Over the past several months I have been doing some thesis building around the API economy. I want to pause to share some initial thoughts, and to solicit your feedback.
2. 2
Definition:
ยง๏งโฏ Application Program Interfaces (APIs) expose some of an
applicationโs internal functions to the outside world
Which means?
ยง๏งโฏ Application A can now access Application Bโs functionality by
simply inserting a few lines of code
Example, please.
ยง๏งโฏ Twillio has built integrations with hundreds of telecom carriers.
Using Twillioโs API, any developer can enable her app to make
phone calls via these carriers using a few lines of code
What Is An API?
3. 3
"APIs are the 'nervous system' of our new digital world.
Being able to share services and data through
interoperable APIs is crucial to establishing modern, digital
ecosystems in any industry. This is especially true in
industries where competition or regulation has created
fragmentation, such as in telecommunications, healthcare
and travel.โ - Chet Kapoor, Apigee CEO
What The Big Deal?
4. 4
API Proliferation Is Exponential
ยง๏งโฏ The number of open (publicly available) APIs grew from
~0 to 13K in the past 8 yrs
ยง๏งโฏ Will more than double to > 30K in the next 2 years
0
5000
10000
15000
20000
25000
30000
2006 2008 2010 2012 2014 2016
NumberofAPIs
Year
Open API Growth
5. 5
The API Explosion Is Transforming
Software Development
ยง๏งโฏ With APIs, software development resembles assembling
puzzle pieces rather than writing a novel from a scratch
โโฏ APIs enable one company to solve a difficult software
development challenge (e.g. cloud storage, in-app email,
payments processing) and let other companies access that
solution, rather than re-solve the same challenge during their
own development process
ยง๏งโฏ The result is a new software development paradigm
characterized by:
โโฏ Rapid development
โโฏ Dramatically lower build costs
โโฏ Niche products/solutions
6. 6
Opportunity: API As Core Product
Within the broader API economy, an investment opportunity
exists for startups offering APIs as their core product
API
Management
Platforms
APIs Create
Ecosystem
Around Product
APIs as
Product
7. 7
APIs as Product: Horizontal v. Vertical
Vertical
Horizontal
APIs as product companies come in two flavors:
โขโฏ Horizontal: Solve a general software development challenge shared across a range
of industries (e.g. Stripe/Braintree: payment integration)
โขโฏ Vertical: Solve an acute pain point shared by developers within a particular industry
The investment opportunity is particularly under-exploited for
startups that offer vertical-specific APIs as their core product
8. 8
Horizontal APIs โ Template For Success
ยง๏งโฏ Validates the API As Product model
โโฏ Hundreds of millions in VC funding
โโฏ Hundreds of millions in exits
ยง๏งโฏ But the horizontal opportunity has been well mined
Funding to date $77.9M from
IPO pending, $100M+ ARR, $100M+ VC funding
Acquired by for $800M
Acquired by for $70M
9. 9
Vertical APIs โ Emerging Investment
Frontier
ยง๏งโฏ Proven venture scale opportunity
โโฏ Yodlee (APIs for fintech development) $75M IPO 10/14
ยง๏งโฏ But minimal VC funding to date
โโฏ Most startups have raised < $3M, many $0
โโฏ Many new entrants in past 24 months
10. 10
ยง๏งโฏ Opportunities concentrated in 3 verticals
โโฏ Healthcare, Financial Services, and Education
โโฏ Large + fragmented + data security issues + startup activity
ยง๏งโฏ Startups solving 3 vertical-specific challenges:
โโฏ Share: read from/write to industry data systems
โโฏ Store: regulation-compliant cloud storage
โโฏ Compute: industry-specific backend-as-a-service
Vertical API Market Breakdown
12. 12
Vertical APIs in Finance
Financial Services
Industry
FinTech StartupsVertical APIs
โขโฏ $3B FinTech VC in 2013,
up 3x in 5 years
โขโฏ Startups req access to
core fin services
functions/rails to build on
โขโฏ Demand for fin process
automation
โขโฏ Wealth of financial data =
new potential FinApps
โขโฏ $485B global fin
services tech spend
โขโฏ Incumbents under
pressure to innovate
(e.g. mobile, BTC, P2P),
disaggregation of
traditional fin services
โขโฏ Complex, intertwined
user base
โขโฏ High data sensitivity
โขโฏ Aggregate,
standardize,
enhance data
โขโฏ Expose core banking
functions as service
โขโฏ Secure data storage/
sharing
13. 13
Yodlee
ยง๏งโฏ What: APIs provide data aggregation,
account verification, money
movement, and analytics
ยง๏งโฏ Founded: 1999
ยง๏งโฏ IPO: $75M IPO 10/14
ยง๏งโฏ Funding: $125M total
ยง๏งโฏ 2013 #s: Subscription fees from 15M
consumers; 27M API calls/day; $70M
rev; $1.2M loss in 2013
Overview: A modular suite of APIs that provides data and functionality for financial
institutions/fintech cos to build FinApps ranging from SMB banking to consumer
wealth management.
