Shopmonkey.io, a portfolio company of I2BF, raised $25M from Bessemer last week. The company provides process management software designed for auto repair shops. This is a good example of a Vertical SaaS solution we like to invest. Vertical SaaS is a solution tailor made for the needs of clients in a given vertical, for example, a CRM for hair dressers or farmers. Typically it provides all-in-one solution for the client including CRM, Field service management, a plugin for website and a client mobile app, integrations with 3rd party solutions and API’s, e-signature, payments, marketing, lead generation, and/or a marketplace.
Why Vertical SaaS is booming now:
1. According to various forecasts Vertical SaaS is a trend of 2020.
2. I believe despite 20%+ CAGR the SaaS market is in the late majority stage by Geoffrey Moore. It means that you need to apply N+1 marketing strategy, i.e. to increase profitability you need to segment your clients more granularly and deliver a tailor made solution for them.
3. Technology adoption is not the same in various segments. In IT sector we have ~10 SaaS tools per employee while in agriculture, construction, or manufacturing you could be the only viable alternative.
4. In traditional industries you often compete with outdated solutions from 90ths, Excel, or pen & paper. Any solution which is better than that would be a success.
5. To develop a Vertical SaaS solution you need to account for specific needs of the sector. Often times you need to have an expert in your team. On the other hand your potential clients could be new to adopting IT solutions and couldn’t develop a solution internally. Your competitive advantage is a mix of industry and IT expertise.
6. Business owners and managers in traditional industries are looking for a “hummer”. They are ready to pay an extra if you provide a tailor made solution working out of the box.
7. On one hand employees in traditional industries sometimes are not tech savvy. But on the other hand the younger generation of clients and employees are used to Netflix, Uber, and Amazon. They would like to get the same level of service from companies in other sectors and they push traditional industries to adopt modern IT solutions.
8. In general profit margin decreases in traditional industries. IT solutions help to improve profitability and bring new revenue. So if you’re currently working on yet another marketing or profitability tool for IT sector perhaps you should consider an opportunity to build a Vertical SaaS instead. If you are already working on Vertical SaaS feel free to reach me out via LinkedIn.
Original article was published in 2020 at my LinkedIn here.
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