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Vertical AI Agents 10X > SaaS
Why Vertical AI Agents Could Outpace SaaS by 10x – Key Takeaways for Builders
Rahil Nazir
December 17, 2024
Hey there 👋 - Rahil here!
Happy Tuesday, Micro-SaaS and AI Builders!
Imagine a world where AI agents tailored to specific industries don’t just compete with SaaS—they outscale it by 10x.
In today’s newsletter, I’m unpacking Y Combinator’s bold take on Vertical AI Agents and what this means for builders like you.
Whether you’re exploring side hustle ideas or looking to supercharge your existing products, this is a shift you can’t ignore.
Here’s how we’ll break it down:
1️⃣ Market Opportunities – Why the demand for Vertical AI is exploding.
2️⃣ Go-to-Market Strategy – How to bring these agents to life effectively.
3️⃣ Finding Opportunities – Where to spot untapped verticals.
4️⃣ Success Stories – Real-world wins to inspire your next move.
5️⃣ Future Outlook – What’s next for Vertical AI?
let’s explore key takeaways together 🚀
Market Opportunity
Potential for vertical AI agents to be 10x larger than SaaS companies they're disrupting
Companies spend more on payroll than software, creating a massive opportunity
Each successful SaaS unicorn could have a vertical AI agent equivalent
The market extends beyond just replacing software - it includes replacing both software AND operations teams
There could be 300+ vertical AI agent unicorns, similar to the SaaS revolution
Recommended Go-to-Market Strategy
1: Top-down Sales Approach:
Avoid selling directly to teams that will be replaced (they'll resist/sabotage)
Target decision-makers above the teams being replaced
Sometimes need CEO sign-off for implementation
2: Vertical Focus:
Develop deep domain expertise in specific verticals
Build solutions tailored to specific industry problems
Focus on comprehensive solutions rather than simple demos
3. Product Strategy:
Build sophisticated systems that can handle complex workflows
Go beyond simple zero-shot LLM prompting
Focus on fully replacing functions rather than just augmenting them
Strategies to Find Opportunities
1.Look for:
Boring, repetitive administrative work Tasks that require large operations teams Areas where you have personal experience or connections Industries with high manual data entry or approval workflows
2.Best Practices:
Spend time observing actual workflows in target industries Look for tasks that are "butter passing jobs" (boring, repetitive).
Focus on areas where you have domain expertise or relationships Find problems through direct observation or personal connections
Success Stories
1: Customer Support:
Power Help: Building complex workflow automation beyond simple prompting
Cap.AI: Specialised support for dev tools, reducing support team sizes
Gig ML: Processing 30,000 tickets daily for marketplace companies
2: Voice Applications:
Salient:
Automating collections calls in auto lending .
Successfully deployed with major banks Replacing high-turnover call center jobs
3: Other Examples:
MCH:
Automating QA testing, replacing entire QA teams
Apriora:
Handling full technical screening and recruiting
Outset:
Taking on survey and qualitative research
Future Outlook
1: Technology Progression:
Every 3 months, capabilities are significantly improving Moving from simple text generation to full vertical AI agents
Voice technology becoming increasingly realistic and practical
2: Market Evolution:
Competition increasing in foundation models (beyond just OpenAI)
Market moving faster than expected with rapid enterprise adoption
Trend toward more sophisticated, specialised solutions
3: Organisational Impact:
Potential to extend management capabilities (beyond Dunbar's number)
May change traditional organisational structures
Could enable much smaller teams to run larger operations (possibility of unicorns with just 10 employees)
Key Quote:
I came across a following quote in a video that really resonated with me, and I wanted to share it with you all.
"every three months things have just kept getting progressively better and now we're at this point where we're talking about full-on vertical AI agents that are going to replace entire teams and functions and Enterprises"
The future belongs to Micro-SaaS and AI Agents
Happy building
🔔 Quick Ask:
If you found this valuable, share it with another founder who might be looking for their next big idea! And hit reply to let me know which vertical you're thinking about disrupting.
What's next?
If you’ve got any feedback, question, idea don’t hesitate to ask.
Enjoy!