Keeping it SaaSy
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New-age SaaS
You may have noticed that I write about software a lot. I believe that we are in a renaissance period for new-age SaaS. Today, there is greater accessibility to developer tools that help engineers build applications faster and more efficiently than ever before. This, along with the decreased cost of compute, infrastructure, and storage contribute to founders building stronger, enduring businesses quicker.
New-age SaaS companies look and feel differently than the first generation of SaaS businesses, which mainly transitioned core enterprise systems of record to the cloud. New-age SaaS targets once misunderstood and underserved markets. These sub-markets tend to have large and growing TAMs. New-age SaaS takes the user experience seriously and incrementally grows within companies through product-led growth and freemium functionality, antithetical to the top-down sales motions of the 2000’s. The end markets for New-age SaaS tend to include SMBs, business-unit specific software, vertical software, collaborative end-user software, and more.
New-age SaaS companies go far beyond the transactional systems of record of old schools SaaS. New-age SaaS is collaborative and data-driven. They are not workflow tools, but networks of engaged users, ecosystems and platforms. They establish growth loops within the user-base and incentivize additional usage. They leverage data to help users achieve more value from their platform.
There is ample opportunity for new-age SaaS to overtake the legacy application, infrastructure, business process management, and point products that are currently found within the enterprise. Below are a few examples of exciting sub-verticals capitalizing on the opportunities left by tech giants.
Operationalizing AI/ML: Widespread adoption of ML is still nascent, and has largely been siloed to elite institutions. Only a few vendors have successfully built applied ML software to help solve business challenges. However, there are many picks and shovels. The idea of enterprise automation has not come to fruition and is not large horizontal platforms powering end-to-end processes. It’s multiple solutions working together to create an intelligent enterprise. Companies like Baseten are democratizing access to ML solutions, while Cohere and Hugging Face are enabling anyone to leverage pre-built language models for their applications.
Expansion of Data: Large companies need to unlock, clean, and use siloed data that was historically locked in unreadable formats. Monte Carlo, Hex, Observable, Felt, and more are enabling data teams to cleanse, monitor, collaborate with, and embed data into applications for better data-driven decisions.
Business-Unit Software: Vertical and business unit software is well positioned to expand its attach rate and saturate the enterprise. We have seen companies like Ramp penetrate the enterprise with ultra-specific products that served as a wedge into the enterprise and expanded into multi-platform products. Additional companies worth keeping an eye on include Mosaic, Pave, etc.
SMB Digitization: SMBs will require the back-end digitization that’s powered the past 10 years of innovation for the enterprise. SMB does not mean startups — I’m talking about mom and pop shops that will leverage software to stay afloat. Companies like Check, Persona, Pinwheel, and more are reinventing how businesses operate, verify their customers, keep track of payroll, and more.
Developers as a target user: Developers have proven to be an attractive entry-point for high-retention, cash-flow generating SaaS businesses. Today, Retool, Twilio, Datadog, and more have proven to be sound businesses, organically growing throughout the enterprise.
Outside of new-age SaaS, I am particularly interested in healthcare arbitrage, future of work, unsexy B2B marketplaces, and more.