5 Vertical SaaS Predictions for 2025

2025 has the potential to be a growth year for vertical SaaS. These are my predictions...

January 22, 2025

CEO notes

By Joshua Silver, founder and CEO

 

After nearly two decades in the vertical SaaS (vSaaS) space, these are my top 5 vertical SaaS predictions for 2025:

1. More startups will be built specifically for the embedded fintech opportunity 

The “traditional” playbook for vertical SaaS is:

  1. Build a business management solution for a specific vertical
  2. Monetize with subscription fees 
  3. Increase revenue per user by adding embedded fintech

But now, several years in, the embedded fintech revenue opportunity has been proven in every imaginable vertical – from wedding photography to pest management to enterprise B2B. 

And it’s so compelling that we’re starting to see startups build vertical SaaS with the specific goal of monetizing payments. From Day 1.

In other words, instead of building a house (the core SaaS product) and then building a sunroom (embedded finance), startups are building a house just so they can have something to attach the sunroom to. 

Enabled by low-code tools that decrease the barriers to building SaaS, this model will get traction in 2025 and we’ll see a lot more startups building SaaS as a shipping container for embedded fintech.

2. Hyperspecialization of SaaS will accelerate

This has been happening for over a decade, and there are no signs of slowing.

Within the healthcare industry, there are more specialized SaaS platforms for dermatology, chiropractic, physical therapy, mental health, direct primary care, etc. Within the home services industry, there are more specialized SaaS platforms for lawncare, cleaning, plumbing, roofing, etc. 

Hyperspecialization is normal in any industry as the industry matures. 100 years ago a bicycle was a bicycle. Now buyers choose between mountain bikes, road bikes, city bikes – and within mountain bikes, between cross-country, all-mountain, downhill, fat tire, etc.

The increasing hyperspecialization in SaaS is also enabled by low-code tools that allow startups to build products faster than ever before. When startups can build products faster than with less up-front investment, it makes sense to build products for smaller, hyperspecialized markets.

In 2025, we’ll see vertical SaaS get even more specialized. This is also related to our next prediction…

3. Vertical SaaS will embed more AI tools in their core product

All signs point to increased AI adoption. AI deals represented 37% of all VC deals in Q3 2024, and EY analysts suggest AI will “dominate the landscape” for the foreseeable future. Meanwhile, you only need to glance at a technology news site to see AI all over the headlines.

But, when it comes to vertical SaaS, there’s even more to this trend. 

Machine learning (including large language models) excels where domain-specific data can be used to develop highly tailored models. 

Vertical SaaS companies are able to amass a lot of data for a small set of use cases within their specific domain, which means they’re uniquely positioned to harvest more value from machine learning models than their horizontal counterparts – and use those models to create more value in their product. 

For this reason, we think the most specialized vertical SaaS platforms will see the biggest benefits from integrating AI tools into their products. And this will drive growth for the most specialized vSaaS companies.

4. SMBs will move more processing volume to vSaaS platforms

UBS analysts expect that Integrated Software Vendors (ISVs, many of which are vertical SaaS platforms) will increase their share of US SMB payment processing revenue from ~30% in 2023 to >40% in 2028.

This migration is not new. 

But we think it will accelerate in the coming years due to the increasing hyperspecialization and built-in value of vertical SaaS platforms. 

In other words, SMBs will migrate from traditional ISOs and processors faster, because vSaaS is delivering even more value than just a few years ago.

5. Service will be a differentiator

This prediction isn’t unique to vertical SaaS – we’ll also see it in payments and a lot of other B2B markets, including those generally thought of as “commoditized”. 

Competition is increasing everywhere, a lot of companies are focused on cutting costs, and many of these companies will target support as a “cost center” to be minimized.

This will prove to be a huge mistake. 

Although the most price-sensitive customers will endure poor support to save a few pennies, many customers will instead opt for companies that invest in strategic support – not just reactive support, but consultative service that helps customers get the best ROI. 

How vSaaS companies can win in 2025

2025 has the potential to be a growth year for vertical SaaS. Companies that effectively monetize fintech, incorporate domain-specific AI to provide more value for their customers, and invest in strategic support will come out ahead.

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