ANDREW WALSH: I’m Andrew Walsh. I’m a partner at Tidemark. We’re a growth equity firm. We also happen to be very passionate about vertical software. We’ve been very fortunate to have invested in many category-leading vertical SaaS businesses including Clio, ServiceTitan, Toast, just to name a few. 

Beyond what we invest in, we really aim to build an ecosystem in service of builders. That’s where this whole benchmarking report comes in. When we talk to founders, one of the questions that we always got was, “What does good look like with attach? Where should I go next?” There were frameworks to help think through some of those challenging questions, but really lacked the quantitative to back it up. 

So we partnered with Stripe and a few other global partners, brought the benchmarking report to life last year. We ran our second one that just closed. We have not launched the report. Be on the lookout for it later this year. But we’re going to get a sneak peek on a few of the insights that we garnered from this year’s report.

What I’d love to do today: walk through our view of the vertical SaaS growth playbook, layer in some of those insights, cover the state of AI in vertical SaaS—we had a spotlight this year covering everything related to AI—and then get through that quickly to create enough time to hear from Stripe and Housecall Pro on their experience embedding fintech into Housecall Pro’s platform. 

So the way that we think about the vertical SaaS opportunity at Tidemark is winning your category with your control point, expanding multiproduct, and then extending through the value chain. So building for your customer’s customer, your customer’s supplier, other stakeholders in the market. There’s a lot to cover here. We’re not going to cover each one of these different expansion vectors. Check out the Vertical SaaS Knowledge Project on our website. We have frameworks, case studies that dive into win, expand, and extend extensively there. We’re going to focus more on the expand portion today.

So you’re going to hear me say “control point” a few times during this discussion. I just want to level set on how we define a control point. It’s the most critical system for your customer. Do you occupy the workflows that matter most to them? We call that “workflow gravity.” Do you house the most important data of your customers? That’s “data gravity.” That’s obviously very important for capturing the opportunity and winning your category, but it also sets the foundation to go and capture the multiproduct opportunity. What I mean by that is, when we look at the data, depending on where you start heavily dictates the success you’re going to have in your second and your third product. So, if you start in, say, point of sale, you want to find the product that is very complementary to what your initial control point is.

Let’s take lending, for instance. Lending? Somewhat of a commodity product. If you just slap it on, how is it any different? But if you tap into that data gravity, all of a sudden you can underwrite better. You tap into the workflow gravity, you’re in the payment flow, you can service those loans better. So that creates opportunities where 1 + 1 actually equals 3, and you can take a commodity lending product and actually drive a tremendous amount of differentiation and the experience with lending. 

So on the multiproduct side, there’s obviously tons of benefits for going multiproduct. You can sell more to your existing customers. You can drive stickiness, because as they increase reliance on your product with multiple different features, you can change the go-to-market paradigm as the go-to-market economics change. You can charge more. You can spend more to go acquire those customers. All this goodness. What we see in the benchmarking report is that multiproduct businesses are growing 21% faster than single product businesses. If you look at it from an NRR perspective, you’re driving 5% higher NRR. So there’s proof in the numbers here, but we’re very, very excited about the future of multiproduct across all different control points.

So the question we got of where are people actually expanding. Fintech is the winner of the multiproduct expansion, I guess, race—I don’t know—followed by commerce, expense management. But again, this varies dramatically by where you start. Naturally, we’re at Stripe Sessions, so we thought it’d be great to dive into the fintech component here and spend a bit more time there. 

Fintech has largely been a story of payments. Eighty-seven percent of people that have expanded into fintech as an expansion category have launched payments, lending, merchant banking, expense management a lot earlier in the journey. We’re still in the early innings there. To go back to this whole concept of making sure you’re building on top of your control point in a way that it’s very integrated, these more complicated financial products? It’s a lot harder to really tap into that workflow gravity and the data gravity to drive those delightful experiences. Not to say it’s not possible, but it’s just a little bit more difficult.

