I’m going to say something that might be unpopular in some circles: the horizontal SaaS dream is dead.
I’ve been in Silicon Valley for a while. I’ve built four companies, sold two, and written checks to over 200 startups—including some you’ve definitely heard of, like OpenAI, Anthropic, and Scale AI. I’ve seen trends come and go. And I’m telling you, the era of the “one-size-fits-all” platform is over. It’s done.
If you’re a founder building a SaaS company right now, you have a stark choice: niche-down or die. That’s it. That’s the new reality.
My Own Scars Prove the Point
This isn’t some academic theory for me. I learned this lesson from the trenches.
My first real swing was a company called MovieLaLa. The idea was to create a social hub for movie fans. We got millions of downloads and, on paper, had a massive reach of over 350 million people through partnerships. Sounds great, right? But it was a constant, grinding struggle. We were trying to be everything to every movie fan. The product was a mile wide and an inch deep. We eventually had an exit to Gfycat, but it was a brutal ride that taught me a valuable lesson.
So, when I started my next company, RemoteTeam, I did the exact opposite. We didn’t try to solve every problem for every company. We focused on one, specific, painful problem: handling HR for remote teams. We went deep. We obsessed over the unique workflows of distributed companies.
The result? Gusto acquired us just 580 days after we incorporated.
Think about that. The entire process—from pitching investors, to hiring the team, to the final M&A negotiations—happened entirely over Zoom. We never even had a single in-person meeting. That’s the velocity you can achieve when you have a product that solves a very specific, very expensive problem for a very specific audience.
The Horizontal Nightmare
For the last decade, everyone wanted to build the next Salesforce or Slack. The goal was a massive, horizontal platform that could serve any business in any industry. But that playbook is outdated. It’s a trap.
Trying to build a horizontal product today means you’re willingly entering a bloodbath. Customer acquisition costs are through the roof. You’re competing with hundreds of venture-backed startups who all have a generic message. It’s a race to the bottom on price and a sprint to burn through your funding.
And here’s the dirty little secret nobody talks about: most customers of these huge platforms are miserable. They use maybe 10% of the features they pay for. They’re drowning in complexity and constantly looking for a simpler, better solution that actually understands their business. They’re ripe for the picking.
Why Vertical Is the Only Way to Win
This is where vertical SaaS comes in. When you dedicate your company to a single industry, you gain superpowers.
Your Marketing Becomes Insanely Efficient. Forget spraying and praying with Facebook ads. You know exactly who your customers are. You can go to their industry conferences, advertise in their trade journals, and become a trusted voice in their online communities. Your customer acquisition cost (CAC) plummets because you’re not wasting money on people who will never buy.
Your Product Becomes Stickier than Glue. Churn is the silent killer of SaaS companies. But for vertical SaaS, it’s dramatically lower. When a dental office finds a practice management tool that is built just for dentists, they aren’t going to switch. Ever. It’s built around their workflow. It speaks their language. Your lifetime value (LTV) skyrockets.
You Build a Real Moat. A horizontal giant can’t just waltz in and crush you. To compete, they’d have to build a dedicated product, hire industry experts, and build a brand from scratch in your world. It’s too much work. Your deep industry knowledge becomes a powerful, defensible moat that protects your business.
How to Find Your Goldmine Niche
So, where do you find these profitable niches? It’s not about picking a random industry out of a hat. As an investor, I look for founders who have a unique insight, often from personal experience.
Here’s what to hunt for:
Find the “Spreadsheet Industries.” Look for industries still running on clunky, outdated software or, even better, a complex web of Excel spreadsheets. Law firms, construction companies, manufacturing plants—many are still shockingly underserved by modern tech. These are goldmines.
Follow the Money. Find a problem that is causing a massive, expensive headache. Is there a workflow that’s costing businesses millions in inefficiency or lost revenue? If you can solve a million-dollar problem, you can build a billion-dollar company.
Look for a Tribe. Is there a strong professional community? Do these people talk to each other? If you can get a few key players in a tight-knit industry to love your product, word-of-mouth will do most of the selling for you.
I’ve put my money where my mouth is, investing in vertical SaaS companies tackling everything from licensing management to AI-powered contract analysis. The pattern is always the same: a founder’s obsession with a specific industry problem leads to an incredible product.
Stop Boiling the Ocean
The next wave of great SaaS companies won’t be built by trying to be everything to everyone. They will be built by founders who have the courage to think small. To go deep. To become the absolute best solution for a specific set of customers.
So, my advice is simple. Stop trying to boil the ocean. Find your niche. Own it. Build something so good for that specific audience that they can’t imagine going back to the old way.
That’s how you build a company that lasts.
Frequently Asked Questions
What's the most common pushback you get on this?
People often push back by citing exceptions or edge cases. And they're usually right that exceptions exist. But building a strategy around exceptions rather than patterns is a losing game for most founders.
Do all experts agree with this view?
No, and that's fine. The best ideas in business are often contrarian. I share my perspective based on my experience and data, but I encourage you to seek out opposing viewpoints and form your own conclusions.
What experience informs this perspective?
This perspective comes from over a decade of building companies in Silicon Valley, two successful exits (RemoteTeam to Gusto, MovieLaLa to Gfycat), and investing in 200+ startups including Anthropic, OpenAI, and Scale AI. I write about what I've lived.