I recently published a market map of the vertical saas ecosystem with
and got a ton of great questions and feedback.In this post I’m starting from the top - walking through the nuts & bolts of vertical saas. Below I define what it is and why we’re excited. Click on the video for the full take and check out the highlights below.
What is Vertical SaaS?
It's important to define what we consider vertical SaaS because there isn't a universally accepted definition. In many ways it's a useful categorization because many companies in this space have similar characteristics in terms of the product and go to market, but also hard because it's unique in the vast universe it covers. What other categories span everything from beauty and wellness to forestry to health care?
At Redpoint, we define vertical saas as companies that are building software purpose built for a specific industry like construction, restaurants, financial services, etc.
Ideally, the software becomes the core workflow for users the business critical operating system to run their business.
Why are we excited?
Usually in software we're looking for products that improve efficiency, enhance the user experience or improve economics.
Sometimes we see products addressing two of the three, but rarely do we see companies doing them all. Vertical software solutions are uniquely positioned to deliver on all three because they generally operate in what we call “dustier industries” that are traditionally slower to adopt software or are using legacy solutions today. The ability to deliver this trifecta makes companies incredibly sticky, given how mission critical they become. Because these workflows are highly customized to the needs of a specific industry, we would expect higher adoption and far higher penetration than for a more horizontal product.
A few examples to bring this to life
ServiceTitan is a great example of how their software has driven efficiency for trades businesses to better manage their customer pipeline, schedule jobs and collect payments from their customers. This leads to more business and higher conversion.
Mindbody has transformed customer and employee experience at fitness studios because they're more effective in engaging with their customers through online, dynamic class availability, booking and purchase options. More transparency, less friction means more revenue and loyalty.
Shopify has allowed e-commerce sellers to spin up online stores quickly and scale with their business. It's almost 30% penetration among e-commerce websites, which is unheard of market share.
There's so much to be excited about in the world of vertical SaaS. I'm excited to dive into the market map in our next installment.
Check out the previous episodes if you haven’t yet:
What is Vertical SaaS? (Video Series Part 9)