed Series A nine or twelve months ago. He is not sure investors are into vertical software right now. Horizontal software and AI investment is a green light, and vertical software is where founders are really struggling.

A team can reach ten to fifteen million in revenue, and often twenty-five, thirty, or fifty million, with ten or fifteen people, and stay very profitable. Fifteen people, two million in annual revenue a head, and fifty percent margins comes to about a million dollars a year each, an amazing outcome for a lot of people. Founders who got the brass ring sit in his office hours bummed they cannot raise. He tells them they will probably look back on the missed Series A as a blessing, because the company does not need the money.

Getting to thirty million a year in revenue once meant raising a hundred million dollars to hire all the people. The company does not have to do that now.