Tool versus Marketplace in Vertical ERPs
Matt Brown, Co-Founder of Bonsai, on the rise of vertical ERPs
The core choice is whether the company is selling software efficiency or demand. A tool business like Bonsai or HoneyBook wins by owning one user’s daily workflow, contracts, invoicing, payments, and now banking, then monetizing that same user with software fees and financial products. A marketplace like Upwork or Workrise gets paid more because it delivers jobs or transactions, but it must constantly balance both sides of the market, which changes the product, pricing, and operating model.
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Marketplaces earn their higher take rates by solving lead generation. Upwork is valuable to a new freelancer because it brings clients, not just billing software. That means the product has to attract buyers and sellers at the same time, and decisions that help one side can hurt the other.
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Pure play tools can go deeper on one persona. Bonsai is built around freelancers only, which lets product, payments, and support all focus on the same customer. HoneyBook follows a similar path, expanding from proposals and payments into checking, debit, and money tools without becoming a two sided market.
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Starting as a marketplace can still end at embedded fintech, but the economics and complexity are different. Workrise combines a labor marketplace with workflow software, contractor onboarding, timesheets, and payments. That creates more revenue opportunities, but also adds the operational burden of marketplace liquidity and service quality.
The next wave of vertical ERP winners will stay disciplined about this split. Software first companies will keep adding payments, banking, and credit around a single user workflow. Marketplace first companies will add the same financial products, but only after building enough liquidity that lead generation remains their strongest reason to charge a premium.