Vertical software used to have a TAM problem for VC investors. But now it doesn’t in many big markets, or at least that’s the new theory. The TAM expander is agents that do work instead of people.
The labor market is 50X bigger than the software market. That’s where the new total available market opportunity is — do the work, don’t just track it.
Industry-specific software companies were ignored by almost all investors, especially VCs, until about 2010. How can you build a $ billion company that grows very fast and consumes gobs of our capital by selling to small industries that grow very, very slowly?
Then growth equity and private equity started investing in vertical software with its steady, slow, efficient, compounding, and defensible growth.
Now vertical SaaS looks like the cool kid with its efficient GTM, deep workflows, proprietary data, and low churn. No SaaSpocalypse here.
The vertical agent opportunity on top of software is causing some VCs to write big checks to find the next $ billion software company for lawyers, dentists, or whatever.
The riches might be in these niches that could get very big.
Growth equity and private equity investors are VERY active right now in vertical SaaS with an AI upside.
And VCs are showing up in the biggest categories with the biggest checks.
I see the same opportunity for efficient, bootstrapped, and lightly funded founders to build awesome, profitable $50M businesses with SaaS/AI and agents on top.
Bootstrapped founders are the hidden majority of vertical SaaS winners. Always have been.
There are clearly threats in vertical software with AI these days.
But there are far more opportunities, no matter how you play your funding game.
We all want software that works the way we do, out of the box, with the ability to add our custom approach too.
Specialists Eat Generalists. Almost always.
Sorry, horizontal software, it’s not as fun for you after a great run for 30 years.
