APIs All the Way Down

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.

Using a bunch of APIs that are really flexible, and figuring out good ways to connect them, leads to a combinatorial explosion of potential workflows. API-first companies turn software into like customizable building blocks, and companies like Zapier and Tray.io function as “APIs for all APIs,” making connections between nearly any app with an API ... See more

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.

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

Focus. API-first companies focus on solving a very specific problem. Stripe started with payments, and put all of their efforts into building the best payments solution. Twilio started with messaging and calling. Plaid does bank data, Algolia does search, Shippo does shipping, Checkr does background checks. That focus means that everything the comp... See more

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

Use Case. Traditional SaaS products help employees get things done, APIs automatically do those things themselves.

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).