Layer that into go-to-market, as well. These are more complicated products to explain to your customers. So we’re bullish on the opportunity in these categories. I don’t look at this chart and say, “Oh, it’s not worth pursuing.” I see just a tremendous amount of opportunity and potential to continue to innovate and drive in these directions. 

On the payment side, specifically, we’re still not at saturation. Like the growth in attach rates that we’re seeing across all these businesses still has a lot of room to run. Across our entire dataset, we have an average attach rate of about 40%. That’s up from 27% last year. This varies dramatically by end market and industry. So, for instance, hospitality and beauty as a category has much higher attach rates on payments than, say, industrial trades. So just be very mindful of understanding your customer, that you’re going to have different benchmarks depending on where you’re at and where your customers are at. That’s something—hopefully our benchmarking report can help you as you think through some of those decisions.

The other thing that really stood out to us when we looked at the data here on payments specifically was the mandatory payments. About a third of our companies that replied—a third of them made it mandatory. These businesses showed higher NRR. They tended to have business models that were a little bit more reliant on payments as a business model. It’s something that we’re seeing more companies explore and test. So something to maybe just think about as you embark on your payments expansion.

It wouldn’t be a talk on vertical software without mentioning AI. I actually think the insights that came out from this year’s benchmarking survey are really interesting on this front. So, not only are companies embedding AI at a much higher rate than last year—last year, we were at 31%—this year, we’re seeing 55% of vertical software platforms launching some form of AI product. Of those that have launched, we’re seeing higher monetization. Eighty-seven percent are now monetizing, up from 76% last year. Within the monetization, we’re seeing all sorts of different payment models, but the most prominent is actually subscription followed by usage-based.

There’s all sorts of charging for value in different directions we’re going, but predominantly people are just charging the subscription fee. Customers really want it. Eighty percent median attach on these new AI products. NRR for these companies is 110%. What this just screams to us is that customers are ready to adopt these types of products. For existing vertical SaaS platforms, there’s a tremendous opportunity to tap into that to accelerate growth, but also the AI native upstarts. 

We’re very excited for the future of AI and vertical SaaS and think it can create a whole new type of operating leverage for these businesses. I said this would be brief. I want to make sure we have enough time to have a great discussion with Housecall Pro and Stripe. So I’d love to welcome Christian DiCarlo, head of global platform sales at Stripe, and Ethan Senturia, president of Housecall Pro, to the stage.

Hey there. Welcome.

ETHAN SENTURIA: Nice to be here.

ANDREW WALSH: So we walked through control points—one of my favorite words—and I thought to give the group a bit of background on Housecall Pro. Would love to hear what you consider the core control point for Housecall Pro.

ETHAN SENTURIA: Sure. Yeah, I like that word, too. I never sort of thought about it until I saw your presentation, so now I’m using it all the time and it’s going to catch on. For Housecall Pro—just quick context, we are a field service management software, so we’re vertical SaaS that powers plumbers, electricians, HVAC technicians, and many other types of verticals. 

For us, our control point was the calendar. That’s really where we started. When I sort of think about what can a pro glean from their calendar, it’s sort of like when I wake up in the morning and I look at my Oura score and I’m like, “Eighty-two. I’m probably going to have a good day.” They wake up, they look at their calendar, and their calendar can be like the thing that tells them everything they need to know about their business. Like, “Am I making enough money? Where am I going today? Do I need to hire more people? Do I have too many people?” So it’s also that central node between everything upstream of doing the work, which is, “I got to get a customer, I got to create them, I got to know something about them, I got to quote them,” and then everything downstream, which is where a lot of the fintech stuff comes in. So that’s where we started, and it’s pretty powerful to own that.

ANDREW WALSH: So you have the control point. As you thought about sequencing, there’s so many different directions you can go for multiproduct. Walk us through a little bit. What was the framework that you used, and ultimately, where did you land? What was that next product that you jumped headfirst into?

