Start Vertical, Scale Wide: Where Breakthroughs Actually Happen

Innovation begins when focus becomes ownership of one clear space.

In an earlier piece, I wrote about “The AI Mirage” and how hype smothers real progress. It’s companies rolling out tools for sales, logistics, and healthcare all at once.

Founders chase trillion-dollar markets while investors imagine global domination.

But this horizontal dream sinks most startups.

The ones that shape the future fixate on problems too costly to ignore. They don’t boil the ocean. They heat a teacup.

Real breakthroughs almost always start in the vertical.

Find Your One-Inch Square (And Own It)

Imagine a tiny patch of land, just one inch square. Now picture owning that inch so completely that no one else can touch it. That’s vertical focus.

Let’s get our terms straight.

A horizontal company makes a tool for everyone. Excel is the classic example of a powerful yet generic tool. A baker tracks ingredients, a hedge fund models risk, and a student logs homework. It works for all, but fits none.

A vertical company builds for one world. It chooses an industry and solves the overlooked problems that matter there.

The horizontal pitch sounds bigger. The vertical pitch wins.

Why? Because when you go vertical, you gain three abilities.

1. Purpose.

You know exactly who you are building for. You’re not guessing what features “most people” might want. McKinsey research finds that purpose-driven innovation beats scattered creativity. Success demands precision, not volume.

You spoke with restaurant owners every day. You saw their struggles. They needed more than payment tools: orders linked to printers, inventory, and reservations.

So you built Toast, now worth billions, by solving that exact problem.

Shopify began the same way. It started with snowboards, not global commerce, and now powers online retail.

2. Clarity.

A 20-person startup selling to “all industries” has no center. Marketers write ten versions of the same ad. Salespeople learn hospital speak (HIPAA) before lunch and sports franchise language (contracts) after.

Nobody gets good at anything.

Vertical companies focus everyone on a single target — all become experts in a single domain.

3. Defensibility.

In a horizontal market, your only differentiator is often “cheaper” or “faster.” That’s a fragile, temporary advantage.

In a vertical market, your moat is data and workflow. True defensibility comes from control. Owning data, tools, and customers end-to-end creates walls rivals can’t climb.

Let’s examine Solyco Capital portfolio company, ai.io, a company utilizing AI to scout young athletes. They aren’t trying to build “HR AI for everyone.” They are solving a tiny problem. How does a professional soccer club find a superstar playing high school in Brazil?

Their AI learns from thousands of hours of footage from youth sports. The data means nothing to a bank or hospital but everything to a scout. It forms a moat so deep that even Google or Microsoft can’t cross it. They’ve built a fortress, not a picket fence.

Why ‘Going Big’ Often Makes You Small

As investors, we see the “big TAM” (Total Addressable Market) slide in every horizontal pitch. “If we just get 1% of this $2 trillion market…”

It’s a fantasy.

Companies that chase breadth scatter their resources. Decisions stall. Brand clarity vanishes. Even established firms expand too fast, say too much, and forget what made them distinct.

When you build a horizontal product, you are a “sea of beige.” You’re a compromise. You aren’t anyone’s perfect solution. You are just… available.

You’re up against giants. A basic AI writing tool competes with Google and Microsoft for attention. Clio won by replacing file cabinets and spreadsheets with a law firm’s operating system.

That’s the fight you want.

When you serve everyone, you inspire no one. Your product weakens. Your marketing dilutes. A focused competitor who understands the customer will outperform you.

Every Giant Starts as a Niche

“But Chris,” you might say, “What about Amazon and Uber? They’re massive and horizontal.”

Look closer. Every giant starts as a niche.

Many of today’s industry titans began focused, determined, and embedded in a specific vertical before scaling.

