19days is a vertical-based B2B SaaS venture studio. Our entire thesis is to find and define problems worth solving (with technology) in different vertical spaces. But to find a problem, you first have to know where to look. And so, this begs the question — how do we choose the right vertical?
Let’s not bury the lead. Over the span of the last two years, we’ve taken many different approaches to choosing a vertical (leading us to commercial banking, human resources, privately-owned veterinary practices, and funeral homes, amongst others). We’ve found that there’s not one surefire way to choose a vertical because there is no such thing as the right vertical.
The reality is that every vertical has problems worth solving, and some verticals will have characteristics that signal better conditions for a new innovation to take root. However, once you know the characteristics to look for, choosing between two high potential verticals upfront is almost apples to apples.
We propose that instead of ‘how do we choose the right vertical?’, the better question is ‘how quickly can we choose a vertical?’
The best path forward is through
Studies have shown that there is a peak amount of experience for founders to have in a certain field to become innovators. According to the Harvard Business Review, founders with at least three years of prior work experience in the same narrow industry as their startup were 85% more likely to launch a highly successful startup, than those with no experience.
Well, our team begins with roughly zero years of vertical experience. You could see this as a handicap, but it is also our superpower.
Our thesis rests on the bet that our team can enter any vertical and get up to speed faster than any other. And, more importantly, this beginner mindset will allow us to challenge assumptions that others take for granted. We couple this mindset with a human-first approach to finding problems. With the right balance of empathy and objectivity, we set out to find the real, painful problems for the humans living and working in these spaces everyday, and then weigh the business potential of these problems.
The issue with thinking that we can find the ‘right’ vertical before we dive into our discovery and problem exploration process is that we need the in-depth process to truly understand the industry with nuance and pinpoint opportunities for innovation or disruption.
In the past, we have tried to explore 2-3 verticals simultaneously with a lightweight process to find early indicators of problems worth solving. The result was some interesting insights, but nothing that in and of itself satisfied our desire to learn or would definitively tip the scales. Knowing what we know now, we would rather just choose any of the three out of the gate and allocate all research efforts into going deeper in this single area.
Our characteristics of promising verticals
That being said, there are certain vertical characteristics that we seek out. These come in the form of data that is fairly easy to find, or details that are quickly sniffed out through conversation with people working in the field.
We look for these characteristics because they indicate to us that the vertical is ripe for innovation. If we are to create a solution in this area, the market and the individuals acting within the field would be willing to adopt it. These will be big factors for the future success of our venture (once we have the problem, build the solution, test it, take it to market…)
Characteristics to look for:
- Large (or large enough) total addressable market — Is it an established market with proven buyers? If we win even a percentage of this market, will we have a successful business? We aren’t afraid of small TAMs; some creative thinking about business models or how our concept might be applied in adjacent or similar markets can unlock larger TAMs that weren’t immediately obvious.
- Big industry movements — Is there a trend changing the way that businesses or consumers are feeling, thinking, or acting in this space? Will businesses need to change the way that they operate or deliver to meet consumer expectations or demand within the next few years?
- High consumer value — Will gaining just a few more customers each month mean major gains for the business? If consumers are high value, then even small gains will make our solution worthwhile.
- Short, uncomplicated sales cycle — How long does it take a business to gain a new customer, and what is the relative effort of each sale? Is there compliance involved? Is a consumer compelled to buy quickly? The shorter and sweeter the sales cycle, the more likely we can quickly make an impact for the business.
- Decision-maker gains value — Will the decision-maker’s life improve because of this product? Do they understand the pain of the current problem and realize the potential upside of a solution? If our decision-maker is also a user, they are more likely to buy into change.
- Access to people and companies — Do we have access or can we easily get access to people and companies for interviews, ethnography, SMEs, pilot customers, etc.? If we have existing access or can see a quick path to access, we accelerate our discovery/testing processes.
We keep a running list of to-be-explored verticals that meet these characteristics, and have created a venture evaluation framework to quickly assess our early stage ideas. Ideally, a vertical demonstrates all six characteristics, but we might not know this fully until we begin the discovery process.
The make or break factor: timeliness
Finally, before selecting a vertical to jump into with both feet, we consider timeliness.
With a handful of ventures now under our belt, we cannot discount the idea of timeliness, or a vertical’s particular present relevance. This typically relates to a big industry movement or an external market factor (think GDPR, COVID-19, etc). We look at our list and think, is there an area where there will be a greater advantage to solving this problem right now? This will not only indicate a good opportunity to innovate, but also demand for innovation.
Then, we choose.
The more quickly that we select our vertical, the faster that we are able to allocate our resources to where it really matters — diving in with the full power of our research and strategy team to understand the space, identify problems, concept early solutions, assess demand, look for new business models, and validate.
Remember: there is no ‘right’ vertical. There are real problems worth solving and great solutions delivered boldly. If you want to successfully deliver innovative solutions in areas of need:
- Don’t get hung up on finding the perfect vertical
- Keep your eyes peeled for verticals ripe for disruption (reference our list of key characteristics)
- Be willing to get your hands dirty with some preliminary research and conversations
- Stay ready to activate your team and dive in when the time is right.
Want some inspiration for where to find your start? Check out the ventures we’ve launched and grown across multiple verticals – from commercial banking to death care.