ETHAN SENTURIA: Yeah. I mean, they say necessity is the mother of all invention, and so for us, going multiproduct was not particularly a choice; it was an imperative. We serve businesses that typically have between 0 and 20 employees, they tend to be later to adopt tech, they’re hard to find, they’re out in the field all day doing work. So what that means is their willingness and ability to adopt technology is not necessarily super high. That means that alternative monetization avenues, besides a line item that says “technology expense” on their P&L, is important to find. Payments was sort of the most logical extension of what they were already spending hours per day in the platform, right? Getting those jobs done, and at the end, like it’s how they butter their bread. Let them have the reward of “take a payment.” So that’s where we went next.

ANDREW WALSH: I feel like that’s something that we see quite frequently, where you kind of need to drive that ARPU expansion over time to make the machine work, make sure it maps to your go-to-market, make sure it fits to that market and creates that opportunity. Maybe I’ll shift to you, Christian. You obviously work with so many different businesses at Stripe. For someone embarking on embedding payments, what are the best practices that you typically share?

CHRISTIAN DICARLO: It’s a great question. It probably varies a little bit by industry. But if you’re looking for advice, I’d say look to Ethan and his team. I mean, they’re probably the gold standard in the way they’ve approached payments and lending. But I’d say, OK, a decade ago, payments was often a bolt-on product for most software platforms. Today, payments is deeply embedded. It’s not just a revenue driver, but it’s a multiplier for the business. One of the most common pitfalls I see when platforms are making that journey—and maybe they integrated a referral partner several years ago—the biggest mistake I see is actually treating it the same way, like pricing payments separately, making payments optional.

Going the full embedded route is an opportunity to reenvision the service you’re providing and the value you’re delivering for your customers. The companies that do it best really do that. It would be crazy to not have payments running in Housecall Pro, right?

ETHAN SENTURIA: Yeah.

CHRISTIAN DICARLO: The product just wouldn’t work and deliver the value.

ETHAN SENTURIA: Yeah. I mean, it’s like capitalizing on what you call the workflow gravity, right? It’s like the difference is that pros do all their workflows in our platform all day long, and taking payment can happen at various parts throughout that job cycle. So embedding those capabilities, and all across them, is really what can make it different from sort of legacy providers.

ANDREW WALSH: So you nailed the payments opportunity. There’s a whole host of different things you can go to next. What was that next product? Where’d you go from there?

ETHAN SENTURIA: Yeah. So just one quick thing before I go there. On payments—like when I first got to Housecall, it was quite interesting. We’ve gone through an evolution of, like, what does payments actually mean? When we first got there, it was just card payments. Then it was like, well, there’s other ways to get paid. So you start introducing additional payment methods. So we’ve evolved our definition now. Even when we talk about payments, it’s many different methods. So, even when you sort of go into it, you can go layers and layers deeper to capture more GMV from your customers.

But payments was really a proof point for us. It proved that we could expand from that control point of the calendar into multiproduct monetization. Secondarily, it was really important, it proved to us that our pros would trust us with some of their financial services. Our customers are small. They don’t raise capital. They don’t carry big balance sheets or cash balances, and they generally work job to job and so they basically need a complete financial partner. That’s what we sort of set out to build. 

One of the first extensions beyond payments was capital. Our pros are cash constrained and they don’t have time to go down to the local financial institution. Even if they did, they’re service businesses. Small business owners often have credit blemishes. They have a lot of seasonality. They’re hard to underwrite. They don’t have that access to that capital, and so we expanded into various embedded financing products and really serve that pain point.

ANDREW WALSH: I think one of the things that we see with any embedded fintech product is, you know, they’re complicated instruments, right? So how did you approach the go-to-market particularly for the lending product? Was there a particular kind of message that you would give to your pros? Like how did you actually go about doing that?

