Josh Sirota

“Revenue scales with compute NOT seats…” “While SaaS multiples have collapsed from 50x to 10-15x, OpenAI is raising at 65x revenue.” https://lnkd.in/gVGPKDBk

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Too many vertical SaaS founders are burning down their markets before they even realize it. You hit $2M-$3M in revenue and think the next move is to scale like a horizontal company. Cold email programs. Spray and pray demand gen. All the tactics that worked for companies you read about on LinkedIn. It works for a quarter or two, then it stops. And by the time you realize it, you've burned through 2/3 of the companies in your vertical. I've worked with dozens of vertical SaaS and AI companies over the last couple years. The same mistakes keep showing up. Vertical markets have their own physics. Three laws in particular: Law 1: Brand velocity compounds fast Early at Levelset, we got into a public legal dispute with a competitor who ran the industry association for one of our core buyer personas. They banned us from their events. Made their position on Levelset very clear. We lost deals we didn't even know existed. Buyers disqualified us before we had a chance to earn their business. We spent 8 years working to overcome negative brand velocity with that segment. Your brand in a vertical is never neutral. It's either building momentum or losing it. And it compounds faster than you think. Law 2: Everyone on your team has to be an expert The founder knows the problem cold. But when you start hiring sales reps, marketers, and CS people, they don't have that foundation. At Levelset, we spent weeks onboarding new hires on how construction payments worked. The lien laws. The payment challenges. The GC and sub dynamics. Without that knowledge, they couldn't have real conversations or build trust. Your customers expect you to understand their world better than they do. Law 3: Vertical markets are local markets We struggled for years to build a repeatable mid-market sales motion at Levelset. Right ICP. Strong product. But we couldn't close consistently. Then we realized our best customers came through local referrals. A contractor in Dallas didn't care who we worked with in New York. They cared about the competitor across town using our software to gain an advantage. Everyone knows everyone in their city. They see each other at association meetings, industry events, job sites. They talk to each other often. You want your company to be part of those conversations. Show up to the conferences. Get active in the communities. Even better if you can own the community. Most industry associations haven't evolved in decades. Shift the center of gravity over to your brand. _______ The tactics change every year. The laws of nature don't. Build a great product. Know your customer. Educate the market. Show up in their world. When the vertical adopts your brand as the one they identify with, you'll have more demand than you can imagine.

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Thanks Ryan Lawler for covering our raise. “Investors are clamoring for new ways to acquire pre-IPO shares as high-growth startups stay private longer… Augment focuses on high-demand, late-stage names like OpenAI, SpaceX, xAI, Databricks and Canva, but has roughly 300 private companies on its platform… ‘You can go from seeing an offering to owning the shares in five minutes,’ Moldvai says.” Read the full Axios article here: https://lnkd.in/gn-K8-h7

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I'll never forget walking into Hungryroot's NYC office in 2017 to meet Ben McKean, a few months after they closed a Series A. He told me Hungryroot was going to stop taking customer orders. Revenue would go to zero for six months. The business was growing and doing about $1 million a month. Customers loved our products. But Ben concluded the business wouldn't scale and, more importantly, he saw a bigger opportunity: turning a product company into an AI-powered grocery service. Whether that makes Hungryroot a “VC graveyard” story is debatable. What I’ll never forget is Ben’s conviction despite the enormous risk: Six months with no revenue and a completely new direction. Hungryroot relaunched in late 2017. It was obvious within a few weeks that the new model would work. Last year, the company generated more than $700 million in revenue—and was profitable. Not every success follows a straight line. Worth remembering in a 2026 venture market that increasingly treats anything short of immediate success as failure.

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If you want to raise money from VC, you need to understand how they win and how they fail... it took me too long to fully understand this. There are two kinds of failure in VC, and they are treated very differently. Consensus failure > You invest in the hot AI company everyone is chasing. > It goes to zero. > You are forgiven. “You followed smart money > You failed with dignity. Non-consensus failure > You invest in something weird/ > A niche marketplace. > An unsexy vertical... like flooring > A strange hardware wedge. > It goes to zero. > Now you look incompetent. > You wasted capital on a “toy.” Same outcome with very different career consequences for the VC partner. So investors do what humans do best. They optimize for institutional survival, not absolute returns. This is why (most) VCs herd and why funds chase the same themes. If you are a founder building something non-obvious, this is not a signal you are necessarily wrong. It is a signal you are expensive to fail with. The irony in this whole thing is that venture returns only come from non-consensus bets. But venture careers are protected by consensus ones. That tension explains almost everything you see in the market.

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5% of YC startups reach a $1B valuation. That's insane and it highlights how rare breakout success is even within elite accelerator cohorts. For founders, this underscores the importance of focus, capital efficiency, and building product–market fit. For investors, it reinforces the need for portfolio diversity and long-term support. Small, consistent advantages matter more than chasing a unicorn. Here's the math: if you invest in the top 5% of YC startups, you 100x your money. For example, if you invest $10k, it turns into $1m, each time you can buy 2-4 Ferraris While if you are on the other side it will turn into $500m-$1b, while you have roughly 1 in 300 million chances of winning the lottery Of course it's not pure luck - if you're in YC it's because you created your own luck, and you can create more to be in the top 5% (like Screenpipe) Why aren't you applying to YC?

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