Specialization is a requirement for high performance everywhere we look. In forums as diverse as medicine, law, sports, education, and engineering, progress drives specialization, which drives better outcomes. In software, almost all offerings began as horizontal, however it was not long until we saw the emergence and proliferation of vertical B2B software. The success of vertical B2B software offerings was driven by their superior ability to enable companies across various industries to optimize their operations and ultimate growth trajectories. We believe that such verticalization will also be a catalyst for success in the Entrepreneur Enablement category (the ecosystem of tools, platforms, and technologies that enable digital entrepreneurs).
Although tools for online commerce have come a long way over the last decade, to this day there remain many instances and verticals in which digital entrepreneurs continue to stitch together non-specialized solutions to build and operate their businesses. The increasing sophistication of many online entrepreneurs and their businesses has outgrown the “one size fits all” strategy that most of the earlier platforms and marketplaces naturally pursued, which ultimately made them far too clunky, cumbersome, and convoluted to efficiently serve their most specialized customers. The YouTubes, Fiverrs, Instagrams, and Cameos of the world fail to deliver the optimal functionality, depth, and user experience to appropriately serve certain verticals.
The best solutions for online entrepreneurs will focus on specifically optimizing workflows and eliminating pain points for their respective verticals. As online commerce continues to evolve and new digital businesses emerge with increasingly specialized solutions and innovative approaches to existing problems, the requirement for verticalization will become more acute. The winning solutions would be expected to provide 1) solutions to the most glaring pain points (including superior distribution and monetization features), 2) a clean and uncluttered UX, and 3) an emphasis on simplifying the most salient and rote workflows for each vertical.
In addition to optimizing operations for specific categories of entrepreneurs, these new vertical solutions will also service the needs of the end-customer better. Platforms will enhance distribution and sales capabilities through superior UX and delivery. Vertical marketplaces will improve curation and optimize discovery. There will also be vertical point solutions and tools that will more thoroughly address specific industry practices such as working capital solutions to mitigate long invoicing cycles or superior lending models predicated on vertical-specific customer behavior.
While we expect vertical solutions to become an increasingly important component in the tech stack of an online entrepreneur, there are a number of horizontal solutions that will remain important. The first set includes horizontal, white labeled offerings – payments, checkout, distribution, etc. The second set comprises other administrative services such as certain accounting, banking, and benefits functions. Additionally, horizontal revenue-generating solutions will retain their importance in the Entrepreneurial Enablement category as multi-SKU entrepreneurs look to build their brands through such offerings as eCommerce, newsletters, online courses, and podcasts.
As these online entrepreneurs grow and scale their businesses, we see many of them operating entities underpinned by a core vertical solution that is supported by horizontal infrastructure and complemented by additional SKUs (or other customer-facing solutions). Of course, the most effective entities will be operated with a disciplined and coordinated approach that maintains the quality of their core offerings and the integrity of their brands across their entire infrastructure.
If you are a founder building in the Entrepreneur enablement category, we’d love to hear from you!