Vertical-SaaS, The Future of Startups!

Sassing it up!

In today’s tech landscape innovation is both profitable and scarce. What do I mean by this? It’s harder than ever to create new ideas to start new businesses for new services. This makes innovation scarce. At the same time the successful ideas which come forth are almost always revolutionary in their niche or area, thus making them profitable.

Businesses are always continuing and evolving. Why? Because the consumers and end-users are growing and changing. Businesses need to adapt. Businesses need to learn. They must succeed. This is already a given for the likes of Meta, Dell, IBM etc. They have enough monetary reserves to backup their ideas both bad, good and all. They also have established businesses and main products. Lets think about the small-medium enterprise workers. They are the ones who are still working out their main products. What decisions do they have to make to adapt themselves to their business environment and consumers?

In terms of consumer/end-user studying the methods are all the same. As an example, a company, both big and small, could get data of target demographic and their habits, analyse how their product fits into their life and work flow etc. That will tell you your end result profit over whatever amount of time you want to. Big enterprise don’t need to worry about their business model or tech stack. On the other hand, small-medium tech enterprises have to be very careful when picking their tech stack and their business model. Are they a SaaS company, like Salesforce? Ad revenue based company, like Meta? Are they basing themselves more off a donation model, like Mozilla Foundation?

Let’s not beat around the bush any longer……..SaaS is the future and present of all small to medium enterprise at this moment in time and for the future. SaaS companies are also currently the best way for startups to go and already established enterprises. On explodingtopics.com Josh Howarth had this to say about the SaaS market:

“There are five key insights into the SaaS market:

• There are currently approximately 30,000 SaaS companies.
• The US has the largest proportion of SaaS companies (around 60%).
• Including repeat users, the US has around 54 billion SaaS customers.
• Salesforce has the largest SaaS market share at just under 10%.
• The SaaS market is predicted to reach a valuation of $307 billion by 2026. “

In the past it was almost mandatory, for you, a young entrepreneur to make a new technology or method that does something which people will pay subscriptions for. It was harder at that time to make SaaS companies because of the technological hurdles. Now? It’s hard to find a SaaS company which isn’t already in the niche you want to get into! The solution? Vertical-SaaS!

Niche of Niches

We know what a SaaS is but what’s a vertical-SaaS? Staxpayments defines vertical-SaaS as:

Vertical SaaS is an emerging branch of software solutions tailored to specific industries or niches—as opposed to software for generic business needs like CRM, project management, or accounting (otherwise known as horizontal SaaS)

Upon reading that you may think to yourself “wait a minute isn’t that just regular SaaS with specific steps?”. The answer is YES! Yes it is. Regular SaaS companies target your needs and charge you for it. Vertical-SaaS companies target the most specific points of yours to monetize. Whether you’re a business or an individual.

An example of a regular SaaS is Spotify, You pay to to easily find music and stream that said music. Let us list 5 examples of vertical SaaS to really drive the message across on what they are and how they operate:

1. Textura: This vertical-SaaS is a payment management software. It hyper specialises in construction payments.

2. Riskalyze: This vertical-SaaS helps with money management. Very specifically, it was made for only assisting financial advisors.

3. Veeva: This vertical-SaaS helps businesses streamline their operations. However, they very specifically target the businesses regulatory affairs and clinical data.

4. Upvoty: This might be the most special on this list. This vertical-SaaS works as a feedback management solution, however, it is a feedback management solution which is specifically made for other SaaS companies. That is right. It is a SaaS that is “Sassing” off other SaaS companies.

5. DropEvent: This SaaS works with media photo sizes. They make it so all photos you take are shared at their original quality and specifically their original sizes no matter who you send it too. It’s a vertical-SaaS literally built to handle photo sizes……we end this list with a specific app even among other vertical-SaaS companies.

ALL of the vertical-SaaS companies aforementioned above are on the up and up. How do we know this? Well vertical-SaaS startups are the go to for a growing number of young entrepreneurs. Why? because the money and opportunities are there. At the end of 2022 Fractal Software had this to say about vertical-SaaS as an industry:

Since January 2020, the total market cap of the Vertical SaaS Index has grown by 30% and Fractal’s vertical SaaS index remains above its pre-pandemic highs. Over the past 2 years, the total LTM revenue of the companies in the index has doubled from $14.9B to $29.5B.

Not only did they state this, emphasising an obvious accelerated growth in the industry but they also stated this shortly after:

Of the 12 companies that existed in the Vertical SaaS Index in January 2020, only 3 have seen a decline in market capitalization as of November 29, 2022. Of the companies whose market cap increased during this time period, the median increase in market cap was 27%.

Overall what can we take from Fractal software’s article? It’s that vertical-SaaS companies are ever growing in terms of number and industry power. The ones which will see a decline will regain their previous strength sooner rather than later. As of 2022 companies were increasing their average market cap by 27%. Granted this might not be a reasonable estimation as some companies get much greater evaluation than others so this might greatly skew the data. Regardless the smaller companies are still growing, arguably even much more than their normal SaaS counter-parts in the industry.

From a personal standpoint I also have reason to believe vertical-SaaS products will work. not just from the various different developers I talk to regularly but even partially because of the content shown through social media. We all get affected by social media but this time it was the good type of affection. It made me realise the power of vertical-SaaS. Who do I specifically mean? On TikTok there is a young developer by the name @saasgod who has over 20 thousand followers. He posts videos talking about the benefits of SaaS and young developers and entrepreneurs getting involved in SaaS building. Unbeknownst to him almost all the SaaS companies he’s made or references are actually vertical-SaaS companies! There is a strong and growing trend of young startup builders building vertical-SaaS companies and it’s only going to grow!

Remember if it ain’t SaaS, it wont last!