Nine Four Insights

Embedded Products and Services

A while back, we’d often joke about startups “sprinkling a little blockchain” (or ‘AI’) in every pitch deck or business overview. The next descriptor that might take its place is “embedded ____”. Embedded insurance, embedded lending, embedded marketplaces, embedded services…embedded…everything. While the use of the phrase is entering fever-pitch territory (no pun intended), history feels like it is rhyming: there’s a lot of overuse and incorrect application of the words, but underneath are valid uses, strategies, and platforms that could turn into huge businesses. Companies can be so big, and so alluring to customers, because at the core of almost every software company is an aspiration of becoming a FinTech company. The logical conclusion of virtually all software is, eventually, a purchase. If you sell business management software for a home services company for example, your goal is to deliver a service that requires labor, materials, and insurance. Those purchases are needed to deliver your service. Knowing that, what better way to use your “SaaS as a wedge” and keep customers in your workflow to purchase something within a single platform, with structured and consistent data, streamlined accounting, and a better customer experience?

In the PropTech world, we believe the potential for embedded products is perhaps more significant. We see PropTech as products and services that impact the people, processes, and ecosystems that interact with the built world. In short, it’s a lucrative place to start weaving together the purchase and management of purchases across a variety of industries that a single software player has historically struggled with.

Take the single-family home purchase as an example. The decision to purchase a home is one of the more meaningful decisions that a person makes, both financially and for the life change it represents. But it also represents a massive trigger for other purchases. Mortgage, home insurance, home services (one-time and recurring), taxes, you name it. And despite the singular process of a home purchase, it’s brutal because each purchase doesn’t necessarily interact with any others. Embedding products and services – or at a minimum a marketplace to see acceptable options based on your specific criteria – at the point of sale could result in meaningful payment flow across the largest purchases in one’s lifetime. That is lucrative.

Separating the one-time process flows and those that are ongoing, such as our prior home services example, we see opportunities to streamline the purchases that are very likely predictable for your business. If you manage a landscaping company, you will need to manage orders of fertilizer, belts for your machinery, and consumables that you expect to use routinely. Those purchases and management aren’t necessarily contained within the same system or flow as how you work. Mashing everything together is done via API or custom integrations, at best, or manual reconciliation (pen and paper) at its worst. So should the short-term loan you need to purchase materials for a job, make the order, and save time, be embedded in the software you use to manage your business? Yes, it probably should.

Embedded products also have the potential to drastically simplify purchase processes and streamline work. If you’re a commercial HVAC technician and you’re working across jobs that require different insurance coverages, it would be nice to automate the top-up for supplemental coverage (or downgrade) and ensure you’re compliant with all requirements. The more complex a product (insurance, for example), the more of a headache it can be to buy, and it more than likely requires people that slow down communication loops and inflate costs with commissions.

While we joke that we hear “embedded…everything”, we take it with a grain of salt. Embedding the right products across SaaS platforms has massive potential to extend a company’s reach, expand share of wallet, and will inevitably create companies that are challenging to define. Are you really a BMS for landscapers, or are you really a FinTech company? We hope we can wrestle with these challenges soon.

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