In a high-energy session that sparked nods across the room, Lucille and Marc tackled the shifting paradigms in the SaaS market—and made a compelling case for why vertical SaaS is quickly outpacing horizontal models.
The Horizontal SaaS Dilemma
Marc opened with a candid assessment of the current SaaS landscape. “What’s the flaw in the current market?” he asked. In his view, horizontal SaaS faces serious headwinds:
AI is leveling the playing field: Tools like AI-assisted coding have lowered the barrier to entry. Startups can now build and scale to $10–20M in revenue without a CTO, making it easier than ever to launch—but harder to stand out.
Enterprise sales are brutal: Horizontal SaaS faces challenges in defining clear ICPs (Ideal Customer Profiles), making it harder to gain traction quickly. This often results in sluggish proof points and delayed product-market fit.
Why Vertical SaaS Wins
Vertical SaaS—companies that serve a single, well-defined industry—has several structural advantages that Lucille and Marc believe make it the smarter play:
Clear Go-To-Market Motion
With deep domain knowledge, vertical SaaS teams know exactly how to sell and to whom. Their understanding of customer pain points gives them a clear runway for product adoption.Economic Moats from the Start
By solving a niche problem deeply (rather than broadly), vertical SaaS players build sticky products with defensible positioning. This leads to easier upselling and faster PMF (product-market fit).Composable Growth
Once established in one vertical, these companies can expand into adjacent markets or layers—embedding financial products like payments, insurance, or lending. That transforms them into mini-operating systems for their customers.AI as an Embedded Edge
AI isn’t just a buzzword here—it’s embedded into the business model. These companies use AI to build smarter workflows, increase automation, and create differentiated products right out of the gate.M&A and Platform Potential
Vertical SaaS allows for cleaner M&A and roll-up strategies, given the homogeneity of the user base. This is significantly harder with broad horizontal plays. Layering in APIs and platforms makes them extensible and scalable.
The Secret Sauce? Deep Workflow Integration
Lucille emphasized that success in vertical SaaS hinges on one key ingredient: deep workflow integration. These companies become indispensable to their customers, reducing churn and increasing lifetime value. It’s not about shallow features—it’s about becoming mission-critical.
“The future is not just SaaS—it’s vertical SaaS,” Marc concluded. “That’s how you build enduring, category-defining software companies.”
