The Unvarnished Truth About Building a Successful Startup
Let’s get down to the nitty-gritty of building a successful startup. It’s not about the flashy office space or the ping pong tables. It’s about understanding your customers’ burning need and solving for it. That’s the golden ticket. The product you’re building should start with an inherent need and as you build more, every subsequent customer should get more value as the product becomes better and more nuanced.
Nowhere is this more evident than in the realm of vertical SAAS. This is software that’s built with a purpose, designed to solve industry-specific problems. It gets into the nitty-gritty of customer businesses, evolves with consumer behaviour, and adapts to changing industry dynamics. When done well, vertical SAAS is transformative, and we’ve seen several examples of successful companies in this space.
A ChatGPT Assisted Introduction to Vertical SAAS
When I first sat down to write this blog, I was faced with the daunting task of what to say about Vertical SAAS that hasn’t already been said. There are several unicorns in the space, some from India, and VCs have been making vertical SAAS market maps for a while now. To overcome this hurdle, I turned to Chat GPT for an ‘interesting opening paragraph outlining the Vertical SAAS opportunity’. Here’s what it came up with:
“Picture a skyscraper in the bustling city of modern commerce. Instead of floors filled with people, it’s packed with silos of specialized software solutions, each tailored for specific industries or niches. This innovative business model, characterized by its remarkable depth and precision, is revolutionizing the software industry. As the technology landscape continues to evolve, the prospects for vertical SaaS have never been greater, offering entrepreneurs and investors a golden opportunity to climb aboard this rapidly ascending business express.”
This got me thinking about the Generative AI opportunity, more broadly, the AI opportunity in Vertical SAAS, and what lies ahead for Vertical SAAS companies.
The Evergreen Vertical SAAS Investment Thesis
Let’s start with the basics: what is the core thesis in Vertical SAAS? This has largely remained the same over the last decade. In simple terms, we believe software that helps companies become more efficient at their business is valuable. Doing this in so-called dusty, old-world industries that don’t grow much and are facing constant pressures with changing customer preferences is a winning formula if there ever were one.
The Generative AI Buzz in Vertical SAAS
There’s a lot of buzz around Generative AI being the next platform shift. Some of the most respected Venture Capital Investors and Founders alike have identified it as such. There’s no doubt that Generative AI will probably be extremely relevant extremely quickly, thanks to some groundbreaking research that’s leading to transformative business model shifts.
The Potential of Generative AI in Vertical SAAS
Generative AI has the potential to truly revolutionize customer service. It can act as a force multiplier for many jobs that employ a lot of desk workers. Customer Service sits on top of this pile. We aren’t far from a world where models trained on public datasets but tuned narrowly to private datasets can impact cut-down time to support.
The Final Word: Does Generative AI Upend Vertical SAAS?
Generative AI is a platform revolution, much in the way the cloud was. By this I mean foundational models in Generative AI will be available to everyone and would probably be as easy to integrate and use as GitHub Copilot has been. As a result, I think every company that wants to use Generative AI would be able to do so and give 80-90% of what could be construed as a great experience out of the box.
