---
title: "AI Will Drive Vertical SaaS Into the Next Wave of Enterprise Software"
author: "Unique Research"
sourcePublication: "Unique Research (FFCAP English library)"
originalPublishedAt: "2023-09-22T18:54:19+08:00"
canonical: "https://ffcap.cn/en/research/20230922a08iq900"
source: "https://ffcap.cn/en/research/20230922a08iq900"
language: "en"
cnSourceUrl: "https://view.inews.qq.com/a/20230922A08IQ900"
---

# AI Will Drive Vertical SaaS Into the Next Wave of Enterprise Software

_Unique Research · Insight · September 22, 2023 · Compiled from Forbes Council (Sanket Firodiya, Jul 14 2023) + Sapphire (Jul 19 2023) — full rewrite of both essays_

Horizontal SaaS enjoys huge TAM and copyable capability—but also fierce new entrants. As traffic dividends peak and consumers fragment, generic tools solve fewer firm-specific pains. Vertical SaaS builds deeper moats and stickier client ties via industry-depth solutions. AI now supplies infrastructure and imagination space—Unique Research argues the present and future belong to vertical SaaS.

## Essay 1 — The rise of vertical SaaS (Forbes Council / Sanket Firodiya)

Over 20 years SaaS remade business software; vertical SaaS is the next decade-scale shift per industry. It leaves horizontal’s one-size formula for tailored industry needs. Concept is not new (Veeva, Procore, Toast)—but acceleration signals a market-wide turn founders cannot ignore.

**Win-win economics:** ecosystems fitted to industry workflows deepen loyalty and lift upsell/cross-sell. Embed fintech (payments, lending, payroll, insurance) for new recurring revenue + end-to-end cost/cash/capital visibility. Avoid heavy generic customization; one-stop stacks beat multi-tool sprawl. AI/ML catalyzes predictive analytics, workflow automation, intelligent UI—turning industry data into actionable ops gains; real-time response and personalization; risk/compliance in healthcare, pharma, construction, manufacturing.

**Customer-centric success:** product alone isn’t enough—active CS (training, ongoing education, support) cuts churn and creates advocates; in niches, reputation decides survival.

**Partnerships:** peer SaaS, influencers, associations share bases, lower CAC, add credibility—claim a niche in the industry ecosystem, not just ship a SKU.

**Challenges:** faithfully model complex regulated workflows; customization without killing scale—work with domain experts/advisory boards/early customers; modular architecture.

**Close:** vertical SaaS × AI is a strategic bet to redefine industry software as a growth/transformation platform.

## Essay 2 — Vertical AI is the new horizontal (Sapphire)

Horizontal SaaS (Salesforce CRM, Coupa procurement, Bill.com AP) long dominated investor attention for TAM and platform potential. Converging forces now make **vertical AI the new general model**.

**AI × vertical SaaS:** durable advantage = proprietary hard-to-copy data + model-level and company-level domain insight. Best vertical products sit deep in workflows, harvesting opaque industry data to fine-tune models (law settlements; medical claims).

**Underserved vs crowded horizontals:** many horizontal startups are 3rd/4th-gen fighting “good enough” incumbents. Vertical core workflows remain manual/on-prem; historically under-funded → less competition when displacing legacy. Early vertical winners (project44 alumni ≥10 supply-chain cos; Veeva, Shopify, nCino, Procore, ServiceTitan playbooks) show TAM expands vs first estimates—life-sciences cluster Apprentice, Benchling, BenchSci, Causaly, Medable, Reify Health, TetraScience. Talent + vertical-savvy capital now accelerates the ecosystem. Embedded fintech further sticks workflows and monetizes adjacent transaction flows.

**Durable efficient growth:** less competition + less crowded capital → steadier growth; deep features + uneven distribution → referral loops. Public comps (Sapphire watchlist of 13 listed vertical SaaS, as of Jul 12 2023): median NTM multiple ~9× vs ~5× for ~40 broader public SaaS apps; ~20% avg YoY growth; 11/13 FCF-positive; Rule of 40 ~25%—in line with broader apps (TOST excluded from median/mean multiple & gross-margin calcs as it recognizes gross payments as revenue; CapIQ/Sapphire; classifications subjective).

**Future:** horizontal software taught “software eats the world”; domain AI apps will drive the next adoption/expansion cycle—vertical software leading via AI + industry data, underserved markets, and solid financials.

_1 CN image; attach on ingest._

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Editorial English edition published on UniqueCapital: https://ffcap.cn/en/research/20230922a08iq900
On-site reading page: https://ffcap.cn/en/research/20230922a08iq900