AI Opens Gold Rush in Niche Business Software Markets

Silicon Valley investors are seeing a wave of opportunities in specialized software for laundromats, chiropractors and other previously overlooked industries as artificial intelligence improves profit potential.

The shift comes as AI technology allows software companies to expand from basic business management tools into handling sales, marketing and customer service tasks that were once too complex to automate, potentially increasing revenue per customer tenfold while slashing acquisition costs, according to new research from venture capital firm Andreessen Horowitz.

“In vertical SaaS, AI is making previously unprofitable markets viable by increasing customer value and driving down costs,” VisionX founder and CEO Antwyne DeLonde told PYMNTS. “With AI automating complex tasks and delivering personalized solutions, software companies can now serve smaller, niche markets that were once financially out of reach.”

The economics of niche markets are shifting. Andreessen Horowitz’s report said AI makes vertical SaaS viable in previously unprofitable niche markets by increasing customer lifetime value and reducing acquisition costs. The analysis examined 620 North American Industry Classification System (NAICS) industries in the United States, highlighting examples like dry cleaning services (18,000 businesses and $2.7 billion labor spend), chiropractor offices (38,000 firms and $4.5 billion labor spend) and veterinary services (28,000 firms and $13.8 billion labor spend).

The firm said in the report that AI-enabled software can replace labor-intensive tasks in sales, marketing, customer service and back-office operations, potentially increasing monthly revenue per customer from $1,000 to $10,000, turning a $120 million market into a $1.2 billion opportunity.

“Instead of just selling booking software or an industry-specific CRM, a VSaaS company can now help the businesses they serve develop pipeline, write cold outbound or use a voice agent to answer inbound leads (sales); ingest data from every customer touchpoint and create personalized campaigns (marketing); answer phone calls and respond to texts of customers’ inquiries (customer experience); and manage invoicing and data-entry tasks (back office),” the report said.

Chiropractors adopted AI-powered practice management software like Noterro to streamline workflows and improve documentation accuracy. AI-driven chatbots and voice services automated patient engagement, handling inquiries and appointment scheduling, thereby reducing administrative burdens.

Voice dictation technology enabled faster creation of SOAP notes, allowing chiropractors to focus more on patient care.

In the laundromat industry, AI applications optimize operations through predictive maintenance and energy efficiency, leading to cost savings and increased revenue.

Revscale AI founder and CEO Unnat Bak told PYMNTS that his company is seeing this transformation firsthand through its clients.

“Emerging franchise brands that previously couldn’t afford customized software solutions are now able to leverage AI-powered tools that adapt to their specific franchisee recruitment needs,” he said. “One of our clients, a specialized service franchise, was able to automate their initial franchisee screening process using AI in ways that would have been cost-prohibitive just a few years ago.”

The economics of serving niche markets has long been a delicate balancing act in the software industry. Before the advent of AI, software companies often found smaller markets unattractive due to high customer acquisition costs relative to potential revenue, Siddharth Parakh, senior engineering manager at Medable, told PYMNTS.

“Many companies decided that this sector of niche markets was not worth the focus required to achieve economies of scale and instead looked at larger and more lucrative markets,” he said. “In addition, customer service and support in these smaller markets would often require costly manual processes that made it difficult for these operations to be sustainable. AI’s capability to both automate and optimize these processes means that software companies can now serve much smaller, niche segments of the market profitably.”

For all PYMNTS AI coverage, subscribe to the daily AI Newsletter.

The post AI Opens Gold Rush in Niche Business Software Markets appeared first on PYMNTS.com.