Some SaaS companies cast a wide net in the customers they’re equipped to serve, seeking to create a universal product that can address challenges across many applications and industries. Others cast aside versatility in favor of specialization, offering solutions that are highly industry-specific and informed by the complexities and challenges of one industry alone. The latter solutions are known as vertical SaaS products, and their expansion and importance have only grown in recent years.
From healthcare billing SaaS programs to logistics software and cybersecurity, more and more vertical SaaS products are popping up to address the demand that exists in each industry for tailored solutions that truly address the challenges they face. The findings? This deep specialization in focus doesn’t limit the customer base, it deepens it, better speaking to the problems end users are encountering and offering a targeted solution for them to turn to.
For SaaS companies and their invested parties — attorneys, CPAs, growth advisors, and more — this demand for vertical SaaS solutions offers a vital opportunity for growth, but this growth requires the right funding. Read on to explore the projections and growth potential vertical SaaS products have to offer, then evaluate the best funding options for your SaaS clients.
Present and Future Growth Potential of Vertical SaaS Products
Though vertical SaaS products have been on the market for many years, their demand has surged as more and more industries infuse digital solutions into their processes. Industries that have relied on manual efforts for decades and centuries are beginning to embrace the power of digitization and automation, seeking software solutions to make their operations more efficient and accurate. This leaves your SaaS clients positioned to provide valuable solutions that empower industries and industry leaders with tailored software that truly illustrates the value of technology over manual efforts alone.
More millennials are entering decision-making roles across all industries. A whopping 73% of millennials are now involved in buying decisions in companies, representing a large set of customers who grew up with digital technologies and have integrated SaaS products throughout many facets of their lives. This added familiarity and expectation for digitization opens a window for SaaS companies to facilitate business shifts with essential vertical SaaS solutions.
Technology also continues to advance, providing a stronger foundation for your vertical SaaS clients to introduce their solutions. The innovations in data integrations and accessibility streamline the adoption of vertical SaaS solutions into industries, which can improve engagement. The growth potential of vertical SaaS companies is clear: there has never been a time when it’s easier for vertical SaaS companies to integrate into industries, and the demand for these tailored solutions has never been higher.
The first step in helping your SaaS companies leverage this growth potential? Finding the right funding.
Finding the Best Funding for Vertical SaaS Growth
The funding mechanism your SaaS clients use will prepare them for success and inform their growth, from how quickly they can accelerate their scaling to what challenges they may face as they expand. Three common financing mechanisms include equity funding, bank loans, and venture debt, but one rises above the rest.
Equity Financing
Equity funding is a popular choice, but equity deals have been slowing down quarter over quarter for more than a year. Securing a deal is difficult, particularly for SaaS startups and companies that aren’t following a proven growth track. If your SaaS client is introducing a vertical SaaS solution that revolutionizes a brand-new industry, it may be harder to secure a deal because the proven potential is less clear. Due to its limited availability and high competition, equity financing may also force your SaaS clients to sacrifice high amounts of equity. For many companies, maintaining ownership control and minimizing equity dilutions during critical growth stages is a key consideration, and equity may force them to compromise more than they want to obtain the funds needed to grow.
Bank Financing
Bank funding is another common option, but some are still feeling weary after the complexities this sector faced earlier this year and the shutdown of the bank that held the largest number of SaaS companies. Bank loans also come with a steep list of expectations that your SaaS clients must reach, and if they’re lacking in the necessary track record of growth or assets from certain milestones, they may be left without funding.
Venture Debt
Venture debt offers a third option growing in popularity, and it addresses the challenges of its counterparts with ease. This fast, flexible financing option is available sooner than its competitors, enabling your clients to put it into action faster and reap the rewards. It’s also uniquely non-dilutive, keeping the equity control in the hands of your clients. Due to its flexibility, it’s designed to serve SaaS clients at every stage — from startups on their journey to the market to established companies seeking additional resources to expand further. It’s the financing option that grows with your clients and can even be paired with existing funding like equity to further your client’s ability to mitigate equity dilution or extend their runway between raise rounds.
Venture debt serves as a strategic launchpad for your clients to discover new growth and leverage the current demand for vertical SaaS solutions so they can become leaders within the industries they’re addressing.
Achieve Powerful Growth with the Right Funding from River SaaS
When you want to support your vertical SaaS client’s innovations with better funding, turn to venture debt from the River SaaS Capital team. We’ve supported some of the brightest minds in SaaS from a range of industries — transportation, cybersecurity, logistics, and more. We never operate with warrants and our flexible funding is available in three unique structures that enable your clients to tailor the way they receive their loan and repay it based on what best suits their needs. We also offer strategic growth insight to further the value we deliver as a strategic financing partner.
Vertical SaaS offers powerful growth potential in the coming years, and the time to act is now. Contact our team today to learn more about how we can serve you and your clients with the funding to make it happen.
