Almost every non-financial brand that I started to engage with over the past ~2 months is a vertical SaaS company. While the concept of vertical SaaS is in Europe still at the beginning, in markets like the US it is the norm.
Initially, when software-as-a-service providers became popular, almost all of them were horizontal. This means they develop a SaaS offering around a service (let’s say bookkeeping) and offer it to a wide range of customers (for example, from software developers to window cleaners). The founders of a vertical SaaS company, on the other hand, start with the customer segment (let’s say veterinarians) and build products and features for them (not just bookkeeping but also appointment booking, invoicing and so on).
Vertical SaaS companies tend to approach embedded finance much faster than horizontal SaaS. This makes a lot of sense if you understand that vertical SaaS means a lot of different services but for one target group.
In the past few weeks, I read A16Z’s “Vertical SaaS: Now with AI inside” (see image), “The Verticalization of Everything” by Pete Flint from NfX, and Matt Brown’s newly published Vertical Software provider overview.
My personal take away is that customer’s trust and access to them will become the new gold. In the old days, we went to a bank because only they could offer banking services, and the same applied to insurances, schools and everything else. With embedded finance, we are seeing how entry barriers are being removed and any company can offer financial services. And the same happens with the insurance, education or media industry in one way or another. You can probably not combine anything with everything. But industry barriers don’t matter so much more, many services are available via APIs. Perhaps this means as a founder you can build anything, the question is for whom and why you.
