The Human Factor in Scaling Vertical SMB SaaS in the Times of AI

Article by Filip Van Innis & Hugh Phelan

We’re all on board with the vertical SaaS (vSaaS) thesis by now.

For a long time, horizontal SaaS models won out because of scalability: products and GTM motions were easier to repeat, and the tech stack was simpler to build. Meanwhile, verticals were seen as messy, fragmented, and hard to scale.

That’s no longer true. Massive, complex industries (even niche ones) that have been historically underserved are now compelling opportunities in B2B software. Product development costs have plummeted. LLMs can now take vertical-specific data and generate tailored outputs with natural language. Agentic workflows can automate repetitive processes faster, better, and around the clock – often without replatforming.

This shift allows SaaS companies to capture both software and labor spend. As data and usage compound, so does the moat. So it’s no surprise that vertical SaaS and AI-native automation are getting so much capital and attention.

But the challenges of scaling in these verticals remain the same (and significant). The “S” of “SME” often denotes small P&Ls, low margins, limited tech fluency, and entrenched legacy tech. Additionally, folks in these segments are also just really busy - cutting hair, cooking food, plumbing, building, etc. – optimizing their software stack often takes a back seat to more (possibly literally) burning priorities.

If you can’t find that perfect balance between (short) sales cycle and (low) ACV, then sales doesn’t accelerate. If onboarding fails to quickly realize the ROI, churn happens. Taken together, vSaaS for SME fails once again, despite having a killer product (if they only used it the right way!).

At Fortino we’ve had quite some exposure to vSaaS for SMEs through investments in Salonkee, Sides, Vertuoza, and Teamleader (and Hugh’s personal experience at MarginEdge). We’ve found that while AI has unlocked many SME verticals, the key to scaling within these markets is still very human.

Some of our learnings

On sales

1. Go where others won’t: The SME market is vast AND dense. When we first invested in Salonkee, they were only active in Luxembourg, Belgium, and Switzerland – small markets. Most international VCs passed. But since then, they have reached +8k customers in Western Europe by targeting secondary markets outside major metros, where their SME ICP remained concentrated enough to support scaling, and competition was limited. Doordash won the delivery war in the US using a similar beyond–big-metros strategy, despite highly capitalized competitors (Uber, Grubhub, Seamless, Postmates, Olo). These regions may be overlooked, but they still have more than enough SME density to sustain rapid, capital-efficient growth.
2. Replicate, Don't Hack Timelines: If you want to grow fast, you have to accept having multiple plates spinning at once, opening several regions in parallel. Rather than trying to maximize a geography by moving up/downstream, take what works for an ICP in one region and bring it to another. And do this earlier than you think, as you can’t fast-track local learning and initial scale of teams on the ground. Each new region has its own rhythm: you need to hire a core local team, localize the product and the sales story, and only then can you scale.
3. Hire Junior, Promote Internally: Granted, this isn’t true for every vertical, but many of our companies have found more success developing junior talent into leaders than hiring more experienced operators from the outside. Juniors who rise through the organization bring deep context around the culture, processes, and customers – the hard part – and can more easily layer on the leadership skills that build from that base of credibility.
4. Run Talent Acquisition Like Sales: Once you have found your GTM motion, recruiting GTM employees can become a major bottleneck. Make this a core competency: define your ideal hiring profiles, track hiring funnel metrics, and hold managers accountable. Hubspot demonstrated what this looks like at scale – treating recruiting as a quota-bearing function with candidate ICPs and weekly pipeline reviews, allowing them to grow from dozens to thousands of employees without compromising talent quality.

Sales productivity rises with market share: Trust compounds with penetration; selling gets easier. At Salonkee, once they achieved >20% market share in a region, sales is actually accelerating, as SME markets are often driven by referrals and word-of-mouth in the communities.

On onboarding / adoption

1. Know Your Window: SMEs adopt during acute pain moments or when they’re just starting their business. Miss that window, and adoption becomes exponentially harder. We have found that the adoption window is 3 weeks max (and is ideally much quicker).
2. Design for Default Behavior: Users often have 5-30 minutes for software and do not have time to read documentation. Any required configuration becomes a barrier to adoption. At MarginEdge, we automated what we could, and for the tasks we couldn’t yet automate, we simply did the work manually for customers and used those learnings to automate it later.
3. Keep the Human Layer: You can't automate trust. Even automated flows need human touch, especially for sensitive workflows like payments. A 5-minute phone/video call can go a long way in building trust and driving adoption (another MarginEdge learning).
4. Onboarding and support should be on the same team: The handoff from sales to onboarding already erodes trust. If onboarding and support also tell a different story, with support ultimately driving ROI for the customer, this is a disaster that leads to churn. Treat onboarding and support as one continuous function - one team accountable for activation and ongoing success. 

Vertical SaaS is entering its most exciting era, with the next generation of category leaders emerging from markets that were once considered too niche or too operationally messy to touch. But in SME verticals, technology alone isn’t enough. Growth still depends on people: local teams who know the rhythm of each region, junior hires who mature into leaders, recruiters who move like sales teams, and onboarding and support teams who win trust (for this reason we backed Donna, which illustrates how AI can remove the administrative drag from field sales teams, letting humans double down on what they do best: selling, advising, and building trust).

If there’s one lesson from Fortino’s experience across our SME-oriented companies, it’s this: AI may change what is possible, but people still determine what is scalable. The future belongs to the teams that can combine both.