Part 2: Is the Middle Disappearing?

Dave Walker

Fortune 50 CMO | Founder, B2SMB Institute | Building the Operating System for Enterprise→SMB Growth | Publisher, Between the Lines

January 7, 2026

This is the second installment in our three-part series examining the patterns that defined the $2.5 trillion small business marketplace in 2025. Yesterday we explored how SMBs are evolving faster than sellers. Today we examine what happens when giants consolidate and specialists strike.

In 2025, the B2SMB marketplace began a split into two winning strategies.

Build everything or dominate one thing.

Be the big gunboats of the Spanish Armada or be the fast-frigates of the Royal Navy.

The massive platform consolidators (Google, Intuit, Salesforce) relentlessly assembled enormous battleships and fleets to serve all.

Meanwhile, the vertical specialists became the quick, highly maneuverable, single-cannon attackers.

Toast took restaurants. ServiceTitan took home services. Procore took construction. They’re not trying to serve all. They’re trying to own one industry completely.

And caught between them? The mid-size generalists.

“Big ships, small fleets.” Big enough to be slow. Small enough to be vulnerable. Building pretty good solutions for multiple channels while specialists build perfect solutions for single ones.

Let’s look at the charts.

The Spanish Armada: Platform Consolidation Accelerates

Salesforce completed acquisitions of Informatica for data integration on November 18th, Apromore for process mining on November 3rd, Spindle AI on November 21st, and announced acquisition of Qualified for agentic AI marketing on December 17th.

Every acquisition adds another row of guns to the hull. Accounting, payroll, HR, sales automation, AI agents, data integration, process mining.

Build it all. Own the entire stack.

This strategy makes perfect sense to serve large Enterprise customers. Big companies want comprehensive platforms. They want everything on one plate.

For enterprise buyers, the Spanish Armada wins.

But here’s what the Big Consolidators are betting: that SMBs want the same thing enterprises want.

That bet might be – as history would suggest – spectacularly wrong.

Because SMBs don’t operate like enterprises.

They need tools that solve specific problems. Fast. Simply. Without a lot of training, and without requiring a systems integrator to make them work.

That’s not Salesforce.

In 2025, while the juggernauts were assembling, the smaller ships started attacking.

Are you building a platform that serves enterprise needs, SMB needs, or are you trying to serve both? Because the SMB market is proving that just because it’s bigger doesn’t always make it better.

The Royal Navy: Vertical Specialists Dominate Single Markets

Toast achieved $5 billion in revenue in 2025, growing at 27%. The platform beat Oracle and NCR went public at a $20 billion valuation by focusing exclusively on restaurants.

ServiceTitan generated $890 million in revenue in 2024 serving HVAC, plumbing, and electrical service providers. The company went public in at an $8.9 billion market cap, serving over 10,000 companies.

Procore reached $982 million in revenue, growing at 33%, by owning construction project management. They went public at an $8.5 billion valuation by serving a single vertical that horizontal platforms ignored.

According to Software Equity Group, vertical SaaS accounted for 46% of all SaaS M&A activity in Q2 2025, up from 40% the year prior. Buyers prioritized sector-specific solutions with embedded workflows and strong retention dynamics.

So while Salesforce grows at 8%, Toast grows at 27%. While horizontal platforms add features, vertical specialists own categories.

The Royal Navy strategy is simple: go small. Pick one industry, go absurdly deep, become so essential that switching becomes impossible.

Toast didn’t build generic retail software. They built everything a restaurant needs. Nothing a law firm needs.

ServiceTitan didn’t build generic field service software. They built everything a plumber needs. Nothing a Vet’s office needs.

Vertical Specialists aren’t remotely trying to serve 30 million SMBs.

And it’s working.

Because a restaurant owner doesn’t want Salesforce and the Seven Dwarfs. They want Toast. One login. One vendor. One bill. Everything just works.

Vertical Specialists can charge premium prices. Toast charges restaurant-specific pricing. ServiceTitan charges trade-specific rates. When you’re the only serious option for your category, pricing power follows.

And Vertical Specialists create switching costs that horizontal platforms can’t begin to match. Try switching away from Toast when you’ve got 3 restaurant locations with integrated POS, payments, payroll, and compliance systems. The switching cost isn’t just technical. It’s operational suicide.