ETHAN SENTURIA: Yeah. I think we made a couple decisions around capital in particular that were—one that was actually quite different from what we do with most of our products, which is not to actually sell it because it’s a sensitive product, right? If you take the wrong amount of capital or the wrong type of capital, it can be adverse to your business. So our view was to make it available, to make it accessible, and to try to contextualize it in those workflows that pros had. So our approach was really to, A, expand as much availability to our pros as possible, and then, as they’re in the product doing things that might evidence that they have a need for capital, to create those triggers and calls to action that would allow them to see that it’s there for them. Then the beauty of these embedded products is it’s just a few clicks and a day—sometimes not even a day—before it’s in their account.

CHRISTIAN DICARLO: So I’m going to make a bold prediction, Andrew. On your slide earlier, you had 23% doing capital. I’m going to bet 50 to 100% growth next year when you do the survey.

ANDREW WALSH: All right. We’ll be on the lookout for it. It does feel like there’s a lot of momentum. I can’t remember off the top of my head where it was last year, but there definitely was a substantial uptake, particularly for lending, and it’s something we’re seeing a lot more companies much more comfortable with today.

CHRISTIAN DICARLO: It’s a big trend we’re seeing, as well. I think there are a lot of platforms that look at lending. Some get concerned up front. They’re like, “Oh, does this feel a little bit predatory because the rates are high?” But you know what? Most businesses have such an extremely hard time going to a local bank and getting a loan to grow their business. 

I was having a conversation a couple of weeks ago. Actually, I think the person is in the audience. They were in our offices and we’re talking about banking and lending with the CEO and the head of payments, and the CEO said, “Look, I’m not looking to replace a bank account. I’m not looking to replace a basic loan. I’m looking to provide a service to my customers that helps them better manage their money and grow their business faster.” That’s really the mindset you have to have when you’re bringing these products to market. Don’t try to replace the analog thing that exists today. Try to actually reposition it and deliver it in a way that’s going to delight your customers and help them grow their business faster on your platform.

ANDREW WALSH: Do you see that spillover effect from someone that effectively launches the lending product in uptake and other financial products that you offer like payments and others?

CHRISTIAN DICARLO: So yeah. When we see platforms deploy capital—I’m actually curious to hear what you have to say here, as well—we typically see their payments volume grow probably on average about 20% faster than those that don’t take it. We also see 80% refill rates of the loans. So, for the business itself, it’s helping them grow faster. For the platform, who’s probably monetizing payments, they’re actually accelerating the growth rate of their payments revenue, and it’s making their customers stickier and more successful. I mean, it’s like, everybody wins.

ETHAN SENTURIA: Yeah, that’s exactly what we see. Yeah, everything like that. It’s definitely a virtuous feedback loop in the stickiness of these products. Particularly, once you start to get into their wallet, those products are very, very sticky.

ANDREW WALSH: I’m not going to push you for exact numbers, but what are some of the KPIs that you measured as you thought about success for your various expansion products? 

ETHAN SENTURIA: Well, so on the expansion side, when it came to capital—this is a bit pie in the sky, but fundamentally my belief is like, if you come to Housecall Pro and use our platform to conduct commerce, you should be eligible for capital. So 100% is maybe not a realistic North Star, but—

CHRISTIAN DICARLO: It’s a good goal.

ETHAN SENTURIA: —something quite high. So, when we first started, you sort of get, I’ll call it “off-the-shelf product” with capital. But one of the things we’ve seen a lot more of in the industry is just more innovation and product design that can help expand accessibility. So we’ve really been focused on driving the availability rates up to our pros and we’ve seen—yeah—just dramatic uptake.

ANDREW WALSH: Awesome. Maybe to get back to AI, which is the fun stuff, what are you guys doing on the AI front these days?

ETHAN SENTURIA: A lot. I can’t keep up. I feel like every week I’m behind, which probably you guys can all relate to. But we’ve gone back to the calendar, back to that control point, as sort of one of the starting places for us to introduce true value through AI to our customers. We did it through an AI customer service rep, an AI CSR as you might call it. That really solves a big pain for our pros. If you’re working a job, and your phone rings, and you miss the call, you don’t get to call that customer back. Like they have gone and taken their business elsewhere, and that could be the difference between you and your family at the end of the year going on a vacation, so that’s a very sort of painful experience.

