Pipeline Lessons from Vertical SaaS
Down with spam cannons.
tl;dr - Here’s how Vertical SaaS sales teams build predictable pipeline with outbound:
Nail relevance: Focus on precise ICP segments to deliver messages that resonate. No spam cannons required.
Get fanatical about the TAL: Stop at nothing to create a fully-researched target account list (TAL) before assigning accounts to reps. Kyle Norton, CRO at Owner.com did this, creating a juggernaut with great unit economics.
Systematize account coverage: Segment on similarity and use dynamic assignment from the TAL to scale high-quality engagement and rep accountability.
Read on for the full story.
Job #1 of a CRO is to make the number. Job #2 is to have enough pipeline.1 When it comes to pipeline, inbound is fickle. Outbound, however, is something you control.
It may not feel that way. LinkedIn is filled with posts announcing the death of outbound. But there’s one place outbound is working: Vertical SaaS.
Most of the LinkedIn angst is from folks in horizontal markets. So far their answer seems to be scorched TAM tactics like million-email-per-month spam cannons operated by truly unhinged Rube Goldberg tech stacks. (That’s a post for another day.) We’re also seeing parallel dialers have a moment in the pursuit of outbound scale.
Maybe it isn’t that outbound no longer works. Maybe the problem is strategy, not tactics.
Enter Vertical SaaS.
Why pay attention to Vertical SaaS?
Vertical SaaS companies build solutions for very specific markets: think commercial contractors, residential contractors, subcontractors, restaurants, accountants, healthcare providers, property managers, even airports.
And, well, they’re probably growing faster than you.
This market is expected to grow above 12% CAGR through 2030, from $120B to $240B2. That includes public Vertical SaaS companies like Procore (contractors) and Toast (restaurants). Procore is growing 19% at $1.2B revenue and Toast is growing 28% at $1.6B in revenue.
On the private side, ServiceTitan (trades) just filed their S-1, possibly helping to break the tech IPO logjam. Investment is rolling into high growth early stage companies. A16Z is highlighting their vertical theses (plus AI, naturally). Firms like Stage 2 Capital out of Boston have made it a cornerstone of their approach.
“We love Vertical SaaS,” says Liz Christo, Partner at Stage 2. “We've found that many founders in the space are solving a problem they have experienced first hand. This strong founder<>market fit and clear ICP allows them to build deeper products, minimize dollars spent on marketing and gain traction faster. We've made investments in companies like AeroCloud, Cable and Steelhead to do just that.”
Vertical SaaS is hot. As we’ll see, their pipeline success comes from the simple act of reaching a clear ICP with a compelling solution.
The Vertical SaaS Outbound Playbook
I’ve recently had the opportunity to talk to several Vertical SaaS revenue leaders. For them, outbound is the simplest and best growth driver.
As a consequence, these teams are growing in an environment that is still seeing shrinking or flat sales teams. For example, I met an SDR leader at Pipeline whose company sells to to subcontractors. He’s going from 40 SDRs to 60 over the next few months.
Guess what? It’s more old school sales than rocket science. The basic outline is:
Build the target account list (TAL) with a fanatical attention to detail
Segment on similarity to deliver an incredibly relevant message
Drive thorough, high-velocity account coverage
Let’s break it down.
The fanatical TAL
It starts with fanatical focus on building account lists and prioritizing them based on the highly-industry-specific criteria—a combination of customized firmographics and contact information. You usually can’t buy this data off the shelf. But if you don’t do this work for the reps, all that research falls to them and slows down the engine.
Kyle Norton is CRO at Owner.com which is growing like crazy. He posted about their target list approach on LinkedIn recently, so I asked Kyle how they decided all that effort was worth it.
“We realized we needed to change when we started unpacking our true cold outbound conversion rates, as opposed to our conversion rates with old inbound leads,” he said. “When we extrapolated out those numbers, we understood that the economics weren’t compelling or even viable for outbound BDR. Once we fixed the data and infrastructure, we were able to scale outbound with modest unit economics, and have gone from modest to amazing over the last 24 months.”
Kyle’s realization itself isn’t unique. The difference is how he followed the data and executed against what he saw.
This kind of fanatical list building isn’t easy. Every example of it I’ve seen is a combination of human effort, multiple data sources and web scraping (which has vastly improved with the rise of AI research agents3). The key is to stop at nothing to get the information you truly need. Don’t just give up because you can’t buy it off the shelf from one of the big legacy data providers.
Segment on similarity for relevance
Next up, they start thinking segmentation and messaging. Vertical SaaS messaging is all about relevance—after all the product is built for the highly specific problems of highly specific buyers.
