Linear #005: Sales Hacks, The Story of Zoho, & How To Build a BIG vSaaS
One business story, one how-to, and one vertical SaaS breakdown. Once a week!
Happy Sunday folks! Linear episode #4 here.
Below you’ll find one vertical SaaS breakdown, one Biz Story and one ‘How To’.
Hope you enjoy.
One ‘How To’:
5 Sales Hacks To Win More Customers Immediately
One Biz Story:
The Story of Zoho: From an Indian Village To $1B ARR
One Vertical SaaS Breakdown:
How To Build A Billion Dollar Company In Only One Industry
Investor: Your market’s too small, I'm out.
Founder: I promise you it’s not, but OK.
—5 years later at IPO—
Investor: F*ck, she was right
Here’s how to build billion dollar businesses within ONE industry 👇
I'm a big believer that the future of software is industry specific. For a long time, most software has been built horizontally, to be used by many businesses from many different types of industries. Docusign, PayPal, etc. When you're chasing scale, this seems logical. BUT...
More and more founders are proving that industry-specific software is a better path. Why? 1) It creates a better experience for the end user 2) Contrary to popular belief, IT IS a venture-scale opportunity Let's explore these two points further...
How does industry-specific software create a better experience for the end user?
#1. Workflows are ACTUALLY tailored to the customer
Horizontal companies say their tools are tailored to your workflows. But are they really? How can a horizontal tool that creates a CRM be used by businesses in hundreds of different markets. It can, just probably not well.
Each industry has different: >Sales cycles >End-users >Acquisition channels Etc..... Wouldn't you rather use a tool that knew EXACTLY how you acquire customers within your industry? That actually knew about the customers you were going after? I sure would.
#2. Both parties have skin in the game
When you both live in ONE industry, reputation is everything. If a horizontal company screws up their reputation in one market, they have 99 more to go after. It's comforting for your customer to know success is aligned.
If you do a great job, you create a referral fly-wheel. Success actually compounds. Be careful though, failure can too. But for the end user, alignment is EVERYTHING.
#3. Opportunity to become a one-stop-shop
The great thing about vertical software? All your customers are similar. They will tell you what to build next. Then they'll tell you what to build after that. Before you know it you'll have an all-in-one solution. A win-win.
#4. Regulatory / Compliance tie-in
If you're going after a market that is regulated, you can create lock-in by ensuring your solution meets industry compliance requisites. You'll beat horizontal competitors all day long. Compliance is one of the BEST, most underrated moats.
#5. You just KNOW your customer really really well
I find it funny when horizontal companies talk about persona. Really? You believe that your persona is actually the same across hundreds of industries? C'mon man... In industry-specific SaaS you REALLY know your customer.
The result of these five attributes? ->Strong Product NPS ->Fantastic Customer Retention ->Referral Flywheel ->FAST Brand Awareness Nail those three items and you've got a FAST growing business.
Ok, so onto our second question, how is industry-specific software a venture-scale opportunity?
#1. It's way faster / easier to add more modules
Horizontal tools have to add a zillion things into ONE feature to satisfy different customers across different markets. In vertical SaaS, you nail your first module faster, then you're told what to build next. Rinse & repeat.
#2. Initial Product-Market-Fit compounds
Product Market fit is hard to find. Horizontal companies have to find it over and over again for every new product. In ONE market, pattern recognition is far easier. The PMF hurdle gets lower and lower for future products you launch.
#3. SaaS is an incredible jump off point
Billion dollar vertical SaaS companies are created by scaling product lines into finance or insurance. These include payments, lending, financing, etc. Let's do some quick math on the opportunity of adding payments into your market.
I sell software to trade schools. There are only ~6,000 of them in the U.S. At an ACV of $100K, this is roughly a $600M market. DEFINETLY NOT a venture scale opportunity. BUT...
I add embedded tuition payments into our offering. The average trade school costs $20K per year. There are 5M students who attend trade schools in the U.S. At a 3% transaction fee on every payment, our $600M market just turned into $3.6B opportunity via ONE new product line...
#4. Become the Platform / Operating System / App Store
As you add more and more modules you can start to become the PLATFORM. The single destination they go to for all of their products, whether you've created them or not. Talk about an INCREDIBLE MOAT.
With most software today being horizontal, it is a GREAT TIME to launch a vertical software / industry-focused SaaS solution.
So... GO FOR IT. Make it happen. Put in the work and you'll be amazed at the value you can create for the world.
Thanks for reading: Linear: A Vertical SaaS Newsletter. If you enjoyed it share it with a friend or leave a comment. Have a great week!