Vertical SaaS

“I think that's kind of how I view this, the real SaaS-pocalypse. It's more of a vertical SaaS-pocalypse. Which is software that's designed for just one vertical.”

“So are you long vertical SaaS or are you short it like Freeberg and I are?”

“I don't think vertical SaaS has a system of record. I don't think that's what they do. I think they're workflows. This is the key point where these horizontal monolithic companies like Salesforce are just unique. Workday, Oracle with respect to their GL. It's …”

“Let's say as you compare to a vertical thesis, the challenge in verticals is unless you are here close to the customer, how can you build for verticals? But the person sitting in India actually has a very clear visibility of the latest and greatest problem tha…”

“And I think the new world is, you know, if. 400 people in the United States own funeral homes, let's say like 20 of them are smart and no AI, they're all going to build their own software. And so what does that do? That means It's great for the consumer. There…”

“Not a lot of investors Understand the play of vertical SaaS and forget about understanding the, in the world of construction. A lot of investors would come us to build their own thesis.”

“If you're a 203 104 hundred million dollar fund, you can absolutely create a ten billion dollar company. Because remember, one of the big changes is that vertical SaaS does take over labor.”

“Over a quarter of Australian small businesses are using vertical SaaS, as are nearly a fifth of small businesses in the UK. Other markets like Singapore, 14%, France, eight percent, and Germany, five percent are more nascent, but adoption is growing quickly.”

“In today's world, if you have a big fund, I don't think that's where you should be focused. I think you should be focused on the absolute mega outcomes, the platform companies that are going to generate that disproportionate return, and you're actually going t…”

“Especially in the sort of vertical SaaS space. You know, I think even 30, 40% growth puts you in the top, you know, 25%.”

“So I've just learned from experience that if I'm selling a software product and I position it for everyone, It's harder to get traction. If I position it for a certain vertical, a lot easier to get traction more specifically from partners within the space.”

“The effort that's needed in overcrowded categories is double the normal effort. Versus in vertical, the challenge is to understand the domain really well, and to establish go to market activities that are very specific to that industry. But then you're not fig…”

“And then once you excite a few customers, ideally recruit them to be, you know, fully open up for your team. And that's what you need. I mean, of course, early days they would say, you know, they may need the software for free or they may need it in for a sign…”

“If it becomes so expensive that, you know, your model doesn't work, well then given the specialization you're in, and particularly if it's something like a very specialized vertical SaaS thing that you're doing, okay, you can probably get as good, if not good …”

“You can get to, I would say, 1,000,002 1,000,003 million of ARR, somewhere in there, for a lot of vertical SaaS businesses with that sort of self-serve model. Like, you can differentiate the pricing, and like, you know, you gotta figure out, there's a lot of s…”

“Most vertical SAS companies had no downturn, so-called downturn. And you know, I w I did, I was with the Sierra of owner this morning. They had no downturn in restaurant SAS.”

“And as I think back on our vertical SaaS investments, you know, like a Shopify or a Service Titan or a Toast, when they added payments, it became that big Next Horizon unlock for them and really doubled the TAM and the market caps for these businesses.”

“I think AI is going to do the same thing, that what it can do you know, with Service Titan, as they talk about automating the technician experience and the ability to go out there and have a co-pilot alongside of you.”

“It is attractive for them. And that's the most important thing. It's a great entrepreneurial opportunity. It's just not compelling for our business model.”

“Vertical SAS is still under invested in because the AI wave is just coming to vertical SAS. It's just starting in a lot of these categories and you're going to see five competitors, but you're not going to see 500 in a lot of categories in legal. You are in sa…”

“These very, very verticalized niche products. I think are going to get, they're going to get competed down a ton.”

“So there's a lot of, I think, vertical, niche-specific SaaS tools that are generatable very easily, even with today's technology, let alone like a year from now, I think you'll be able to kind of generate them, especially on a platform like Replit, which gives…”

“This is also why I believe horizontal SAS is so much harder. Like if you're building Sinewell, right, Ruben Gomez has, it's a competitor to DocuSign. Horizontal electronic signature, like, Can he possibly have one ICP? Probably not. Versus if I'm vertical... T…”

“I don't know a single vertical SaaS company that doesn't want to add some type of banking or fintech product, right? At a bare minimum, they're adding some sort of Payroll, but they're also, they want to add credit, right? They want to add banking. They want t…”

“The money in vertical sass is full stack. Like, that's the playbook, like, you do it all.”

“We just did a bluntly very boring vertical SaaS company, had 13 term sheets.”

“In this deep of vertical SaaS, you've got to have a mix. Of that prior experience, that industry experience over SaaS experience, you can't over index on the SaaS side only”

“A lot of this, in my opinion, if it's like mission critical to do business with you, just make it free.”