So we have an agent that will pick up the phone, but not only do that. It can check availability on the calendar, it can see which technicians are available, it can provide pricing, and it can actually book that job. So we’re sort of working towards a state where every pro can just wake up and see a full calendar and go do the work, and that would be nirvana for them.

ANDREW WALSH: That’d be pretty nice. I would take it. With kind of walking through that AI slide that I flashed up earlier, what’s the pricing model that you’ve decided on the AI front? This is a big question that we’re constantly getting asked, as well.

ETHAN SENTURIA: I would say it’s varied. Our view ultimately is that we’re, like many, going to have a team of agents that can basically have our pros’ back. In some cases, we are finding that the expectation is that it’s included capability out there, and in others, we find that where you’re really able to solve a specific pain point in a unique way that you have an opportunity to monetize. So we’re using different models. Sometimes it’s included, sometimes it’s price, sometimes it’s SaaS, sometimes it’s usage-based, depending on, sort of, what problem is being solved by the agent. But I’d say if you don’t really use AI in a way that distinctly solves a customer problem, your ability to sort of command a premium is probably going to be a little challenged.

ANDREW WALSH: To take it to completion on the attach rate side, is it something that people are really excited about? Eighty percent I think is what our survey said. Is that in the ballpark of what you guys are seeing?

ETHAN SENTURIA: It’s really high and it’s one of the fastest, I would say, types of products—probably the fastest adoption we’ve seen across our customer base of anything we’ve launched. There’s just a tremendous thirst. These are from an industry, or set of industries, that you might not think would have the thirst or appetite for it, but the adoption is quite strong and we’re definitely optimistic about AI.

ANDREW WALSH: That’s awesome. Full circle moment coming back to the control point at the end there. Christian, what about Stripe and AI? What are you seeing on the embedded finance side of things?

CHRISTIAN DICARLO: It’s a great question. I mean, so we’ve had AI embedded in many of our products for years now. Back when it was called “machine learning.” So, whether it’s like our fraud protection, our adaptive acceptance product, which optimizes auth rates across networks, we’ve had AI pretty deeply embedded across a lot of our products for a while. We’ve embedded AI across all of the different functions at Stripe, so our marketing team’s leveraging AI, sales team’s leveraging AI, our engineering teams. So it’s been a huge cost saver and efficiency driver internally.

With the vertical SaaS platforms, there’s a couple of ways we’re seeing AI roll out. One is—so we’ve invested a lot in our billing product, which actually supports a whole host of different complex business models, whether it’s subscriptions or usage-based. We’re seeing the hybrid models. You probably don’t want to build your own hybrid usage-based subscription billing engine internally, and so we’ve built this solution to enable AI companies to run their billing more efficiently. Eighty percent of the leading AI companies are leveraging Stripe for their subscription engines. Then on the embedded finance side, it’s deeply embedded in our underwriting models and really everything we’re doing now.

ANDREW WALSH: I think we’ve talked a bit about selling AI to our customers. What about internally? Like are you leveraging it from a development perspective? What kind of productivity gains are you kind of seeing on that front?

ETHAN SENTURIA: Yeah. I would say that actually in terms of the true business impact today, internally is where you can realize it more. We use it across all of our functions. The expectation today is that everyone is going to double or triple themselves over a relatively short period of time through working smarter, not harder. We help our sales reps do training calls with AI. We help our bookkeepers do complex journal entries faster. We certainly have our engineers using tools and actually rapidly expanding usage across product organization, where a picture is worth a thousand words, and so rapid prototyping tools are becoming the norm. 

I would say 6, 12 months ago, there was a little bit more challenge getting everyone inside the business to see that this was good for them and not something that was sort of antagonistic or contrary to their interests. I would say as an organization, we’ve seen a big shift. Everyone now is much more bought in. I think the pace of impact that it can have internally will just accelerate.

