Instead of starting from scratch on AWS or GCP, founders building niche vertical applications can leverage a PaaS like Salesforce. This provides pre-built enterprise-grade infrastructure, security, and data models, offering a significant head start and allowing small teams to compete with larger ones.
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Horizontal SaaS companies fracture their customer knowledge across diverse industries, forcing generic messaging. Vertical SaaS companies build compounding knowledge with each customer within a niche. This leads to deeper insights, stronger competitive secrets, and more effective, specific messaging over time.
Propel leverages the Salesforce platform to handle foundational infrastructure like uptime and security. This allows their team to focus entirely on the business logic layer, enabling a faster pace of innovation against legacy giants like Oracle and Siemens.
Most SaaS startups begin with SMBs for faster sales cycles. Nexla did the opposite, targeting complex enterprise problems from day one. This forced them to build a deeply capable platform that could later be simplified for smaller customers, rather than trying to scale up an SMB solution.
The fear that large AI labs will dominate all software is overblown. The competitive landscape will likely mirror Google's history: winning in some verticals (Maps, Email) while losing in others (Social, Chat). Victory will be determined by superior team execution within each specific product category, not by the sheer power of the underlying foundation model.
Most successful SaaS companies weren't built on new core tech, but by packaging existing tech (like databases or CRMs) into solutions for specific industries. AI is no different. The opportunity lies in unbundling a general tool like ChatGPT and rebundling its capabilities into vertical-specific products.
Analyzing over 200 investments, TinySeed observed that vertical SaaS companies consistently achieve stronger exits, grow further, and have lower churn than horizontal SaaS. This data-driven insight has shifted their investment thesis toward more defensible, niche-focused companies, as they have proven to have distinct advantages.
Don't try to compete with hyperscalers like AWS or GCP on their home turf. Instead, differentiate by focusing on areas they inherently neglect, such as multi-cloud management and hybrid on-premise integration. The winning strategy is to fit into and augment a customer's existing cloud strategy, not attempt to replace it.
Smaller software companies can't compete with giants like Salesforce or Adobe on an all-in-one basis. They must strategically embrace interoperability and multi-cloud models as a key differentiator. This appeals to customers seeking flexibility and avoiding lock-in to a single vendor's ecosystem.
In the future, it will be easier for businesses to build their own custom software (e.g., Salesforce) through prompting than to buy and configure an off-the-shelf solution. This shift towards "liquid software" will fundamentally challenge the one-size-fits-all SaaS model, especially for companies that currently rely on implementation partners.
A16Z's Martin Casado argues that startups should not fear being copied by public clouds like AWS, as a focused startup consistently beats an incumbent's "two-pizza team." The real competitive threat comes from founder-led scale-ups like Stripe or Figma, which remain hungry, execute at a high level, and possess significant institutional momentum.