The Rise of Hyper-Specialized Startups: Why the Future Belongs to the Niche

After meeting with hundreds of startups across different ecosystems, I’ve started noticing a consistent pattern. Innovation today is moving in a very different direction than it did even just a few years ago. Where startups once chased the largest possible markets, building generalist tools like CRMs, project management software, or payment platforms for the masses, we’re now seeing something else entirely.

More and more, founders are turning their attention to historically underserved segments. These are niches that previously would have been dismissed as too small or too fragmented to justify building around. We’re talking about SMEs, industry-specific workflows, and even frontline operators in very particular verticals.

Why the shift? Simply put, because it’s now possible, and often smarter, to do so.

‍Building for the Niche Is Finally Viable

‍The barrier to building software has dropped dramatically. With cloud infrastructure, low-code platforms, and now AI-powered tooling, a team of two or three people can build and ship a high-quality product for a well-defined audience. Distribution is more targeted too, thanks to specialized online communities and increasingly accurate ad tools.

Because of that, we’re seeing things like CRMs built specifically for restaurants. Inventory tools built for small-scale wine producers. Compliance platforms made for crypto-native teams. Or payments infrastructure designed for municipalities or schools. These aren’t edge cases anymore. They’re becoming a new standard.

Rather than trying to serve everyone a little bit, these startups focus on serving someone really well.

‍A New Way to Define the ICP

‍The traditional Ideal Customer Profile used to revolve around enterprise clients. Large contracts, long sales cycles, lots of complexity. Today, it’s a different story.

Founders are targeting SMEs and local operators. They’re diving into sectors like hospitality, beauty and wellness, legal, or home services. These are markets that have been overlooked for too long, yet they have clear, painful problems and are more than willing to pay for tools that actually work for them.

I’ve seen startups close deals faster, onboard users more easily, and scale efficiently by leaning into these vertical-specific needs. And as it turns out, users in these markets often become the most loyal advocates. They know when something is built for them, and they stick around when it is.

‍From Niche to Scale: Real-World Examples

‍This isn’t theoretical. Companies like Jobber, which helps home service businesses like landscapers and electricians, or Boulevard, built specifically for salons and spas, are proving just how scalable these niche plays can be.

Fresha, focused on appointment scheduling for beauty and wellness businesses, and Clio, which created a practice management tool for law firms, have both grown far beyond their initial scope. Clio is now a unicorn, and Fresha has raised over 150 million euros. Each of these companies started by solving a very specific pain for a very specific type of user, and then scaled from there.

At Tenity, we see this trend play out in our own portfolio. Take Warren, for instance. Rather than compete head-on with hyperscalers, they’re challenging traditional cloud infrastructure by building a distributed network of smaller clouds that better serve SMEs. Or Groundley, which focuses on a specific internal function, procurement teams, helping them streamline operations and improve efficiency through AI. Both are great examples of how starting with a well-defined use case or audience creates clarity, traction, and a solid foundation for growth.

‍But Are These Opportunities Big Enough for VC?

‍This is the question we ask ourselves the most. If a startup is targeting a narrow vertical or a smaller customer base, can it still return the fund?

In my views, the answer is most probably, yes!

What looks like a small niche in one geography can turn into a huge opportunity at a global level. Dentists, boutique hotels, or independent gyms might seem limited in one city, but when you scale across borders, the numbers add up quickly. And once a startup becomes the best solution in that niche, it has leverage to expand into adjacent verticals or add new products for the same customer base.

AI and other synergies allow for more interconnected jurisdictions, allowing for a local tool to easily spread across other regions.

Some of the most successful startups I’ve met used a vertical as a wedge. They enter with one product, win the trust of their users, and then layer in payments, analytics, financing, or HR tools over time. It’s not just land and expand. It’s land and embed.

And because these companies serve a well-defined audience, their go-to-market motion tends to be more efficient. The CAC is lower, the messaging is sharper, and the retention is stronger. From a VC perspective, this translates into better unit economics and more capital-efficient growth.

Even when these companies don’t reach unicorn status, the exits can be meaningful. A 100 to 200 million euro outcome for a capital-light, vertical SaaS company can still drive strong returns, especially for early-stage funds.

‍Going Deeper, Not Just Bigger

‍In a crowded tech landscape, trying to be everything to everyone is no longer a competitive advantage. What I’m seeing, time and time again, is that the companies gaining traction are the ones going deep. They’re listening closely to underserved users, building with intent, and staying focused on solving real problems.

Innovation used to mean building tools for the masses. But the most interesting startups I meet today are doing the opposite: building tools for the people who were ignored, and doing it exceptionally well.

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