CHRISTIAN DICARLO: Yeah, I agree. You know, if you rewind six months ago, it’s like everyone thought AI was just going to be like a better-solving customer support, right? Reducing customer support costs, improving the experience, and that was like the use case. I think the pace of innovation within AI just I think continues to surprise us, as well. Agentic commerce is not quite here yet, but I’d say by the end of the year it will, and it’ll, like, sneak up on us faster than anyone here can believe it. So that’s the one thing that’s true with AI is just the pace of innovation and the pace in which it’s having impact is just incredible.

ANDREW WALSH: With all that extra development power, what’s the next product that you’re most excited to go out and launch? I mean, how many products do you have today if you were to count the multiproduct portfolio of Housecall Pro?

ETHAN SENTURIA: Twenty? Something like that. I mean, our mission, our vision was to create a complete business and financial operating system. So, on the one hand, we went down into sort of the financial world of our customer all the way; not just in terms of money movement, like how you get paid, how you spend, how you save, how you borrow, but the money-related functionality, so things like payroll or accounting or tax. But importantly, we also went upstream, right? So that includes things like, what happens before that job gets on your calendar? Well, you’ve got to go get a customer, so maybe you want to have some marketing automation tools, or you need to communicate with that customer and so perhaps you want your voice system embedded in your software, or to manage a pipeline, a CRM.

So I think at this point we’re—I sort of—I don’t actually know quite, probably, what the next product is. I think we’ve gone through that multiproduct expansion in a big way and really are now focused on deepening the attach of those products, and then I think starting to look more into that third leg of your stool there, which is about you know extending the value chain and looking at suppliers, and distributors, and subcontractors, and those sorts of relationships.

CHRISTIAN DICARLO: I want to ask you one question because there’s a great shift from AI. I want to ask you about the most analog payment method ever: checks. What’s your—because, I mean, there are a lot of vertical SaaS platforms out here. I know all of them struggle with checks. What does Housecall Pro think about it?

ETHAN SENTURIA: Yeah. So we have a tremendous amount of check volume. I implore you, if your home service pro asks you to tender payment, please take out a card. But it’s a significant amount of their wallet, as you can imagine. It’s interesting because if you ask the pro, they’ll say, “Well, I didn’t ask for a check.” If you ask the homeowner, they’ll say, “Well, I didn’t want to pay with a check,” but yet there is still so much check volume happening. So our approach there was like, well, we have to meet these pros where they are. That’s cliché, but it’s true, so we built Mobile Check Deposit actually with Stripe. I think maybe we were probably the first.

CHRISTIAN DICARLO: Not meant to be a Stripe plug, but just like a real problem that most platforms struggle with.

ETHAN SENTURIA: Right. But it actually—it’s a real problem. Yeah. So we built Mobile Check Deposit and that really is an on-ramp for pros who might say, “Well, I’m not really ready for digital payments or to change my behavior or change my workflows.” OK, cool. Well, you can still operate holistically with inside of our platform, doing the behaviors you’re comfortable with. Take that check—front, back. By doing that, it then creates a lot of interesting opportunities for faster money movement or better underwriting. So even on the surface, there may not be the same economics associated with analog payment methods as there are with digital, but the indirect opportunities from capturing that stream of data and being the center of those workflows is quite powerful.

ANDREW WALSH: Amazing. Well, I think that does it for time. I want to thank Stripe for helping us get this benchmarking report into the wild and throwing a great event. Ethan, thanks for sharing your experience embedding fintech into your platform.

ETHAN SENTURIA: Yeah.

CHRISTIAN DICARLO: Big thanks to the Tidemark team. Andrew, what’s the best way to get access to the benchmarking?

ANDREW WALSH: Go to tidemarkcap.com/VSKP-next. You can sign up for the newsletter. We’re going to launch the report. It’ll get distributed via that newsletter. Hope you enjoy it.

CHRISTIAN DICARLO: All right.

ANDREW WALSH: Thanks a lot.

ETHAN SENTURIA: Thanks, everyone.