Niche is no longer Niche!

SPICE CAPITAL PRESENTS: 🔥 🌶 HOT SAUCE 🌶 🔥 

Here at Spice Capital, we’re focused on making big bets in areas primed for rapid change. To do that, we believe it’s important to stay up to date with what some of the most exciting thinkers and builders are saying day-to-day as well as mixing up your content intake with some fun from the corners of the internet. We know there’s a lot of noise and the space can feel overwhelming. Don’t worry! We’re here to be the Hot Sauce in your bag so you can make sure you always keep things spicy!

Niche Is No Longer Niche

In favor of Vertical SaaS!

Investors have grown to love enterprise SaaS. This wasn’t always the case. In 2002, after the dot-com crash, the growing narrative was that there was a “software surplus”. IT departments had overspent on enterprise seats of busted startups and reeled back their spending. It is interesting to read a 2008 blog post advocating for enterprise SaaS. Out of this “bear market” some of the biggest SaaS innovations of our generation were born: Salesforce, ServiceNow, Atlassian

Today, there’s a new narrative coming for the world.

VERTICAL SaaS

The behemoth enterprise SaaS companies are becoming unbundled by new CEOs who understand the power of their domain knowledge. The unlock is global internet access. In 2000, when Salesforce started, only 7% of the world had internet access. Today 2/3rds of the global population (5.35 billion people) are online. The internet brings “niche” interests to a global scale. Opening the door for Global TAMs and infinite scale.

What does this really mean?

Typically, a vertical SaaS founder has deep domain knowledge and leverages the latest developments in technology to modernize the tech stack for a specific vertical. Vertical SaaS founders tend to see fast traction because they already have existing relationships with the end consumer/customer. 

Here are 3 examples of Vertical SaaS investments we made at Spice Capital:

Sedaro - Digital Twins for “Hard” Industries

Sedaro creates digital simulations for objects in space. Today a majority of rocket and space companies don’t have a physics simulation to help troubleshoot or forecast after an object enters orbit. You can think of Sedaro as a Unity or Unreal engine but with Physics and Chemistry built in (You can simulate the real world with pressure, atmosphere and other environmental changes built-in). The CEO Robbie Robertson, has a PHD in Aerospace Engineering, Applied Physics, and Space Engineering. It is no surprise that his company Sedaro was able to land contracts with the Space Force and Air Force as a seed stage company.

Prosper Health - Digital Health for Neurodivergence

Prosper Health provides diagnostics and therapy for autistic adults. 20% of the population is considered neurodiverse. As children, pediatricians catch this and help put in place behavioral health therapy. The same doesn’t exist for adults. Until now, autistic adults were largely left to fend on their own. The founder, Ben Shecter - saw firsthand through a family member’s experience that there was a lack of support for autistic adults. So it shouldn’t come as a surprise to hear that Prosper signed up thousands of customers and generated millions in revenue in their first 6 months of business to help solve the gap. 

Moonlight - interactive tarot marketplace

Moonlight is an interactive tarot marketplace that just came out of stealth where readers can conduct sessions, manage booking and payments, and consumers can have an immersive digital tarot experience. Western society has become less religious, however the next generation is turning to more and more forms of esoteric “religions” including tarot.  A 2017 Pew Research study found 30% of Americans believe in occult magic, the highest percentage ever recorded. Co-star is reported to have over 29.6M users and anecdotally the CEO has reported that 1 in 4 Gen-Z is on the app. (Social media has increased visibility and accessibility in the category: Astrology and tarot content is very popular on platforms like TikTok, Instagram, and YouTube. The "TarotTok" hashtag on TikTok had 36 billion views as of 2022.The astrology market is projected to reach $22.8 billion by 2031. Until now, there was no full-stack digital experience for consumers to find and book recurring sessions with a reader. CEO Danielle Baskin has been a practicing reader for over a decade. She saw the subculture growing, but was shocked to learn that nobody had built technology for this demographic. Tarot is thousands of years old and the incumbent (started in 1995) brings in almost $300M in global annual revenues. 

so…

As an investor, you have to understand where each idea is in the bundling/unbundling cycle. As a rule of thumb, every new platform shift causes the bundle pendulum to switch states.. With the rise of generative AI tools, domain expertise is one of the few moat’s left - so going vertical specific makes sense in certain categories. This post may not age well in 20 years years because we will probably be in a different bundle state!

(here is a tweet i thought should have gone viral but never did)