Allied_Advisers_Flav OrsOfSaaS_Fall2022.pdf

Investors remain interested in Vertical SaaS due to its high growth prospects and strong business fundamentals, outperforming Horizontal SaaS companies in metrics such as sales and marketing to revenue (22.0% vs 39.5%), R&D to revenue (20.3% vs 24.4%), and EBITDA margins (7.3% vs 2.8%). Vertical SaaS companies require less capital to reach a liquidity event ($219M vs $398M) and have higher valuations, but are more susceptible to sector downturns. They serve specific industry verticals with purpose-built solutions, offering mass customization, and have faster growth prospects with increasing customer preferences for tailored offerings. Key drivers of Vertical SaaS growth include industry-specific solutions, higher upsell opportunities, lower sales and marketing costs, and increased customer trust. However, challenges include lower total addressable market (TAM) and limited options to diversify, as well as exposure to adverse events impacting their target sector.