• Amazon is the ultimate case study. They didn’t launch as “The Everything Store.” They launched as “Earth’s Biggest Bookstore.” They picked one vertical: books. They spent years solving the specific problems of book inventory, distribution, and discovery. Amazon conquered one category at a time. Books first. Then music. Then DVDs. Each new vertical got bolted onto a logistics machine already humming at scale.
• Uber didn’t start with Uber Eats, Uber Freight, and scooters. They began with black cars in San Francisco. They solved one problem, proved it worked, then earned the right to take it city by city.
• Slack’s purpose wasn’t to be the “email killer” for all businesses. It was an internal tool for a small video game company. It solved their specific problem (team collaboration for developers). It only scaled when they realized other tech companies had the same problem.
• PayPal initially served eBay power sellers before becoming the backbone of e-commerce payments.
• Facebook launched at Harvard, not the entire world.

You must earn the right to go horizontal by winning your vertical first. 

Are You Building a Fortress or a Picket Fence?

So, what does this mean for you?

Identify a $5 billion market that you can realistically capture at a 20% share.

Find a problem you know inside out. Something real, narrow, and ignored. If poor warehouse tools are slowing you down, address the issue. If billing software wastes your time, rebuild it.

A vertical focus is a creative constraint that forces discipline. Ignore “what-if” features by fixing the problem that matters most. Your first win isn’t scale — it’s 100 people who refuse to work without you.

It’s a fanaticism gained by removing a central pain.

If you’re an investor, look for founders who:

• Know the domain from the inside.
• Build for themselves first.
• Focus on defensibility, not noise.

At Solyco, we are skeptical of the “AI for everything” pitch. We get excited by the founders who spent a decade in their field and built the software to fix supply chains.

Why? Because those founders know. They have the domain expertise, relationships, and they’re building a product for themselves.

The horizontal play is a “blitzscale” game. It’s a wager on execution, a race to burn billions in marketing to reach customers. It’s a high-stakes bet.

The vertical play gambles on product-market fit and defensibility. It’s a bet on creating a business so deeply ingrained in its customers’ lives that it keeps the money flowing. And it’s often far more capital-efficient.

The Smart Way to Cross the Chasm
From Laser to Floodlight

Cementing your vertical first helps you:

• Build credibility with early adopters.
• Refine product-market fit before scaling.
• Create a loyal customer base that funds expansion.

Each one opens the next door. Without that base, scale crumbles on weak focus and thin differentiation.

You don’t have to stay vertical forever. Dominate a niche and then leverage that stronghold as a base for growth. We refer to this as the vertical “land and expand” strategy.

You saw how Amazon did it, one vertical at a time. Salesforce did it, too.

They started with a “CRM for B2B sales teams.” They dominated it. Today, their AppExchange is a horizontal platform that exists because they owned the vertical first.

Rapid growth shatters momentum. A quick win lures a startup into chasing new markets. Focus fades, the product loses shape, and sharp ideas turn into fragments.

Stop Boiling the Ocean. Start by Heating a Teacup.

Bypass the big platforms shouting about AI. Find the small teams tackling a single industry-related problem. Those are the ones digging a moat of data and workflow no one else can cross.

The real innovation — the change that sticks — doesn’t happen in the “everything” market. It occurs vertically.

What ocean are you trying to boil?

And what’s the one, single teacup you could heat to boiling, right now?

If you’re building or investing in what’s next, we’d like to hear from you.

The information provided is for informational and educational purposes only and does not constitute investment advice, recommendations, or solicitation. Solyco Capital and/or its affiliates may have financial interests in companies discussed herein, which creates potential conflicts of interest. The views expressed are personal opinions and do not necessarily reflect official positions of Solyco Capital. Past performance does not guarantee future results. Forward-looking statements are subject to risks and uncertainties, and actual results may differ materially. Readers should conduct independent research and consult their own attorneys, accountants, and other professional advisors before making any investment decisions. The content herein should not be construed as a solicitation or offer to engage in any investment strategy, purchase of securities, or other transaction. All information is provided “as is” without warranty of any kind, express or implied.

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