Health Fin Edu
Compute
Store
Share
Use Case: Xero, (cloud-based SMB accounting solution) used the Yodlee API to
integrate with live data feeds from 10K+ banks/acct sources to provide Xero
customers a single ledger view of their finances.
14. 14
Standard Treasury
ยง๏งโฏ What: A set of APIs that ease the
integration of banking services for
small businesses and startups
ยง๏งโฏ Founded: 2013
ยง๏งโฏ HQ: San Francisco
ยง๏งโฏ Funding: $2.7M Seed, 5/14
Overview: Helps banks become digital services providers by offering their core
financial functionality (e.g. transfers) via API. Makes it easier for businesses to deal
with banks and startups to incorporate bank functionality.
Health Fin Edu
Compute
Store
Share
Use Case: Using the Standard Treasury API, Wells Fargo customers and third-party
developers can programmatically interface with the bank to process electronic
checks, book transfers, open/close accounts, and exchange foreign currency.
15. 15
Plaid
ยง๏งโฏ What: APIs to access banking/
credit card data for accounting,
auto tax, and expense
management apps
ยง๏งโฏ Founded: 2012
ยง๏งโฏ HQ: San Francisco
ยง๏งโฏ Funding: $2.8M Seed 9/13
Health Fin Edu
Compute
Store
Share
Overview: The modern API for banking data. Plaid allows developers to
programmatically interact with banks and credit cards. Integrate in minutes and get
high-quality transactional and account data from financial institutions.
Use Case: Betterment uses Plaidโs bank integrations to verify new usersโ account
and routing numbers during onboarding. Enables instant account access vs. 2-3
days wait with traditional dual deposit verification.
16. 16
Vertical APIs in Healthcare
Healthcare Industry HIT StartupsVertical APIs
โขโฏ $2.5B HIT VC in 2013
โขโฏ Startups building for
diverse users/use cases
โขโฏ Patient/provider/payer
data access a universal
challenge
โขโฏ Consumer info useful for
enterprise applications
โขโฏ Shared dev requirements
(e.g. HIPAA compliance,
data standardization,
interop)
โขโฏ Fragmented and diverse
customer base
โขโฏ $55B HIT
โขโฏ Array of central data
stores (EMR, 1000s of
insurance cos)
โขโฏ New, complementary
data from wearables,
med devices, etc.
โขโฏ HIPAA net expanding,
penalties up
โขโฏ Aggregate,
standardize,
enhance data
โขโฏ Read/write to central
data stores/peers/
wearables
โขโฏ HIPAA compliance
โขโฏ Commonly
requested dev
features as a service
17. 17
Eligible API
Overview: Instantly create & retrieve healthcare financial transactions to over 2,000
insurance companies including: eligibility, policy, coverage, authorizations, claims,
payments and more.
Health Fin Edu
Compute
Store
Share
ยง๏งโฏ What: Aggregates, standardizes,
and integrates w insurance
company data systems
ยง๏งโฏ Founded: 2011
ยง๏งโฏ HQ: San Francisco
ยง๏งโฏ Funding: $2M Seed 1/15
Use Case: Kareo, whose practice management cloud software is used by 25,000
healthcare providers, uses Eligible API to interface with insurance companies and
process thousands of of patient eligibility transactions per day.
18. 18
Validic API
ยง๏งโฏ What: Aggregates/standardizes
data from health apps and devices
ยง๏งโฏ Founded: 2010
ยง๏งโฏ HQ: Durham, NC
ยง๏งโฏ Funding: $5M Series A, 8/14
Health Fin Edu
Compute
Store
Share
Overview: Validic is a cloud-based technology platform that solves the accessibility
and integration challenges for healthcare organizations by providing a one-to-many
connection to digital health technologies
Use Case: Using the Validic API, a wellness company can access its populationโs
fitness activity and clinical data across dozens of wearable devices and mobile
health apps to offer incentives for exercise and compliance.
19. 19
Human API
ยง๏งโฏ What: Aggregate, standardize, and
organize health data from various
tracking devices and health apps,
single sign on
ยง๏งโฏ Founded: 2013
ยง๏งโฏ HQ: Palo Alto
ยง๏งโฏ Funding: $6M Series A 1/15
Health Fin Edu
Compute
Store
Share
Overview: Human API is the easiest way to integrate health data from anywhere,
enabling users to securely share their health data, regardless of how that data was
recorded, processed, or stored.
