APIs All the Way Down

Applications are just a bunch of functions that get things done: APIs wrap those functions in easy to use interfaces so you can work with them without being an expert.

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

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

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

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

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.

API-first companies are a subset of Software-as-a-Service (SaaS) companies, with a few key distinguishing features:

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).

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

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