The vertical SaaS playbook is unreasonably effective.
- The vertical SaaS playbook is unreasonably effective.
- It works because having good-enough components pre-wired together well for a niche is better than having great components that customers have to duct tape together and configure themselves.
- It turns out there's basically no way to do arbitrary integration cheaply or scalably.
- You can get consulting style returns (good business but sub-linear return).
- The only way to get super-linear returns with consulting-shaped businesses is to be a platform (like Salesforce) that then hosts an entire open ecosystem of consultant-shaped businesses within itself.
- A swarm gives you super-linear returns, even if each of the members of the swarm is individually sub-linear.
- Vertical SaaS gives a super-linear return because it gives a one-size-fits-all solution to a given niche.
- All of the businesses in a given vertical are more or less the same.
- The customers of vertical SaaS tend to be atoms-based businesses; they use the same business model as their competitors, just in a different geographic area.
- Then the hyper-stickiness of being the system of record or "operating system" for the customer gives durable margin.
- Tech businesses (e.g. businesses that take VC funding) fundamentally presume a super-linear return.
- That's one of the reasons that vertical SaaS has taken over the world.