Aug 28 2007

Let’s Get Vertical

I love to invest in companies that are developing broad horizontal technologies.  Many of them – such as NewsGatorFeedBurner, and Rally – can be applied to many different vertical markets. 

I personally revel in the tension between engineering, product marketing, and sales.  It’s challenging to sell a horizontal product in an emerging market, especially to enterprise buyers.  You need a special type of salesperson – one who doesn’t constantly say “I can’t sell that” but instead knows how to ask his early adopter customers “what is your pain around [problem category X]?” and then figures out how to repurpose the horizontal technology to solve this pain.

In a well functioning early stage team, this tension between engineering, product marketing, and sales results in customer driven vertical market segmentation.  Rather than having a top down sales effort to “go after the following five vertical markets”, the use cases evolve and the ripe vertical markets become clear.

NewsGator recently demonstrated this in the healthcare segment.  In their discussion of The Power of Enterprise 2.0 for Healthcare Delivery they talk about how The National Health Service of the United Kingdom’s Orkney division implemented NewsGator’s Enterprise Server and Traction TeamPage’s blog/wiki product to address their internal communication shortcomings.

As a result, NewsGator is now talking about other healthcare organizations (yeah – there are a few of them) that could use a comparable solution.  Suddenly, the sales organization at the horizontal technology supplier has a vertical market to focus on. 

Now, a traditional enterprise sales (or marketing) executive could say “of course you want to target health care organizations – that’s one of the biggest verticals around, after finance, insurance, manufacturing, government, … ” (you get the idea.) However, in advance of real customers, all the startup is doing is guessing at what people are going to do with the horizontal technology.  Imagine going to a typical health care organization and saying “would you like to buy some enterprise RSS.”  Not very effective.

I hate spending bucks early in the life of a company (and market) to try to create vertical market demand.  However, there comes a time when it becomes obvious you have enough customers in a market segment that you can start to get vertical with your selling efforts while continuing to extend your “horizontal platform technology” into new and exciting areas, such as NewsFriends for Facebook or a reader for the iPhone.