SMB SaaS Goes Vertical with Home Services

Vertical Challenge is Localogy’s series that examines SMB SaaS players that specialize in vertical business categories. See the rest of the series here

To verticalize or not to verticalize? This is a question (among others) tackled in an upcoming LSA white paper on SMB-targeted SaaS. It’s also a perennial topic that we batted around most recently on the latest episode of LSA’s Above the Cloud podcast featuring an analyst roundtable.

This isn’t a new question in the world of SMB commerce, but it continues to shift in the face of increasingly-specialized software. There are lots of dynamics and considerations but the short version is that a highly vertical approach improves product quality and focus but diminishes the addressable market.

LSA’s Modern Commerce Monitor tells us that verticalization shines in areas that have a high degree of operational nuance, or regulatory oversight. That makes sense as the software that serves these verticals has to likewise come equipped with purpose-built features to address category-specific idiosyncracies.

For example, operational support in medicine has regulatory considerations for patient records (HIPPA) which need to be baked into back-office support such as appointment scheduling and billing. Operational support and SaaS tools that support legal and finance SMBs have different but similar considerations.

Beyond regulatory dynamics are operational nuances. There, we see successful verticalization in places like home services. This notably gets around the above dilemma of trading focus for scale: The category is broad enough (with low digital penetration) to adequately feed SMB Saas players like Home Advisor.

With that backdrop, we’ve observed two noteworthy news items in the last week surrounding Home-service focused startups. The first is from Streem, which last week won the 2019 Frost & Sullivan Best Practices Awards. You may remember we wrote about Streem in September for its AR integration for home services.

It lets home service pros literally see incidents via homeowners’ upheld smartphone, including in-situ annotations. This saves them a trip (a.k.a “truckroll”) to scope new jobs. This “see what I see” support is all the rage in industrial applications of augmented reality, but brought to the “B2B2C” realm.

The second news item is that Workiz this week raised a $5 million Series A from Magenta Venture Partners. The company develops software to manage field service, including the ability to monitor technician home visits, document/manage client communications, process payments and other functions.

This makes it a sort of CRM for home services. The vertical focus is justified due to home-visit dynamics and customer interactions endemic to the category, and underserved by more “white collar” CRM. It should be noted in fairness that CRM is our designation rather than the company’s explicit positioning.

Along with funding, the company launched Workiz Voice, an Alexa-powered module that lets remote field workers input records via voice. That likewise seems aligned with the dynamics of the vertical, such as the ability to add records while driving back from a given job (though active use will have to be proved IRL).

These are just two examples but there’s of course lots of other market development in home services. We’ll keep our eye on it, as well as vertically-oriented product development in other local commerce “headings”. But the question of whether to verticalize or not won’t be answered categorically anytime soon.

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