Expanding Horizons: Growth Strategies for Vertical SaaS Companies

Coauthored by TX Zhuo and Patrick McClanahan

The Evolution of Vertical SaaS

Over the past decade, vertical SaaS has emerged as a cornerstone of the $200–400B SaaS industry. Unlike horizontal SaaS — offering broad solutions like CRM and payroll — vertical SaaS delivers highly specialized products tailored to industry-specific workflows, compliance needs, and operational pain points.

While the market remains fragmented, dominant players have emerged within key sectors — Shopify in e-commerce, Procore in construction — leveraging deep industry expertise to win customers and expand market share.

Overcoming SAM Constraints

Despite their strong foothold, vertical SaaS companies often face a limited serviceable addressable market (SAM) compared to their horizontal counterparts. For instance, the global construction software market is valued at ~$10B, whereas Salesforce alone reported $35B in revenue in 2024.

To sustain growth and defend against increasing competition, vertical SaaS companies must expand their SAM through two primary strategies:

1. Broadening the customer base — Launching new products, features, and customizations that appeal to adjacent markets.
2. Deepening monetization — Capturing a greater share of wallet by enhancing existing workflows and unlocking new revenue streams.

Proven Growth Strategies

Several well-established playbooks help vertical SaaS companies strengthen their market position, increase retention, and maximize revenue:

• Integrated Payments — Embedding payment processing within platforms enhances customer experience and unlocks transaction-based revenue. MindBody, an early mover in this space, reported in its 2016 S-1 that payments accounted for 39% of revenue — equivalent to ~$195M in annualized revenue today.
• Ecosystem Integrations — API integrations with complementary tools increase stickiness and expand a platform’s functionality. Procore, for example, supports 500+ integrations across CRM, asset management, and compliance tools.
• AI Chatbots — AI-powered assistants streamline customer support, onboarding, and workflow navigation, reducing churn and increasing user engagement.

AI: The New Growth Catalyst

AI is reshaping vertical SaaS, enabling companies to scale beyond traditional limitations and drive revenue growth. Key applications include:

• AI-Powered Team Memory — AI can retain and surface past decisions, preventing teams from repeating mistakes. A construction planning tool, for example, could flag a previously rejected design choice to avoid inefficiencies.
• Weak Signal Detection — AI can analyze diverse data sources to identify early indicators of issues or trends. A supply chain SaaS platform could detect emerging packaging complaints before they escalate into major disruptions.
• Workflow Automation via Unstructured Data — AI can extract insights from PDFs, emails, and other unstructured data, automating manual processes. A real estate SaaS platform could auto-generate compliance summaries from lease agreements and zoning laws, saving hours of manual review.

AI in Action: Industry Leaders

Shopify: AI-Powered Commerce

Shopify’s new Sidekick and Magic products are revolutionizing e-commerce by providing AI-driven advisory and creative marketing services. These tools can:

• Auto-generate reports — Instantly analyze sales and operations data to answer key business questions (e.g., What are my recent best-selling products?).
• Create on-brand content — Generate product descriptions that align with a brand’s tone and automatically produce background images for products.
• Automate customer communications — Instantly craft email marketing campaigns and provide personalized, relevant responses to live chat inquiries.

Impact: These capabilities dramatically speed up campaign execution and reduce operational workloads, enabling brands to quickly understand trends and strengthen customer engagement.

Toast: AI-Driven Restaurant Intelligence

Toast has integrated AI analytics to optimize restaurant operations. Their tools can:

• Benchmark performance — Provide insights by leveraging data from 110K+ restaurants in the Toast network.
• Forecast demand & align resources — Predict busy periods to optimize staff schedules and inventory, reducing costs and stockouts.
• Automate marketing campaigns — Streamline the creation and delivery of branded, timely customer outreach.

Impact: Early adopters report a 3–5% revenue uplift and a reduction in marketing execution time to just 10 minutes.

Clio: AI-Powered Legal Automation

Clio’s new Duo AI agent enhances efficiency for legal professionals. It can:

• Extract insights from legal documents — Parse complex legal files to answer key questions.
• Automate client communication — Draft and expedite context-specific emails.
• Prioritize urgent tasks — Identify and flag high-priority, time-sensitive matters across cases.

Impact: Lawyers leveraging Duo AI save 3–5 hours per week on document review and client communication.

The Future: Intelligent, Adaptive Vertical SaaS

The next wave of vertical SaaS will go beyond software — it will provide intelligent, predictive solutions that transform industries. The most successful companies will master:

✅ Deep domain expertise
✅ Advanced AI integration
✅ User-centric design
✅ Continuous innovation

The message is clear: In vertical SaaS, intelligence and insights are the new scalability.

AI advancements are creating unprecedented opportunities for vertical SaaS to expand their reach, address new workflows, and deliver greater value. Today’s top vertical SaaS companies win by deeply understanding their markets and finding innovative ways to serve customers. Tomorrow’s leaders will be those who harness intelligence, insights, and automation — evolving from service providers into strategic advisors and co-pilots.