From Niche to Success: How To Make Vertical SaaS a Worthwhile Startup Investment
Now! It’s difficult to find a SaaS company that isn’t already in the niche you wish to enter! The solution? Vertical SaaS!
Vertical SaaS has had a tremendous run during the last decade. The growing number of public vertical SaaS winners worth billions of dollars, such as in health sciences (Veeva), construction (Procore), restaurants (Toast), and banking (nCino), demonstrates how cloud-based and mobile app development specialized to certain industries can become giant businesses. Vertical software is appealing to investors not only because of its appealing business model, but also because of its potential to change traditionally labor-intensive industries.
I. Why is Vertical SaaS on the rise?
Vertical SaaS offers a one-of-a-kind offering: the creation of an ecosystem of solutions extensively built for specific industry demands. This method allows for a more in-depth understanding and integration into your clients’ workflows, encouraging steadfast loyalty. It also opens plenty of chances for upselling and cross-selling.
Spotify is an example of regular SaaS; you pay to conveniently locate and stream music. Let us look at 5 examples of vertical SaaS to help you understand what they are and how they work:
1. Textura: This vertical SaaS is payment management software. It is an expert in building payments.
2. Riskalyze: This vertical SaaS aids in financial management. It was specifically designed to aid financial planners.
3. Veeva: This vertical SaaS application assists organizations in streamlining their processes. They do, however, expressly target the company’s regulatory affairs and clinical data.
4. Upvoty: This is possibly the most unique item on the list. This vertical SaaS functions as a feedback management solution, but it is a feedback management solution designed exclusively for other SaaS companies.
5. DropEvent: This SaaS supports various photo sizes. They ensure that all images you take are shared in their original quality and size, regardless of who you send them to. It’s a vertical SaaS that’s essentially made to manage photo sizes.
Vertical SaaS products that effectively integrate finance goods into their offerings can generate significantly more value for themselves and their clients. This action not only creates new, frequently recurring revenue streams, but it also raises the value for enterprises. These software development solutions provide end-to-end visibility into a company’s cost structure, cash flow, and capital needs by integrating financial services such as payments, financing, payroll, and insurance.
Furthermore, vertical SaaS avoids the configuration issues that are sometimes connected with horizontal software. By providing a product that effortlessly matches the particular demands of your consumers, you reduce the need for the time-consuming customization procedure that is standard with generalized software.
Finally, vertical SaaS provides an all-in-one solution, eliminating the need for clients to manage many different technologies. The result is a more efficient workflow.
II. Vertical SaaS vs Horizontal SaaS: What’s the difference?
Unlike Vertical SaaS, Horizontal SaaS is a distribution model in which a SaaS product serves the demands of many industries. Slack, a company-wide communication platform aimed at small and medium-sized businesses, is the most basic example. While Slack has not done much outside of intra-company communication, it does not confine itself to any industry. Any company, regardless of industry, can use Slack.
Horizontal SaaS has been around considerably longer than Vertical SaaS, has a larger market, and is more difficult to saturate. However, because of their longevity, huge horizontal marketplaces already have entrenched companies with enormous power and client devotion. As a result, new players may find it difficult to enter certain marketplaces.
On the other hand, Vertical SaaS is very new and has one major advantage: it recognizes industry-specific challenges and problems and provides answers that horizontal SaaS products cannot.
III. A guide to vertical strategy implementation for SaaS startups: Tips included
1. Select the right vertical
As previously said, vertical SaaS solutions do not take a “one-size-fits-all” strategy. Instead, it excels at addressing industry-specific issues.
As a result, selecting the right vertical is critical. By “right”, I mean an industry that has room for expansion and is not nearing saturation.
Bowery Capital research found that vertical SaaS startups in the manufacturing, cannabis, transportation, and drones industries are expected to see continuing growth.
Other major conclusions from the study include:
- Because of its small market size, restricted growth, and growing rivalry, the restaurant business is not a good fit for Vertical SaaS.
- The education industry has a sizable market, but expansion is constrained by intense competition and fewer opportunities.
- The energy software business is expanding, with energy demand expected to rise by 48% by 2040.
