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👬 I believe in two trends that are sort of at odds
Software will consolidate while hyper-niche tools will boom
Looking back at this year, Paul and I have actually written a lot of pieces that surround over-complication and overcrowding across software landscapes. In “The multi-faceted multi-family real-estate startup problem,” I wrote about the fact that the multifamily industry has login fatigue. In “Developers want simpler tools,” Paul wrote about…well…developers wanting simpler tools. In “The best users can self-serve,” I wrote about simplicity in onboarding and product intuition. I think you get my point.
I firmly believe in the following:
The average software user is hungry for tool consolidation, especially when it comes to account management.
In the coming decade, more and more hyper niche tools will be developed to solve specific problems exceedingly well.
User story: As a software user, I want fewer tools that do more things so that I can manage fewer accounts and work more efficiently.
The term "Application Overload" aptly describes the overwhelming number of software applications that often lead to burnout and decreased productivity. This is a prevalent issue, particularly in the workplace, where the average company invests in a multitude of software products (for more insights, see "The multi-faceted multi-family real-estate startup problem"). A quick Google search yields countless blog posts discussing this problem, such as the one by RingCentral. Notably, an HBR study found that employees switch between 22 different applications and unique websites about 350 times. This inefficiency is a significant waste of time.
Consumers also face a similar problem. According to TrueList, the average consumer receives 46 push notifications per day and has 80 apps on their smartphone. This abundance of choices can make it challenging to find what you need.
However, this dilemma presents opportunities for specific types of companies – the aggregators, simplifiers, and consolidators. In a world of disparate solutions, services like passwordless authentication, account management, single sign-on, license and key management, and vendor management become paramount. The Identity and Access Management (IAM) market is experiencing double-digit annual growth and surpassed $15 billion in total spending in 2022. These horizontal platforms have the potential to evolve into substantial businesses. Unfortunately, this also means that power and data will continue to consolidate in the hands of giants like Google and Apple, as they become the default method for managing consumer accounts.
The hyper niche vertical SaaS opportunity
Bessemer Venture Partners has championed the vertical SaaS concept for over a decade, with a compelling thesis: focusing on a specific user group allows for the creation of superior products. Following this principle, BVP has generated billions of dollars in returns.
Sam Lessin articulates this notion even more effectively in his examination of the current VC and startup investing landscape. His insights shed light on why hyper-niche startups are more likely to emerge in the current tech landscape. There is a vast opportunity space for ambitious, self-reliant founders to develop innovative solutions with small teams and modern tooling.
Can these seemingly contrasting trends coexist? Absolutely.
They definitely can. Point one, my opinion that we have too many software products to manage in our daily lives, is one that will continue to exist. The benefits of targeted solutions are also far more beneficial than they are detrimental. Point two is a hypothesis around the continued boom in startup creation. I am fairly certain I am going to be right about that…the problem is that I am unlikely to have the chance to invest in many of these companies because they probably don’t need the money.
Large opportunities arise here for the massive consolidator and the incredibly specific, hyper niche product with an ambitious founder. I look forward to watching these worlds fuel one another.