B2B2C: Deep diving Vertical SaaS (2024)

Celine Wee

B2B2C includes both “horizontal” and “vertical” SaaS

At the simplest — B2B2C is a business selling to a business that sells to consumers. It doesn’t only have to be SaaS solutions, but for the purpose of this post that is what we will focus on. B2B2C SaaS can be split into “horizontal” or “vertical”.

Horizontal: Microsoft selling its office suite to companies, and the end consumer is the employee. Another example is Salesforce selling customer relationship management (CRM) Software to any company that has a sales team, who is the end consumer of the CRM. The Microsoft office suite / Salesforce CRM is industry agnostic, and so is “horizontal” SaaS.
Vertical: SaaS products built for a specicfic vertical / industry. See the table below for examples.

Generally the “consumer” in the third column is not exposed to the business in the first column, but is more exposed to the middle column. For example, do you know what clinic management software your dentist uses [1]? Or what gym software your CrossFit location uses? Most of the underlying businesses in the first column are invisible to the end consumer.

Vertical SaaS deep dive

To quote Chatgpt:

Vertical SaaS, also known as industry-specific or niche SaaS (Software as a Service), refers to cloud-based software solutions that are tailored to meet the needs of a specific industry or vertical market. Unlike horizontal SaaS, which offers broad solutions that can be applied across various industries, vertical SaaS solutions are designed to address the unique requirements, challenges, and workflows of a particular industry or niche.

To quote Gemini (previously Bard):

Vertical SaaS, or industry-specific SaaS, is a type of software-as-a-service (SaaS) solution that is designed to cater to the specific needs and challenges of a particular industry or niche.
Here’s an analogy: Imagine you’re a chef. Horizontal SaaS would be like providing you with a general kitchen knife that can be used for a variety of tasks, while vertical SaaS would be like providing you with a specialized sushi knife that is perfectly designed for slicing delicate fish.
Vertical SaaS vendors focus on developing a deep understanding of the unique pain points and workflows of their target industry. This allows them to create software that is highly optimized for the specific needs of their customers.

The sushi knife analogy is interesting 🤔, but the main points are bolded — that the software deeply captures the business needs, and supports the business in meeting their customer’s needs too. So a vertical SaaS company is B2B, but also indirectly B2C.

Building: I offer no experience on building a specific SaaS solution to run restaurants, clinics, charities, but have admiration for the necessity, impact and business model [2]. B2B SaaS - with the stable recurring per seat fees, margin, and stickiness sounds like the kind of business that investors are thrilled to invest in.
Buying: With my experience selling software and choosing between different products/services, I was struck by the commonalities of the buying process for vertical SaaS. The three pillars that remain constant are below:

A/ Online research

Example: Capterra, G2, the websites of software businesses, industry publications.
Pro: Good overview and feedback
Challenge: Unknown if reliable, was it a “pay to play”.

B/ Word of mouth

Example: Reddit (ask strangers on the internet [3]), ask industry peers
Pro: Find people who have actually used the software.
Challenge: May not understand your needs.

C/ Talk to sales

Example: Fill in that “contact sales” form.
Pro: Get more specific information from a sales person.
Challenge: Might be hard to get in touch, or you might find sales people annoying.

You might ask, if the SaaS product is so good, shouldn’t it be self serve? Well, maybe, but you might still need to talk someone at the respective companies, observe the features they emphasize, and assess if it matters. If a large SaaS company doesn’t get back to you, it could also suggest that you’re not their target segment. In that case you can narrow down your options quickly — if they’re not responsive pre sale, you’re not going to get any attention post sale.

Ultimately, it’s ideal to have a sense of what you need (number of seats, common user flows, budget, tech readiness), to help with shortlisting. Talking to peers + sales is a complementary way to assess the landscape.

[1] My dentist uses Plato Medical, a startup that helps medical clinics with their clinic and patient management.

[2] Anecdotally, it seems like the US produces alot of this software — enter a climbing gym in Malaysia or Singapore and you’ll see a climbing gym management software from the US, a church in Asia and see a US church management software suite. Enter a restaurant and you might see Revel/Lightspeed, also from the US.

[3] I found this reddit thread on church management software informative, because I noticed a different software in London vs Singapore. The commentator nicely compared various software to CRM options, which was a nice heuristic. Pasting an excerpt:

Realm is like Salesforce.org — Really powerful but a full-time job to configure right. Once you do it’s amazing. If you don’t have a dedicated team it will never be utilized to the point where you feel it’s worth it.

Breeze is like HubSpot — Light and cheap but if there’s no “killer feature” you absolutely must have that it doesn’t do, you’ll be happy.

Planning Center is like SAP — Old and powerful. It can do pretty much anything, as long as you don’t mind a clunky interface and probably won’t change any time soon.