However, there may be some initial resistance and skepticism from these buyers that the product can actually deliver on the promise. The best way to overcome that is to reference similar companies you’ve helped and share those use cases.
A traditional playbook here is to tackle this through a geographic perspective (“we helped a company in your area do X”) but these stories are more portable across geos than one might think. That leads to an optimal model of sub-vertical messaging where reps can speak to groups of highly similar accounts with ready-made stories.
Buildxact does a fantastic job creating this kind of content, telling highly specific stories across the sub-verticals they serve. The key is to equip your reps to use these stories. They need the ability to select the right one for the job based on the current prospect, not just pull one they one they happen to remember. This takes careful organization and enablement.4
High velocity account coverage
The key to Vertical SaaS outbound is getting on the phone and making a relevant pitch. The secret to doing it at scale is optimizing account coverage processes.
Once we fixed the data and infrastructure, we were able to scale outbound with modest unit economics, and have gone from modest to amazing over the last 24 months.
— Kyle Norton, CRO, Owner.com
Kyle Norton said that they needed to fix the data AND the infrastructure to get good outbound unit economics. That “infrastructure” isn’t just software (e.g. dialers, email sequencers); it necessarily requires some kind of account assignment and disposition process.
It’s not as simple as “carve geos and go” for two reasons. First, as we’ve discussed Vertical SaaS’ core segmentation isn’t truly geography, it’s similarity. Second, we’re talking about outbound, so we’re focused on inside sales, not the field. Geographic territories shouldn’t be a knee-jerk decision.
Most Vertical SaaS companies I’ve run into use some variation of dynamic books. For those of you who aren’t familiar, this is a territory model that has focused, capacity-capped books of accounts. Accounts are assigned from and dispositioned to a pool of unassigned accounts on an ongoing basis to ensure that reps always have a full book of high-quality accounts.
This approach maximizes coverage and quota capacity usage—nobody ends up in a bad territory or can coast because they’re in a great territory. Plus, it creates a system where new reps can be quickly plugged in to drive scale.
It also embraces the fact that Vertical SaaS often means selling into smaller organizations that may be less stable. Those organizations change over time and so should your account list.
Combine this assignment model with sales managers keeping reps accountable for engagement with these accounts (especially dials), and you’ve got a recipe for maximum coverage.
Applying these lessons
When I first posted about this on LinkedIn, several folks chimed in with comments about how this applies outside of verticals.
Piyush Patel from Algolia commented:
You also need to have a bit of investment in how that horizontal value can be applied to their vertical need. Some add on package or price that translates to value for their needs, a services partner with domain expertise and an accelerator for them to get value , and of course customer stories specific to them. Take search. We at Algolia have a very horizontal platform that is used in so many ways, but we also have 60% of our ICP which is ecommerce, our outbound focuses on that and the rest come to us as inbound and PLG. For the ICP we have very specific partner ecosystem for this, pricing, features and package for ecommerce. Each solution or vertical can apply what Hayes is mentioning. Plus it’s easier than walking into a discussion for every possible use case. Unicorn rep and unicorn horizontal customer still gets done but the machine is the vertical which is easier to see value in, buy, implement and actual realize value quicker.
The big takeaway is that outbound does work if you’re delivering an insanely relevant message to the right set of accounts.
Instead of loading up the spam cannons and hoping increased activity will help you fill the pipeline, consider taking a page from the Vertical SaaS playbook.
Segment your prospects into high-similarity clusters and develop a relevant story for them with relevant reference customers. This doesn’t mean verticalizing in the traditional sense (e.g. putting your reps in broad categories like Healthcare, Fintech, etc). It means ensuring that you have a collection of these “clusters” of accounts you can speak to, even within your horizontal TAM.
Package this up so that any of your reps can deliver it. Then use a high-velocity AND high-accountability model like dynamic books to cover those accounts consistently and thoroughly.
Ultimately, the Vertical SaaS approach to pipeline comes down to the rigorous application of relevance. Do it right and you’ll see outbound is very much alive. As another commenter said on that LinkedIn post, “This has always worked and probably always will.”
Same job, different time horizons.
Cognitive Market Research, “Vertical Software Market Report 2024”. Mordor Intelligence (presumably a research firm one does not simply walk into) puts CAGR at 11.2% with a different methodology while Future Market Insights pegs it at 12.9% through 2034, with the market growing to more than a half trillion dollars.
Personally, I think Gradient Works AI Researcher is great for this, especially if you’re doing centralized account qualification before assigning to reps.
Reps need to quickly find relevant customer stories. This could be with a traditional enablement platform or something like Gradient Works Market Map which surfaces customers related to the current prospect.