APIs All the Way Down

Shopify is a really smart company. It wouldn’t tie its own hands for no good reason. Instead, it made a deliberate, strategic choice to focus on the things that it does best, and to plug in Stripe for all of the things that it does best. That’s what third-party APIs enable their customers to do.

They allow customers to focus on the one or two things that differentiate their businesses, while plugging in best-in-class solutions everywhere else.

Business Model. The most common SaaS business model is to charge per seat, while most API-first companies charge customers by usage of the product, either based on Pay Per Call (each time the API is pinged, say if you’re sending an SMS via Twilio) or as a percentage of transaction size (Stripe charges 2.9% plus $0.30 for each transaction).

In the press release, Stripe highlighted its partnership with Shopify, which is using Treasury to build Shopify Balance.

Chris Sperandio, now at Stripe, wrote a piece while at Segment arguing that there needs to be a new, more dynamic model of a firm: the “Request/Response” model.

Purchasing Decision. Traditional SaaS is a department-head, IT, or exec purchasing decision, while API-first is typically a product and engineering purchasing decision.

One of the most common refrains that API-first businesses hear is, “Oh Company X will just build that in-house,” and yet, they almost never do. It’s not for lack of resources. Facebook generated more profit in 2019 ($57 billion) than Twilio’s entire market cap ($51 billion). It’s that once they’re integrated into a customer’s product, API-first com... See more

Strong API-first businesses sit in this sweet spot: they provide mission critical but non-core functionality to their customers, like accepting payments, providing cloud security, or sending communications to customers.

“There’s an app for that” is now “there’s an API for that.”