Bessemer Venture Partners, which invested in Toast, ServiceTitan, Procore, and other vertical winners, put it simply: you trade market size for market share.

The Spanish Armada had overwhelming force. The Royal Navy had superior maneuverability. In 1588, maneuverability won.

In 2025, the same pattern emerged, and it rolls like a tide into 2026.

Could you trade market size for market share? What would it mean to own 50% of a single vertical instead of 5% of ten verticals?

Big Ships, Small Fleets: The Horizontal Players Face Their Future

Think about the mid-size B2SMB generalists – the classic “horizontal players” in a product category.

Companies like Legal Zoom, Constant Contact, Indeed.

Big enough to have built substantial businesses. Small enough to lack Salesforce’s enterprise moat or Intuit’s acquisition firepower.

According to SaaStr’s 2025 analyses, horizontal SaaS companies face more budget scrutiny while vertical SaaS offerings continue to accelerate.

The pattern is clear: mission-critical infrastructure plays specialized in underserved industries beat nice-to-have productivity tools in horizontal markets.

Caught in the middle. Too big to pivot to vertical specialists. Too small to consolidate like the giants.

Big ships. Small fleets.

It’s too early to declare the Gustos or the Legal Zooms or the Indeeds dead in the water. But it’s not too early to ask hard questions about the wind in their sails – i.e. their strategic options given trends and patterns.

Option One: Punch up. Grow to rival the really big players. Make acquisitions. Build comprehensive platforms. Compete with Salesforce and Intuit for enterprise and mid-tier customers. This requires massive capital, years of integration work, and betting that comprehensive platforms win in SMB markets.

The risk: you’re building bigger battleships while specialists build ever-faster frigates. By the time you’ve assembled a comprehensive platform, the vertical players have owned their categories completely.

Option Two: Punch down. Pick a vertical. Go deep. Compete against the specialists by choosing a different industry and owning it completely. This requires walking away from revenue in other sectors, and accepting a smaller TAM in exchange for higher market share.

The risk: you’re late. Toast, ServiceTitan, and Procore already own their categories. The best verticals might already have entrenched specialists. And your brand, built on being horizontal, might not translate to vertical credibility.

Option Three: Get acquired, or merge with a competitor. I’m not kidding here. Spanning all SMBs is just risky, because every SMB is a vertical. And don’t assume 800,000 florists in the US want to operate the same way as 400,000 landscapers. Maybe there’s another strategy we’re not seeing yet. Maybe they can win by doing something neither the battleships nor the speedboats can do. I just don’t see it. So maybe it’s time to seek safe harbor with the Armadas.

The risk: getting acquired, or merging with a competitor.

What we do know-know? Being in the middle is increasingly uncomfortable.

The platform consolidators assemble overwhelming force at the top. The vertical specialists are capturing category dominance at the bottom. And the space between them is shrinking.

Companies like Gusto, Constant Contact, and Indeed aren’t struggling yet. But the pattern is forming. Horizontal growth is slowing while vertical growth accelerates. Generic solutions face pricing pressure while category-specific solutions command premiums.

The question isn’t whether mid-size generalists will survive 2026. They will. The question is whether they’ll thrive. And if so, how.

If you’re running a mid-size B2SMB generalist platform: are you punching up or punching down? Are you assembling a battleship or becoming a speedboat? Because staying in the middle might not be an option much longer.

The Pattern: The Middle Isn’t Where You Want to Be

Three stories. One pattern. The middle ground is disappearing as the big get bigger and the small get more lethal.

What I’d suggest we all watch closely across 2026 and beyond:

• Do the platform consolidators successfully extend their enterprise success into SMB markets? Or do SMBs more broadly reject comprehensive platforms in favor of vertical specialists?
• Do vertical specialists expand into adjacent categories? Or do they stay laser-focused on dominating single industries?
• Do mid-size generalists choose a direction? Or do they stay in the shrinking middle ground, hoping for a buyout bid?

The B2SMB offerings that won in 2025 and will again in 2026 won’t be those with the most features.

They’ll be the offerings that deliver SMBs the right features.

For their small business.

Built by people who get their business.

Who share what SMBs have in abundance: common sense.

Tomorrow: Part 3 examines how capability gaps create massive B2SMB opportunities, revealing where the market is screaming for entirely new solution categories.