Use Case: A provider of individualized weight loss programs (coaching, meals,
evaluations) uses Human API to integrate with and track data from clientโs wearable
devices.
20. 20
Catalyze
ยง๏งโฏ What: HIPAA compliant platform as
a service and backend as a
service, available via APIs
ยง๏งโฏ Founded: 2013
ยง๏งโฏ HQ: Madison, WI
ยง๏งโฏ Funding: $2M Seed 11/13
Health Fin Edu
Compute
Store
Share
Overview: Catalyze offers two products: a PaaS that provides a HIPAA-compliant
alternative to AWS; and a mobile backend as a service comprised of a set of APIs to
build HIPAA compliant mobile apps.
Use Case: The VA and Blue Shield of California use Catalyze PaaS for cloud
hosting, without having to worry about HIPAA configuration, maintenance or
auditing. Health app developers use Catalyzeโs mobile backend to add compliant
user management, data storage, and secure messaging.
21. 21
TrueVault
ยง๏งโฏ What: Handles HIPAA compliance,
allowing for HIPAA complaint data
storage in days instead of months.
ยง๏งโฏ Founded: 2013
ยง๏งโฏ HQ: Mountain View
ยง๏งโฏ Funding: $3M Seed 3/14
Health Fin Edu
Compute
Store
Share
Overview: HIPAA compliant database as a service, which provides a secure API for
healthcare apps to store patient health data.
Use Case: Weave and Rocky Mountain Health Plans use TrueVault APIs to store
and search protected health information in any file format, saving the time/money of
building a compliant app stack in a traditional cloud storage environment.
22. 22
Aptible
ยง๏งโฏ What: PaaS manages servers,
network topology, security,
backups, permissions. Compliance
engines generate docs, audit trails,
reports to show HIPAA compliance.
ยง๏งโฏ Founded: 2013
ยง๏งโฏ HQ: SF (via NYC)
ยง๏งโฏ Funding: $120K Seed 8/14
Health Fin Edu
Compute
Store
Share
Overview: Heroku for HIPAA compliance. Full backend as a service to securely
host and deliver web and mobile apps. Language/framework agnostic, Git-based
workflow, Docker containers move/run services, HIPAA compliance engines.
Use Case: Enterprises, web and mobile development teams can use Aptible to
rapidly develop and deploy apps with the cost efficiencies of the public cloud, while
maintaining security, privacy and HIPAA compliance.
23. 23
Karmadata
ยง๏งโฏ What: Aggregates, standardizes,
and links healthcare data from
public and private sources
ยง๏งโฏ Founded: 2011
ยง๏งโฏ HQ: Hingham, MA
ยง๏งโฏ Funding: NA
Health Fin Edu
Compute
Store
Share
Karmadata is a collection of the worldโs healthcare data, all standardized, linked,
and accessible in one place. The data is standardized into common healthcare
entities enabling users to visualize and simply query the worldโs healthcare data
Use Case: App developers can incorporate health data visualization, search,
analysis and feed functionality into their products.
24. 24
Vertical APIs in Education
K-12/ Higher Ed EdTech Startups
Vertical APIs
โขโฏ $1.25B EdTech VC in
2013, up 35% YoY
โขโฏ Not just rip and replace
central systems, lots of
niche solutions
โขโฏ Access to SIS/peer data
increases functionality,
speeds dev/distribution
โขโฏ Shared dev requirements
(e.g. compliance,
analytics, communication)
โขโฏ $13B EdTech spend in
2013, up 10% YoY
โขโฏ Pressure/mandate to
innovate/adopt tech
โขโฏ Student data locked in
legacy Student Info
Systems (SIS)
โขโฏ New, complementary
data from 3rd party
EdTech cos
โขโฏ CIPA/COPPA/FERPA
data reqs
โขโฏ Aggregate,
standardize,
enhance data
โขโฏ Read/write to SIS/
peers
โขโฏ Reg compliance
โขโฏ Commonly
requested dev
features as a service
25. 25
Clever
ยง๏งโฏ What: SIS data ingestion, data
normalization/validation, and a secure
API available only to district-
authorized vendors. Expanded to
single sign on.
ยง๏งโฏ Traction: Deployed in 30K+ schools
ยง๏งโฏ Founded: 2012
ยง๏งโฏ HQ: San Francisco
ยง๏งโฏ Funding: $30M Series B 12/14
Health Fin Edu
Compute
Store
Share
Overview: Automates the secure transfer of student information between schools
and software vendors. Replaces manual, vendor-specific processes with an API that
gives vendors secure access to student data in legacy school information systems.
Use Case: Clever powers single sign on for the Miami-Dade school districtโs student
application portal. Clever normalizes vendorsโ sign on procedures, auto-populates/
updates class rosters and cuts new vendor integration from 1 month to 1 day.
