Vertical Challenge is Localogy’s series that examines SMB SaaS players that specialize in vertical business categories. See the rest of the series here. 

Among the varied operational tools in the SMB SaaS universe, capabilities are getting increasingly specialized. As vendors look to differentiate and solve SMB pain points, things gravitate towards specialized functions that address particular issues that are endemic to specific verticals.

As we examined recently in profiling Tap.rm, one of the verticals that compels such specialization is beer. Specialized buying patterns and regulations make it potentially primed for more focused software tools. Cannabis software startups are in a similar boat (more coverage to come on that topic).

The latest company to emerge in this frothy sub-sector (excuse the bad pun) is Ekos. The Charlotte, N.C. SMB SaaS player develops software for craft breweries and other beverage companies to streamline operations. It appeared on our radar screen after announcing an $8 million Series A in October.

Erstwhile bootstrapped, Ekos has developed a full suite of software for core brewery functions like production, inventory and order management.  The UX notably involves lots of simplicity in drag & drop interfaces and an app for highly mobile brewmasters to track operations on the go.

Surprisingly, this specialization hadn’t existed in the SMB SaaS universe, prior to the company’s 2014 funding (not the case today). In its requisite market diligence and competitive intelligence, it found that breweries were mostly using a mix of clipboards, Google Docs or general ERP software like SAP.

Yet there was a big need for specialization… so it filled the gap. That need was subsequently validated by lots of demand. It had 100 breweries on the platform after the first year, mostly acquired through word-of-mouth marketing and two salespeople. It now has 17,000 customers in 40 countries.

That brings it to the current growth inflection and cash infusion. It hopes to use the $8 million to staff up, including 40 new employees by the end of 2020 (more than double the current 32 employees). This will position it to grow its market share in the emerging category, and expand into new areas.

That includes the “other beverage companies” mentioned above, as the software is expandable into adjacent categories like wine and cider. This expands Ekos’ total addressable market, while maintaining the vertical specialization and product focus mentioned above — a key balance for vertical SaaS players.

This gets back to the ongoing question of this editorial series: To verticalize or not to verticalize? The former can achieve specialty and differentiation but it can also diminish total addressable market. The latter is the flip side: less specialized functionality but a broader potential market.

So there’s no one answer, but variables can sometimes compel specialization. For example, LSA’s Modern Commerce Monitor indicates SMB demand for specialized single-vendor offerings in areas with unique needs or regulations, such as finance, healthcare, and legal as we examined this week.

Beer checks some of those boxes, and we’ll keep a close eye on the category. As mentioned, we’ll also circle back to examine the Cannabis category, which is growing at an even faster rate. Like beer, it has lots of category nuance, regulation and other factors that make it prime for specialized SMB SaaS tools.