I used to think horizontal SaaS was the best way to create a billion dollar company, but I was wrong. π§΅
First off, a quick definition of horizontal versus vertical SaaS for those new to the concept:
Horizontal SaaS: Software products built for a large audience of business users, regardless of their industry ie. Hubspot.
Horizontal SaaS: Software products built for a large audience of business users, regardless of their industry ie. Hubspot.
Vertical SaaS: Software products built solely for companies within ONE particular industry ie. Procore.
Ok, let's get into why vSaaS is a great way to build a $B company, as opposed to horizontal, in today's world:
Ok, let's get into why vSaaS is a great way to build a $B company, as opposed to horizontal, in today's world:
2/ Vertical SaaS companies have incredible pricing power.
When you are building a solution for ONE industry as opposed to every industry on the planet, you can command a lot higher price.
Your solution will be tailor-made for them, and they will be willing to pay for that.
When you are building a solution for ONE industry as opposed to every industry on the planet, you can command a lot higher price.
Your solution will be tailor-made for them, and they will be willing to pay for that.
Think about their alternative. They'd pay for a bunch of different products that they have to string together, integrate, and then maintain data connections.
Many industries have NO or very little IT resources.
We service a publicly traded co. with just a few IT people!
Many industries have NO or very little IT resources.
We service a publicly traded co. with just a few IT people!
3/ Vertical SaaS companies have far less competition.
Most software is built in red oceans - markets where you have to TAKE from others to feed yourself.
There are many industries out there that have been forgotten about. They run on paper / spreadsheets.
That's opportunity.
Most software is built in red oceans - markets where you have to TAKE from others to feed yourself.
There are many industries out there that have been forgotten about. They run on paper / spreadsheets.
That's opportunity.
4/ Customers are in dire need of a solution.
Customers are SICK of having 50+ SaaS tools. Everyone just wants an all-in-one. Something specific to them.
They hate customization or spending TIME and MONEY to get something to 'work' for them.
vSaaS is the answer.
Customers are SICK of having 50+ SaaS tools. Everyone just wants an all-in-one. Something specific to them.
They hate customization or spending TIME and MONEY to get something to 'work' for them.
vSaaS is the answer.
5/ Vertical SaaS companies become 'platforms' versus 'features.
To build a $B company with a strong moat you want an end-to-end platform.
Most horizontal software companies are FEATURES ie. eSign, email tools, etc.
In vSaaS you can be the one-stop-shop for everything.
To build a $B company with a strong moat you want an end-to-end platform.
Most horizontal software companies are FEATURES ie. eSign, email tools, etc.
In vSaaS you can be the one-stop-shop for everything.
6/ Vertical SaaS companies have stronger customer retention and NPS.
When a business builds a product around a customerβs needs within a specific market, magic happens:
-High Customer Satisfaction & Loyalty
-Low Customer Churn
aka customers actually use the software *happily*
When a business builds a product around a customerβs needs within a specific market, magic happens:
-High Customer Satisfaction & Loyalty
-Low Customer Churn
aka customers actually use the software *happily*
7/ Vertical SaaS companies don't have to spend time building hundreds of third-party integrations
In horizontal SaaS, you've got to build SO MANY integrations.
In vertical SaaS, you're probably looking at ~10 total integrations to open up the entire market.
In horizontal SaaS, you've got to build SO MANY integrations.
In vertical SaaS, you're probably looking at ~10 total integrations to open up the entire market.
8/ Want proof?
I found the Trade School market was running on paper or stringing together horizontal solutions ~7 years ago.
So I founded an end-to-end vSaaS for the space.
The results are real:
I found the Trade School market was running on paper or stringing together horizontal solutions ~7 years ago.
So I founded an end-to-end vSaaS for the space.
The results are real:
I hope you've found this thread helpful.
Follow @lukesophinos for more - I share learnings from founding, operating, and investing in vertical SaaS.
Like/Retweet the first tweet below if you can:
Follow @lukesophinos for more - I share learnings from founding, operating, and investing in vertical SaaS.
Like/Retweet the first tweet below if you can:
If you're more of an email person I also write a newsletter.
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One business story.
One vertical SaaS breakdown.
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Sign up here: lukesophinos.substack.com
One 'how to'.
One business story.
One vertical SaaS breakdown.
Once a week.
Sign up here: lukesophinos.substack.com
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