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Vertical SaaS

VSaaS refers to software solutions tailored to specific industries and verticals.

Toolkits​

FocusIndustry/SectorNotable ProductsOpportunity
FoundationsFood & Nutrition
FoundationsHealth & WellbeingGensolve
FoundationsEducation
FoundationsHousing #safe #affordableHigh
CulturalArts, Fashion and Beauty
CulturalGaming
CulturalHospitality
CulturalMusic
CulturalSport & Fitness
CulturalTravel & Tourism
DeFihashflow
DeFinansen.ai
DeFisftx.io
InfrastructureAgriculture
InfrastructureArchitecture
InfrastructureBanking & Financial
InfrastructureCommercial Real Estate
InfrastructureConstruction
InfrastructureComputing & Tech
InfrastructureCrime Prevention
InfrastructureEnergy
InfrastructureGovernment & Defence
InfrastructureLegal & Regulation
InfrastructureManufacturing
InfrastructureMobility & Transport
InfrastructureScience
InfrastructureTelecommicationsHelium
ServicesAdvertising & Marketing
ServicesPublishing & Media
ServicesEntertainment
ServicesTrades

Background​

  • The first wave of VSaaS brought services online, while the second wave integrated fintech solutions, increasing revenue per customer by 2-5x.
  • The third wave of VSaaS, which combines cloud, fintech, and AI, is the most impactful. It expands the capabilities of VSaaS by turning labour into software.
  • AI enables VSaaS companies to take on tasks previously too complex for software, such as marketing, sales, customer service, operations, and finance.
  • By incorporating AI, businesses using VSaaS can significantly reduce internal and external labour costs for non-strategic roles.
  • As an example Mindbody serves fitness and beauty studios, to illustrate how AI can augment or replace various business functions.
  • AI is expected to further increase the revenue per customer for VSaaS companies by an additional 2-10x.
  • AI will not only increase revenue per customer but also open up opportunities in adjacent markets previously considered too small or not cost-efficient for customer acquisition.

Development Playbook​

  1. Why Vertical SaaS?
  • Market often overlooked by VCs chasing unicorns
  • Opportunity to build enduring businesses with strong retention
  • Still massive potential in 2024, even in "boring" industries
  1. How to pick your vertical:
  • Focus on industry, not idea
  • Look for: a. Large market size ($1B+) b. Fragmented (many SMBs) c. Mix of small, mid-market, enterprise

  1. Understand the industry inside-out:

    • Map end-to-end operations
    • Get hands on P&Ls
    • Follow the money - where are they spending?
    • Identify areas still using pen & paper

  2. Analyze existing solutions:

    • Look for legacy providers
    • Identify where they're using horizontal solutions
    • Find gaps where AI/FinTech could add value

  3. The power of the wedge product:

    • Your "get in the door" offering
    • Should be: a. Easy to implement b. Solves a critical problem c. Ideally free or low-cost
    • Example: roofr's proposal tool

  4. Go-to-market strategy is CRITICAL:

    • Many industries require relationship-based sales
    • Product-led growth is ideal (but rare)
    • Get creative: Industry newsletters, memes, etc.

  5. The payments opportunity:

    • Owning the transaction can 10x your market size
    • Build before/after transaction, then capture it
    • Example: Toast in restaurants

  6. Pricing framework:

    • Understand current spend on problem you're solving
    • Price based on ROI you deliver
    • Aim for 20-50% of value created

  7. Keys to success:

    • Only build products that:
    • Increase revenue
    • Decrease costs
    • Prevent churn
    • Maintain compliance

  8. Validating ideas:

    • Don't just Google search
    • Talk to actual businesses
    • Offer to buy lunch and shadow operations