Vertical software investing refers to the practice of investing in software companies that serve a specific industry or market segment. Some potential benefits of this approach include:
Niche expertise: By focusing on a specific industry or market, investors can gain a deep understanding of the needs and challenges faced by that sector, which can inform their investment decisions.
Strong network effects: In many cases, software products in a particular vertical can benefit from strong network effects, as the value of the product increases as more users adopt it.
High switching costs: If a company's software product becomes deeply integrated into a particular industry or market, it can be difficult for competitors to displace it, as the cost of switching to a new solution may be high.
Industry partnerships: By focusing on a particular industry, software companies may be able to forge strong partnerships with key players in that sector, which can help to drive adoption of their product.