Over the past few months I’ve talked to a number of entrepreneurs with vertical, niche Software-as-a-Service (SaaS) products. As expected, mainstream SaaS platforms are being carved up into small, specialized point solutions, while also providing a better experience to their customers. Most venture investors are looking for large, platform-like SaaS startups, but more entrepreneurs are going to build sustainable SaaS products that aren’t venture backable, yet very successful.
Here are a few thoughts on more vertical, niche SaaS startups:
- SaaS, with strong to recurring revenue, predictability, and renewal rates (hopefully!), makes for a sustainable business, even at limited scale
- Costs to develop and deploy software has continued to drop due to open source and the cloud, making it easier to get products to market and carve out a niche (scaling a business is still capital intensive)
- Depth of product functionality is going to be stronger the more narrow the market, and thus serve the customers’ needs better
- Marketing and sales prospecting is more straightforward with a focused market, especially messaging and talking points
Look for the SaaS cottage industry to continue to grow, especially as more more vertical, niche products reach a sustainable size.
What else? What are some other reasons there will be more vertical, niche SaaS startups?