Vertical

As explained in Tech Startup Toolkit

A vertical market is a market focused on customers within a particular industry or specialized application area.

A vertical is a customer market organized around one industry or specialized application area. After customer interviews show that a product could serve several verticals, the practical question becomes which ones deserve focused attention. section 16.4

A common startup mistake is treating a product as horizontal—useful for almost everyone. That approach spreads marketing effort too thin. A focused vertical gives the team a clearer customer, a sharper product, and a more manageable go-to-market strategy. section 16.4.1

A practical way to choose target verticals:

• List 12–20 plausible verticals. section 16.4.1
• Define company-specific criteria, including acceptable, unacceptable, and middle ranges. section 16.4.1
• Research the markets and place the findings in a comparison matrix. section 16.4.1
• Use the strongest scores, followed by judgment, to select two verticals rather than pursuing every possible market. section 16.4.1

The two-vertical hedge

The one-vertical rule creates focus, but choosing two can reduce the risk of betting everything on a market that proves wrong. If one stalls, the other can keep the company moving instead of forcing a complete restart. section 16.4.1

Table 16.1 Using the Dover evaluation matrix to narrow the final number of chosen verticals to two

Device makers	Automotive	Communications Infrastructure	Industrial IoT	Consumer IoT	Storage
Segment	Infotainment, GPS, & ADAS	Routers, Hubs, & Modems	Industrial	Connected Home	SSD & HDD
# target accounts	100	500+	2000+	500+	<100
# ASIC starts	980	6120	251	455	457
# ASIC sales	70M	1.1B	1.85B	991M	880M
# device unit sales	169M	750M	4.16B	1.2B	600M
SAM	$393M	$350M	$420M	$400M	$91M
Cost per attack	$1.1B	$886,560 (DNS)	$13M	N/A	N/A
Budget metrics	• R&D budget: $1B • Margins: 5%–15% • ASP: $49	• R&D budget: <$500M • Margins: 20% • ASP: $50	• R&D budget: >$500M • Margins: 19% • ASP: $64	• R&D budget: $50M • Margins: < 25% • ASP: $42	• R&D budget: $150M • Margins: >50% • ASP: $67–$102
Timing	Slow (2–3 years)	Fast (<1 year)	Medium (1–3 years)	Medium (1–2 years)	Fast (<1 year)
Upgrade cycle	Medium (6.7 years)	Short (3–4 years)	Long (8–10 years)	Medium/Long (5–12 years)	Long (10 years)
Current value	Medium	Medium	Medium	Medium	High
Future value	High	High	High	Medium	Medium
Compelling need	Safety	Network security	Operational security and safety	Privacy	Data security and privacy
Top 3 pain points	• Safety • Liability • Regulations	• Service interruptions • User privacy • Liability	• Process disruption • More points of attack (edge) • Safety and trade secrets	• Broad privacy breaches • Reputational risk • Liability	• Privacy of data in motion • Commoditization • Differentiation needs
Buyer profile	• Mostly technical	• Mostly technical	• Mostly technical	• Less technical	• Medium technical
Competition	Entrenched: few Other: varied, HW & SW	Entrenched: several Other: onus on InfoSec	Entrenched: large firms Other: large firms, HW & SW	All over the map, lots of SW	• Encryption (Rambus) • Little else
CoreGuard obstacles	Regulation/standard compliance	Agile development cycles, lukewarm on security	TAM/SAM shrinks w/o low power product available	Consumer apathy and unwillingness to pay	Market only interested in encryption
GTM: technology fit	• Complex SW stacks • Consumer OS/interface • High performance • Power/area OK	• Complex SW stacks • High performance • Power/area OK • Varied cores	• Work with basic OS • Platform compatibility • Quick SW updates • SW integrations/ expansions • Bluetooth/Wifi connectivity	• Work with basic OS • Port to more complex OS • Quick SW updates • SW integrations/ expansions • Bluetooth/Wifi connectivity	• Flow translation from host • Encryption essential • High performance • Low gate count
GTM: market fit	• More security attacks • Bigger risks • Trends (autonomous)	• More network attacks • More user risk • Increasing security costs	• Process disruption costly • Sophisticated attackers • Distributed attack points	• Highly visible risks • Privacy is “hot issue” • Distributed attack points	• HW-centric market • Data security critical
GTM: audience fit	• Technically savvy • Project managers • PMs • Engineers	• Technically savvy-ish • Project/product mgrs • Engineers • Architects	• Technically savvy • PMs • Security managers	• Less technically savvy • PMs • Security managers	• Technically savvy • PMs, CTOs • Security managers • HW architects
GTM: leverage	• Upstream • Rental car firms • Ride-sharing firms • Trucking industry • On-demand (e.g. bikes)	• Major vendors • Large implementers • Enterprise SW use can drive selection decisions	• Existing platforms > Arm, IBM • Managed cyber > BMC, ServiceNow • Other stack players > Rambus, Gemalto	• Existing platforms > Amazon, Google • Other stack players > Rambus, Gemalto	• SiFive • Western Digital
Top 3 pros	• Manageable universe • Safety is need-to-have • Technical audience	• Fast time-to-market • Demanding users • Increasing security costs	• Expanding market • Security lapses = real pain • Low regulatory overhead	• Expanding market • Privacy concerns growing • High-profile market players	• Fast time-to- market • Differentiation needs • High margins
Top 3 cons	• Slow time-to- market • Low margins • Regulatory environment	• Slow to address security • Security is afterthought • Infrastructure “inertia”	• Lack of standardization • Outdated, specialized HW	• Less technical buyers • Pricing pressure (low ASP) • Market used to crowded SW	• X86 trending up • Thin market for security • Limited leverage
Bad Neutral Good

Compare candidate verticals across target accounts, sales, market size, costs, budgets, margins, timing, and upgrade cycles; a traffic-light view makes the strongest options visible. section 16.4.1

A vertical also sets the boundary for an initial MVP. Win a beachhead with the smallest useful product, learn from its customers, and add features before expanding into adjacent markets. section 14.1.2

How Tech Startup Toolkit covers it

How deep it goes

Explains selection through candidate lists, scored criteria, research matrices, traffic lights, and final judgment.

Examples

Uses a Dover evaluation matrix and a focused two-vertical choice to demonstrate comparison and risk management.

What it assumes

Assumes customer interviews have identified several possible verticals and a product that fits them.

What you can do after

Evaluate candidate markets and choose a focused starting position for go-to-market execution.

How it connects

Connects customer interviews, go-to-market strategy, product-market fit, MVPs, lighthouse customers, and adjacent markets.

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Also explained in

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  Architecture Modernization: Socio-technical alignment of software, strategy, and structureA vertical is a business area organized around a market, region, product line, or other distinct domain of responsibility.

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Related concepts

• domain platformcontrasts with · A domain platform provides reusable capabilities and workflows for products or teams within a particular business or organizational domain.
• interviewused by · An interview is a structured or semi-structured conversation in which questions elicit information about a participant’s experiences, views, needs, qualifications, or requirements.
• cloud computingused by · Cloud computing is the on-demand delivery of computing resources and services over a network from remotely managed infrastructure.

This explainer was generated by Manning's knowledge graph from the text of Tech Startup Toolkit. The section links point to the parts of the book it draws on.