Visual Agentic AI Tools Get Vertical: Targeting Key Industries for Massive Wins (Part 2 of a 4-Part Series)

If the explosive rise of Visual Agentic AI Tools (VAATs) in Part 1 piqued your interest, this one will unlock a whole new understanding for how the market is evolving: verticalization. Forget one-size-fits-all; VAATs are focusing on industries like healthcare, energy, and manufacturing, to unlock efficiencies and deliver jaw-dropping revenues and valuations. We’ll unpack the “Why” and “How” below.

The “Why” is simple: would you rather be appreciated by the masses, liked by many people, or loved by a few people? In the dopamine fueled world of social media you might be attracted to likes, but in the real world, it's all about being loved by the few who matter to you…and pay you. The same applies to the world of software; and therefore VAATs. Let’s define who those people are:

1. The Masses: These are individuals. Since they merely appreciate your software, they are willing to use it as long as it's free. This could represent 10 million people, but they ain’t payin.
2. The Many: These are people who really like your software. It delivers them sufficient value, so they are willing to pay a monthly subscription. They are a small subset of the Masses above, say 2%, maybe through a Freemium model. This represents 200,000 people and they are willing to pay say $20. So your total addressable market (TAM) is $4,000,000 a month. That’s a whole lot better than nothing from the Masses.
3. The Few: These may be only maybe 20 companies in a specific industry. They love your software. They can’t live without it. On average, each of these companies has 5,000 people who use your software daily, so we’re talking 100,000 users. They are willing to pay you $500 per month per user. This adds up to a TAM of $50,000,000 a month.

Clearly, it is far better to be loved and needed by the right “Few”, than liked by the Masses. This is why they say: “There’s riches in the niches.”

The Virtuous Cycle of Software

By focusing on a very specific problem or set of problems, you get to know those problems really well. You are then able to solve those problems really well. In the process of selling those solutions, you develop and hire people with expertise in that field. Your product, marketing messages, sales pitches, the support team, they ALL focus on that specific industry and its problems. This makes you better able to speak with and sell to the domain experts who need your solution. Then these customers start asking you for new features that solve their specific problems. This makes your solution even better. Once they are happy with your product, they start telling friends about you and those friends buy your software as well. Eventually, you develop such a footprint in that industry that consultants start selling and tailoring your solution, using it to drive efficiencies in their own consulting practices. Then other software companies start taking notice and building integrations so you work together smoothly. This enables you to burrow into that specific market like a tick until you are almost impossible to remove from these organizations. In the process, your software gets better and better. In brief, the virtuous cycle is: more users → more value → more users → more value…repeat.

Going Vertical: How Software Companies It

Now that the “Why” is addressed, we’ll explain the “How”: How do you become loved by the few valuable users who will pay big money for your software? There are a few ways software companies embrace verticals or specific industries. Some are planned, while others just happen, but usually it is a combination of these.

1. Born That Way: Sometimes the founders are from that industry, they recognize the value of building a profitable foothold in a single industry and so they target it from the beginning.
2. Customer Influence: If you land a handful of early customers in a specific industry, they will start asking for features and integrations to other applications that make you a much better solution to that industry. Sales and marketing naturally focus on where they get traction and your customers drag you into a vertical focus.
3. Focusing: You might have early luck in a few verticals. They seem to be going well, but you realize that you don’t have the resources to be a leading provider in all of these verticals. You might see other companies really focusing and getting traction. You realize you need to focus on where you can win, so you do.
4. The Pivot: Maybe you start as a general purpose tool. But then your competition raises 10X the amount you raised or maybe the big “Platform” companies like Google, Apple, Microsoft, etc. start buying your competition; a game of musical chairs where you have no seat left. Or maybe those platform companies release strong competitive products. You realize that your ability to hold a top 3 market share position is a long-shot. So you pivot to focus on a vertical market you can win.

VAAT Verticals: Healthcare, Energy, Manufacturing, and More

Below is a table of some of the leading Visual Agentic AI Tools (VAATs) and how they have focused on a few industries and in some cases a specific use case within that industry. When you consider the focus on specific use cases within industries, you realize that there is a vast market opportunity to absorb the 28 or more tools in the market today.

Sources: Aggregated from platform docs, case studies, and analyst reports like Gartner and Forrester.

The Bottom Line: Vertical VAATs as Your Competitive Edge

Verticalizing isn't about settling, it's about dominating. VAATs are used to build 85% of all agents (Salesforce survey) because they break down application-centric data silos and workflows. But making them work well requires laser-like focus on specific use cases in specific industries. This explains the verticalization of the VAAT tools. It also explains why, in the near-term, there is room for a lot of these tools to dominate their specific focus and get their flywheel spinning. With the use case focus, we might see 10 or even 20 successful tools just in healthcare. Eventually, I expect that these winner of niches will be rolled up into a few big industry focused companies. but for now, solving a real problem in a deep and meaningful way is a great place to be. If you do it well, you could be rolled-up or maybe the one rolling-up other companies, but either way you have a shot at meaningful success.

Stay tuned for Part 3, where we tackle agent-to-agent communication— the key to blending best-of-breed VAATs across ecosystems; the “virtual roll-up”.