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- Valuation Reality Check: Why Vertical SaaS (3.3x) Is Outperforming Horizontal (3.0x)
Valuation Reality Check: Why Vertical SaaS (3.3x) Is Outperforming Horizontal (3.0x)
Chintankumar Maisuria
October 30, 2025
In partnership with
Read time: 3 minutes.
Welcome to the 169th edition of The Growth Elements Newsletter. Every Monday and sometimes on Thursday, I write an essay on growth metrics & experiments and business case studies.
Today’s piece is for 8,000+ founders, operators, and leaders from businesses such as Shopify, Google, Hubspot, Zoho, Freshworks, Servcorp, Zomato, Postman, Razorpay and Zoom.
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October 2025 valuation data is in: Vertical software trades at 3.3x NTM revenue while horizontal SaaS sits at 3.0x.
That 10% gap isn't noise; it's the market telling you something critical about where value lives.
New Valuation Reality
Fresh October 2025 multiples:
Vertical software: 3.3x next-twelve-months revenue
Horizontal SaaS: 3.0x NTM revenue
AI-enabled vertical tools commanding even higher premiums
Why this matters:
10% valuation premium translates to millions in exit value
Public market signals filter down to private valuations
Investors increasingly pay premiums for specialisation
Market dynamics from my operator experience:
Horizontal SaaS faces commoditization pressure
Generic tools compete on price; vertical tools compete on outcomes
Industry-specific workflows create natural switching costs
The AI disruption factor:
Horizontal tools risk replacement by AI agents
Vertical solutions with deep workflow integration survive AI disruption
Specialised industry knowledge becomes the moat
Customer willingness to pay:
Vertical solutions solve industry-specific pain points
Compliance and regulatory requirements create buyer urgency
Domain expertise commands premium pricing
Strategic Implications for Operators
If you're building horizontal:
Focus on becoming the category leader quickly
Build platform effects and network moats
Prepare for margin compression and consolidation battles
If you're building vertical:
Go deeper, not wider in your chosen industry
Build industry-specific features that generic tools can't replicate
Price on outcomes, not features
If you're choosing between vertical and horizontal:
Consider your team's domain expertise
Evaluate defensibility in each approach
Factor in AI disruption risk for horizontal plays
Operator Framework for Vertical vs Horizontal
When to go vertical:
You have deep industry expertise or relationships
The industry has unique workflows/compliance requirements
Horizontal incumbents serve the industry poorly
You can charge 3x+ more than horizontal alternatives
When to stay horizontal:
You're building platform infrastructure (APIs, dev tools)
Network effects become stronger with more users
You can achieve category dominance through speed
The problem is universal across industries
Red flags for horizontal plays:
Competing primarily on price vs. incumbents
Feature parity achieved by competitors within months
No clear path to network effects or data moats
AI could easily replicate your core functionality
What The Data Tells Us About Execution
Vertical winners execute differently:
Sales cycles focused on industry ROI, not generic productivity
Marketing to industry conferences, not general SaaS audiences
Product development driven by regulatory/compliance needs
Customer success measured by industry-specific outcomes
Horizontal winners need different advantages:
Speed to market and category creation
Platform integrations that create switching costs
Network effects that improve with scale
Data advantages that compound over time
2026 Strategic Implications
The valuation gap will likely widen:
AI continues to threaten horizontal productivity tools
Regulatory complexity increases demand for specialised solutions
Economic uncertainty drives buyers toward proven ROI
For operators and founders:
Vertical specialisation becomes table stakes for premium valuations
Generic SaaS increasingly competes on price
Industry expertise becomes a strategic asset, not just nice-to-have
Investment implications:
VCs increasingly favour vertical plays for Series A+
Horizontal startups need a faster path to category dominance
Exit strategies should factor in valuation multiple differences
Bottom Line
The market is rewarding specialisation over generalisation.
A 10% valuation premium today becomes a 30%+ premium at exit when compounded over growth cycles.
Choose your positioning carefully. The market is telling you where the value lives.
If you're building horizontal, you better be building something truly defensible. If you're building vertical, you better be going deep enough to matter.
The middle ground is disappearing fast.
That's it for today's article! I hope you found this essay insightful.
Wishing you a productive week ahead!
I always appreciate you reading.
Thanks,
Chintankumar Maisuria