Top Early-Stage Vertical SaaS Markets

By Luke Sophinos and Matt Shapiro

In our last report, we examined growth equity investors’ interest in vertical SaaS companies. To get to that point, companies first must navigate the landscape of early-stage venture capital. So today we’re looking at recent VC investments by vertical at the Pre-Seed, Seed and Series A stages.

New software, new technologies and AI are applicable across all industries, but each industry is not primed for the same amount of explosive growth and digital disruption. So what are the market factors that early-stage investors are looking for in vertical SaaS companies? Let’s take a look at them, plus some examples from York IE’s portfolio:

Inefficiency and High Costs: Industries that have high operational costs, inefficiencies or waste in their processes are prime targets for software that can address those problems. Science on Call acts as automated IT support for fast casual restaurants. The restaurant industry has massively inefficient troubleshooting processes for their in-store technologies, with every minute of downtime creating significant revenue loss.

Data Volume: Industries that generate or rely on large volumes of data can benefit significantly from software that can help with data management, analysis and decision-making. RealSage is helping multi-family residential property managers/owners connect all their internal and external data systems in one place to better use all their property data for real-time decision-making.

Regulatory Changes and Complexity: Industries with new or complex regulatory requirements may benefit from software that simplifies compliance, manages risk and ensures adherence to laws and regulations.

High Transaction Volume: Industries that handle a high volume of transactions daily (such as banking or retail) are ideal for software that can automate processes, reduce errors and improve customer experiences. Vend sells software to commercial parking garage operators to help them manage the constant incoming flow of cars coming in and out of large garages every day. No more stacks of paper tickets!

Fragmentation: If an industry is highly fragmented with many small players instead of a few large ones, software can provide tools that help smaller companies compete more effectively.

Technological Lag: Industries that have been slow to adopt new technologies present opportunities for transformative software that can introduce significant advancements in efficiency and effectiveness. BlueTrace brought digital traceability to the centuries-old shellfish industry, where pen and paper tags were the preferred method for tracking products through the supply chain.

Customer Demand: Changes in customer expectations, such as a demand for faster service, more customization, or online availability, can drive the adoption of new software in an industry.

York IE has teamed up with Luke Sophinos, a leading voice on vertical SaaS at lukesophinos.com and the founder and CEO of one of the largest vertical SaaS businesses for trade schools in the U.S., CourseKey, to compile the below list.

It includes some of the verticals where early-stage U.S. startups raised the most funding in Q1, along with some SaaS highlights in each industry. All of the below data comes from Fuel, York IE’s market research platform.