New Business Formation and Vertical Platforms
Fora and Moxie
Verticalized is back. Really excited about the upcoming slate. Thanks again for being here!
Yelp publishes a biannual economic report focused on business openings. The upshot: US business formation is at an all time high.
It’s a fun read with a key benefit for our purposes: it reveals where in the Main Street landscape, great vertical SaaS opportunities exist.
It’s usually critical for vertical SaaS companies to operate in industries with healthy new business formation. After all, new businesses need technology, are usually not beholden to a legacy solution, and are great early customers for your product.
This assumes of course, that vertical SaaS companies aren’t intrinsically creating new businesses. They are merely benefactors of tailwinds. But, I don’t think that’s the full story. Some of the most interesting vertical startups are spearheading new business formation. And thanks to Yelp, we finally have some data to back up that statement.
Yelp highlights that the travel industry has experienced a massive boom and is up 39% on the year. Even more astounding, the number of travel agents has grown 76% YoY.
That’s a bit weird! Perhaps your mind fills with a similar vision as me: the tacky shop in a strip mall filled with framed pictures of Caribbean vacations.
Maybe that’s useful to an older generation, but it’s seemingly out of step with modern vacation booking. By all metrics, it’s an industry you might choose to avoid as a vertical SaaS company. And it seems bizarre that it would be growing at such an immense rate. But that’s ignoring the critical ways in which vertical platforms can actually spearhead new business formation. That’s exactly what Fora is doing in travel advisory.
Maybe travel agents were in a dying industry, but what if you a) reinvent the definition of a travel agent, b) take advantage of creator economy tailwinds, and c) help new business formation happen in the industry? Well, then you end up with 76% growth YoY.1
Fora Travel
Fora Travel wants to enable anyone passionate about travel to monetize that passion.
That sounds a bit like a creator economy play… and it is. Everyone’s a bit skeptical of creator economy startups these days, so why would this be any different?
Creator economy startups that haven't worked have one thing in common: They primarily focus on helping creators monetize their existing audience via ads, merch, and the occasional CPG product.
For the n of 1 influencer this has worked. For everyone else, it hasn't. There’s a power law at play here. The biggest succeed, most fail.
But this is a power law across a broad horizontal group. What if instead, you focused on helping vertical influencers more effectively monetize their niche?
After all, influencers are niche experts for the most part. They can show you how to train for a marathon, or give you the best beauty tips, or maybe they're incredibly well traveled. Most niche experts simply want ways to monetize their expertise without coming off as a corporate shill. They don’t want to sell merch, they aren’t trying to become Kylie Jenner. They simply want to be well respected within their domain and make a living.
Even without going after horizontal power law outcomes, they can still monetize. The problem has been that horizontal creator economy startups don’t give them an actionable path to capturing the value created from their niche expertise.
The next step then is to give creators seamless ways to create businesses that capture the value of their niche influence.
And with travel influencers, we got the redefinition of the travel agent.
Digital travel agencies are not an entirely new concept. Creating ready made paths for these content creators and other travel hustlers to monetize in a gated industry is. Through Fora, a travel lover can easily get the training + certification necessary, leverage their platform to create trip bookings, and finally monetize what their audience actually wants: tailor-made trip recommendations.
This subtly redefines the travel agent into a travel advisor - the key difference being the consultative + marketing approach that Fora’s agents possess.
And from there: Fora’s advisors can define their path to success how they want. Maybe that means crafting it into a full time job, or maybe it means doing the occasional trip booking. Whether a career or a side hustle, it invites a path to success with tangible ways to capture their influence.
I love this open-ended path. In my view, humans derive meaning from creating real value for others. But that isn't the only source of meaning. People have kids, communities, and other sources of identity that matter. Combining the impulse to serve others while still having the time and bandwidth for other sources of meaning is a path that many younger workers are craving and niche vertical platforms that open the floodgates for these side hustles are incredibly valuable.
The college student, the stay at home parent, or even the couple looking to create a small business together are enabled.2
And that ends up getting you 76% YoY growth in the number of travel advisors (and backed up by community statistics like this graph from r/travelagents.
The brilliance of Fora was in realizing that this redefinition was possible and then catalyzing the infrastructure - the integrations into booking systems, hotel rewards, itinerary planning, and more to make it happen.
I want to emphasize: this was taken as a dying industry. Digital commerce promised to make trip bookings easier for the consumer and remove the need for middlemen.
But digital exhaustion has set in. Consumers want curation from the clutter of the open internet. In the age of exhaustion, curators are really valuable. And many service industries may be newly recreated in part by vertical platforms that seek to give clear paths for the redefinition of the industry in a digital age.
One last example for today. After all, Fora isn't the only vertical platform catalyzing new business formation.
One of my favorites that I've been following for a while, Moxie, is doing something similar in med spas.
Moxie
Medspas are a perfect example of an industry that has a large talent pool (there are huge numbers of registered nurses and other professionals capable of giving injections). And for the most part, there’s nothing that proprietary about a medspa. Consumers want to go to a safe place where they can get their Botox injections and other services.
The problem is that many of these niche experts are stuck working for others. They want to strike it out on their own, but it’s capitally intensive to do so and they don’t have the coaching necessary to make the jump into business ownership.
On the platform side, the payoff here for helping form new medspas is pretty great: the average medspa does over $1m in sales a year on high margin services.
If you can identify the right talent and the right areas to open locations, help them develop marketing strategies, and alleviate the admin through your vertical stack, you can help expand the industry and position yourself at the center of it.
This isn't a pure vertical SaaS play and it's also not a pure digital franchise play. The brand itself is still dictated by the entrepreneur while the operating guidelines are mostly codified by the software. Moxie is a hybrid vertical SaaS/digital franchise model that I find really exciting as we move to a world where software companies begin to figure out how to add VAHR.
And if you’re competent at identifying the talent with a high success rate and your tech stack is really good, the launch costs go way down (by 50%)3 and you can spend far more time on other value-add services (back office work, etc.). You know the payoff is worth it!
The net impact? Business ownership gets far more obtainable, niche expertise continues to proliferate, and the percentage of medspas that succeed should hopefully grow. That in turn means new wealth creation, new productivity boosts to the economy, and a reclamation of the American Dream for many people.4
For vertical platforms, perhaps now is the time to look at legacy industries with low new business formation. These industries may look like bygones of the digital era. Or perhaps it’s a growing industry with a large need for capital, coaching, and technology. Either way, vertical platforms are increasingly taking on a role beyond simply the operational layer - they’re helping form new businesses altogether.
Disclaimer: They probably aren’t the sole reason the industry is up 76%. But read the argument and I think you’ll grok why they are having an outsized impact.
These are all examples of actual Fora agents (from bios).
Side note: I think you can have qualms about the Gen Z desire for flexible careers and what it means for economic productivity. But life isn’t solely economic productivity and many drawn to these sorts of platforms are seeking something else anyways.
My assumption is that Moxie is able to get favorable terms on loans akin to how a franchise may. Or they’re fronting a portion of the costs themselves. Unclear, but the risk profile is far less then a typical SMB and so they’re able to get favorable rates somehow.
For more on digital franchises, this piece by Forerunner (whom defined the category) is great.