Conducting market research is also essential. Once you’ve decided on a vertical, look for the top 10 SaaS firms (both horizontal and vertical) and compare their offerings (both pricing and features).
Then, consider how you might distinguish your goods from theirs. If there aren’t enough ways to make your product stand out, you’ll struggle to achieve a considerable market share. In that scenario, you should experiment with another vertical.
For example, in many countries, people buy their garments by contacting a designer directly to produce unique pieces. Seeing this, an Adamo Software client has created their own path, focusing on assisting people in producing clothing on their own! Then, a one-of-a-kind platform was created to digitalize this method, making the manufacture of unique, tailor-made garments more accessible.
Pro Tip: Pick at least three verticals and undertake significant market research on each. It assists in determining the best industry that provides enough opportunity to outperform your competitors.
2. Maintain strictly one vertical
It may be appealing to switch to another vertical since they have similar issues, or you want to expand your consumer base. However, you should avoid doing so. Each additional vertical necessitates some degree of customization of your product, limiting your capacity to give solutions to specific vertical challenges.
For example, Innovaccer, a healthcare data activation firm that transforms care delivery, began by focusing on broad industries such as finance, retail, entertainment, and healthcare. However, in 2016, the founders of Innovaccer opted to focus solely on healthcare.
They lost about 60% of their revenue by letting rid of non-healthcare customers. The startup quickly gained traction and has raised more than $120 million to date.
Pro Tip: Another advantage of focusing on a single vertical is the ability to obtain, combine, and store industry-specific indicators. You may then monetize this data by providing value-added services such as benchmarking or marketing reports.
3. Make sure your product has industry-specific compliance tools
By focusing on a single market, you may provide industry-specific compliance tools and standards. As an example:
- If you work in finance, you can provide financial services compliance choices.
- If you serve healthcare clients, you could incorporate HIPAA (Healthcare Information Portability and Accountability) compliance choices.
The more industry-specific compliance tools you provide, the more valuable you’re offering. This will also allow you to stand out from the crowd and enter the market much more quickly.
Pro Tip: If you service international customers, make sure you understand the legal frameworks and standards of each country.
4. Market your product
Product promotion is the final phase of implementing a vertical SaaS strategy to attract the right customers. This is particularly crucial in industries where established competitors are present.
To promote your product effectively, you must formulate a niche marketing strategy. Put simply, the focus of your marketing strategy should be tailored to what your target industry is.
Follow these tips to promote your product:
- Determine the search terms that your ideal consumers employ when looking for your product by conducting keyword research.
- Ensure that your website loads quickly and is mobile-friendly.
- To encourage searchers to visit your website, write a title and meta description that are unique and persuasive.
- Produce insightful content to demonstrate your proficiency in the industry.
- Address the issue points of your target audience and demonstrate how your product can solve it.
- Assemble expertise in your niche by participating in industry-specific forums and responding to inquiries from visitors. Additionally, it assists in directing targeted traffic to your website.
- Expand your reach by running targeted PPC advertisements on Google and LinkedIn (as LinkedIn is a B2B social network).
- Get your product on third-party review sites.
5. Monitor performance and make improvements
Once your Vertical SaaS solution is live, don’t just sit back and relax. Keep an eye on everything and be ready to act.
Consider the feedback that your consumers provide. Utilize their invaluable feedback in order to implement essential modifications and enhancements. Your goal is to bring them greater joy than a child in a confectionery store.
Maintain a competitive advantage by providing the preeminent experience available. Continue refining and polishing your solution until it possesses a diamond-like sheen.
III. Final thoughts
At this juncture, the vertical SaaS revolution is prepared to bring about a significant redefinition of the SaaS landscape. Understanding the complex requirements of your target industry is crucial for creating a comprehensive solution that serves as a powerful instrument that advances the operations of your clients’ companies, rather than simply a product.
As a strategic move, the convergence of vertical SaaS and AI is likely to influence the future of industry-specific software solutions. By harnessing this synergy, your product can become a platform for development, change, and innovation, ready to produce ripples in your chosen industry.