“I will argue that every vertical SaaS needs a trial. Even if it's like a pop up one page full data filled in, there's not too much they can do. See where they go, see where they click, get them in some sort of demo mode to where your sales team then deploys an…”

“Don't wait for them to discover that value because it probably won't happen and you probably have a leaky bucket.”

“Vertical SaaS wins by eliminating choice.”

“I believe you can have both high velocity and high value sales. And the way you do this is you have to stop segmenting by company size. And this is where segmenting by sub vertical becomes even more important.”

“Being not for everyone is going to be your biggest advantage in vertical SaaS.”

“So the like simple framework here is that the product owns success. So this means that It should be so aligned and so good with your verticals needs that it doesn't need translation and it doesn't need somebody to come back in and say, Hey, we noticed you're n…”

“On the vertical SaaS side, a lot of, we're seeing a whole set of new companies that are popping up around these sort of basic manual work processes, because if you're a vertical provider, so if you're providing software to vet clinics, for example, There's a l…”

“Scale matters. Particularly in vertical SaaS. That's the world we're in. Scale matters. Point solutions aren't going to survive.”

“I think the tools, I actually think some of the LLM and the, you know, I think some of the tools are actually very commoditized. So I think that the vertical SaaS or horizontal SaaS or data owners We'll be able to access the underlying tools reasonably cheaply…”

“I think we drastically overestimate the technology sophistication of these companies. To be able to build with AI their own vertical solutions. Are you kidding me? They struggle to onboard Slack.”

“I think if you do the math, you almost have to earn at least 10 K a year from these very small businesses to make the math work.”

“We are led by the customer's problem set is the kind of only way I've ever seen it really work. You can lead by what makes you money. I think the challenge with that sometimes is that can run out on you. It's like eventually It's if it's not a valuable enough …”

“Your early products should solve a very obvious problem for that customer. That customer agrees is a problem that they want to solve because usually those are also the things they're willing to pay you for.”

“Vertical SaaS, I think is not the right model of how you would attack a problem that is sort of an AI native style problem.”

“There's so much opportunity for still today in 20, 24 to not go build the shiny, sexy thing with limitless, you know, market size and, Hone in and focus on one industry, you know, one type of business and build software tailored for them and build really great…”

“I'm a big believer in picking a industry and not a, an idea. So you don't come up with an idea at all. That's not the first step. That's not even the 10th step. So you have to focus on an industry.”

“As a software company, it's so much easier to get into SMBs. They require less. You can get in with a smaller feature set or maybe even one feature, and then you can add to that capability, kind of grow up a little bit, you know take the punches and develop ki…”

“And there's a correlation with successful outcomes and actually, actually having the industry expertise, but it's not a requisite at all. So, you know, we've built one of the biggest vertical SaaS businesses in the country for trade schools, and it's, I didn't…”

“You want to go after Products that have potentially a hundred percent time, right? Where it's a hundred percent of your install base. And it turns out there's not that many of these, right? Cause like, you know, if you go down the stack of like what a small bu…”

“In general, the trend is that we do see vertical and orthogonal SaaS companies, not only growing faster, they tend to have lower churn. Honestly, if they're doing well in these spaces, their net negative churn”

“To charge for a specialized tool, you have pricing power because you're not a commodity, and whether you can charge more or not is one part of the question, but the other one is that you do, in fact, your pricing is not going to zero.”

“The hypothesis around that niche down needs to be as strong or stronger than the one that's currently working for the business. Like, it has to overcome that, I think, for me.”

“It's one of the places, you know, I think that vertical SaaS has a huge advantage relative to horizontal SaaS, where you need to take a much more and a much more expensive, like horizontal and brand based and, Advertising in the New York Times or other mainstr…”

“The harder part is actually getting additional verticals, and I think everybody who nails one thinks they can do many, but that's where a lot of companies go to die.”

“The catch on that, and like one of the tricks is just, it's very, very difficult to be able to build awareness and be able to acquire, at least at the bottom of the market, be able to acquire at an affordable CAC if you don't have really great brand awareness,…”

“If I were to guess, I think it's in the 75 to 80% range of companies that we have funded over the past several years have been vertical SaaS.”

“These days, all, almost all of those reasons still apply about it being less competitive, about you don't need to be the best marketer in the world, you just need to be a better marketer than the other folks in your niche.”

“Boring industries like pools, you know, those are massively overlooked markets that are big and have a lot of opportunity in it.”

“Every industry of any size, any industry with a 100,000 or more customers needs a system of record. They need a core operating system.”

“What I see again and again is I see founders who are pretty good and they hire rep after rep after rep that worked at Dropbox or whatever, and a hundred percent failure rate. Again, and again.”

“The perverse thing about this is, the better your category, the more likely that is to happen. If you're selling some very Focused vertical SaaS app, you're unlikely to find a spending arms race, right? But if you're in some horizontal platform category, peopl…”

“The money in vertical sass is full stack. Like, that's the playbook. Like, you do it all.”