26. 26
Teech.io
ยง๏งโฏ What: Cloud-backend as a service for
EdApps. Ed-specific functionality like
student registration, assignment
creation, grading and Ed-specific
analytics, including activity, duration
ยง๏งโฏ Founded: 2013
ยง๏งโฏ HQ: Italy/UK
ยง๏งโฏ Funding: $40K
Health Fin Edu
Compute
Store
Share
Overview: Develop education apps in hours. A backend and development platform,
delivered via API, for creating beautiful education apps faster and hassle free.
Use Case: Developer creates an astronomy photo quiz app using open source
images from NASA. Developer uses the Teech.io platform to power backend,
automate game mechanics, incorporate learning analytics, and track users.
27. 27
Zzish
ยง๏งโฏ What: A backend for EdApps with
features like personalization
algorithms, gamification, teacher
dashboards, content pushing
ยง๏งโฏ Founded: 2013
ยง๏งโฏ HQ: UK
ยง๏งโฏ Funding: $120K
Health Fin Edu
Compute
Store
Share
Overview: A modular backend as a service platform for building amazing mobile
learning apps.
Use Case: An edtech developer can use Zzish APIs to incorporate features like
content pushing, adaptive testing, teacher and student facing analytics, and multi-
level provisioning to speed dev time, lower costs, and streamline deployment.
B: Wealth advisory firm building a client dashboard must manually integrate w brokerages, build analytics tools to help clients visualize and act on portfolios
A: Firm uses a single Yodlee API to integrate w all brokerages, and another API to incorporate data visualization, analytics, and recommendation functionality.
B: A developer wants to build an app that allows users to automate monthly payments, would have to integrate with each individual bank
A: Standard makes it simple for developers to integrate banking functions from various banks, allowing users to easily automate repetitive tasks
B: Rambler allows users to track their spending based on geographic location and view transactions on a map, has to integrate individually with various banks, credit cards, and debit cards
A: Use the Plaid API to integrate standardized banking, credit card, and debit card data seamlessly, allowing the developer to focus on building the features of the app
B: Over 20,000 health care providers use Kareo to help them process eligibility transactions. Previously Kareo would have had to integrate individually with over 2,000 health insurance providers
A: Kareo uses Eligible to access standardized up-to-date data to help process thousands of eligibility transactions per day
B: A leading corporate wellness company that wants to give customers incentives for healthy living, develops an app to engage users in this program, needs to individually integrate/standardize data data from variety of wearables/health apps
A: Build for Validic, automatically receive standardized data from all applicable health data trackers, can now focus on building out user experience features
B: The Welle is a game where the characters reflect the playerโs actual fitness and healthy activities. The developer would have to integrate with each health tracker individually and then standardize the data across the different devices
A: Build for Human, automatically receive standardized, organized data from all applicable health data trackers, allowing the developer to then focus on building the front end features of the game, the core components of the app
B: A developer wants to build a healthcare app that accesses medical records and health insurance information, has to first build HIPAA compliant infrastructure including storage, user management, access controls, and healthcare data models
A: With Catalyze the developer to get all the infrastructure needs up and running on day one, giving him significant time and money savings, allowing him to devote his resources to building the frontend features of the app
B: A developer wants to build a wellness monitoring app that stores data from medical records and health trackers, has to develop HIPAA compliant storage within the app
A: Integrate the TrueVault API into the app and in days have HIPAA compliant data storage
B: A developer building a healthcare app that involves storing patient data has to develop features that manage HIPAA compliance around risk assessment, polices and procedures, training, ops, and incident response
A: The developer pays $40K/yr for the Aptible platform which handles all of the HIPAA compliance, saving time + 1 engineer + 1 compliance officer
B: Grade book software requires school admins to import new class rosters at the beginning of each semester. Admins must then transfer final grades from gradebook to studentsโ records in the schoolโs/districtโs central SIS at semester end.
A: School/district integrates w Clever API for free. Grade book can be quickly deployed, all roster and grade imports happen continuously and automatically in the background, info in both systems is always up to date.
provides K-12 schools free integration w their legacy school information systems (SIS). By building for the Cleverโs API, third party EdTech developers can then instantly access student data from any permissioned SIS.
B: A developer looking to build an education app has to spend months building both a standard backend and Ed-specific backend functionality like student registration, grading, tracking features.
A: Developer uses the Teech.io backend saving time and money, enabling the developer to focus on building out the core features and content of the app
B: A teacher/developer looking to build an EdApp has to build gaming features, adaptive learning algorithms, analytics, classroom-level dashboards, etc. from scratch, can then get to their special content/sauce
A: Teacher/dev mixes and matches Zzish backend modules, allowing the developer to focus on building out the core features and content of the mobile learning app