Software Growth

Horizontal SaaS

Horizontal SaaS is software that serves one function, like email, CRM or invoicing, for companies in any industry rather than for one sector.

Horizontal SaaS solves a common business function for many industries at once. Accounting, project management, email marketing, customer support and scheduling are all horizontal. A bakery, a law firm and a design studio can use the same product.

How it differs from vertical SaaS

Vertical SaaS goes deep into one industry. Horizontal SaaS goes wide across industries and stays general enough to fit them all. Bessemer's guide to vertical software frames the split the same way, contrasting industry-specific tools with horizontal software that serves broad markets.

Strengths

  • Big addressable market. Every company needs email, billing or support, so the pool of buyers is huge.
  • Easy to explain. People already understand the category, so you skip a lot of education.
  • Room to grow. You can move up from small teams to larger ones without changing industries.

Weaknesses

  • Crowded. Established players with large budgets and strong brands sit in most horizontal categories.
  • Generic by design. A tool that fits everyone rarely feels built for anyone, so differentiation is hard.
  • Costly acquisition. Keywords and ad auctions are competitive.

What this means for a small team

Going horizontal head-on against big vendors is usually a losing fight for a bootstrapped company. A common response is to start horizontal in function and narrow in audience. Rob Walling, answering a listener question, suggests entering an existing category such as a site audit tool and adding differentiation through features or a vertical focus, rather than inventing a new category. See category creation for his reasoning.

Example: a generic invoicing tool competes with giants. An invoicing tool for freelance translators, with per-word rates and multi-currency support built in, has a clear unique selling proposition and a defined audience. It is still a horizontal function, aimed at one group.

Choosing

If you know an industry well, vertical often gives a faster start. If you have a strong idea for a common function and a sharp angle, horizontal can work. Either way, decide on your positioning early, because it shapes the product, the site and the channels you use.

Related terms

Sources

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