Cloud

The API-economy is coming and fast

Above: API concept drawing

Image Credit: Shutterstock

Byron Deeter is a partner at Bessemer Venture Partners. Disclosure: Deeter is an investor in Box, DocuSign, Twilio and SendGrid.

In little more than a decade, application programming interfaces (APIs) have transitioned from relative obscurity to become the “digital glue” that empowers developers to create new software applications, partnerships and even new businesses. This business-to-developer (B2D) market is quickly becoming one of the fastest growing opportunities within cloud computing, and one we’re particularly excited about at Bessemer Venture Partners.

An API is a specification (think of it like a contract) for how two pieces of software talk to each other and exchange data. Web 2.0 companies were the first to recognize APIs, historically used by developers to help teams work without stepping on each other’s toes, as products to be shared with — and sold to — customers and partners. In just a few short years, APIs have become a crucial channel, attracting customers with the ability to extend products, helping partners deliver the value they promised, and growing the ecosystem as a whole.

In today’s world, having a strong API strategy isn’t just good software practice; it’s a powerful business practice. Amazon has built a multibillion dollar revenue business in Amazon Web Services (AWS), leveraging powerful API-based elements such as EC2. Google Maps would be a much smaller business if the only access was through its website directly. Twitter has opened up an entire class of businesses and analytical modules by sharing its data API and platform. Even Salesforce.com, with over 800,000 developers and more than 2.5 million applications on the Force.com platform, proudly states that API calls drive more than 60 percent of total traffic to the site.


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Empowering developers to build against your platform doesn’t just create value for partners; the API provider wins as well by expanding the ecosystem, increasing retention, and driving up the value of the platform. Even more importantly, end customers win when all their products work seamlessly together. Take Box — its API-based integrations with popular applications like Salesforce.com, Yammer, Jive, Netsuite, or even custom internal applications make it easy for end users to work with their files wherever they need them. Similarly, DocuSign’s API lets customers design e-signatures right into their workflows. For example, when a rep closes an opportunity in Salesforce, DocuSign can grab all the right data and automatically send out a contract for signature.

To take it one step further, can a business be API-first, or even API-only? Here at Bessemer, we’re excited about this emerging business model, where developers are the customer, and API design is given the same care and attention that Samsung and Apple might pay their latest phones. Some examples are companies like Stripe and Braintree, which make it easy to add payments to your application, or SendGrid, which does the same for email delivery.

Another example is Twilio, where over 200,000 developers have built applications on top of their API-based communications service offering. Opening up for the first time what used to be a completely cloistered world of telecom boxes and copper wires, Twilio gives developers an easy way to use all the communication services we have on our phones (SMS, voice, Shortcodes, etc.) in web and mobile applications. This enables a slew of new use cases, from the SMS alerts you get from Uber when your car is arriving to highly customized call centers for Home Depot and others.

The common thread here is to take something that’s difficult (or just plain annoying) to do and make it easy for the developer to use, at a reasonable price — much like software as a service (SaaS) companies do for the B2B world, and consumer electronics do for you and me.

Companies likethese have shown the value of executing a strong API strategy, and we likewise encourage our SaaS and PaaS (platform as a service) companies to do the same. We’re also seeing more companies finding success with an API-first approach to the B2D market. Layer in the fact that developers are rapidly building a new marketplace of API-driven mobile apps, projected to be worth $25 billion in 2015, and we’re at a key moment in time for the API economy.

On September 9, at VentureBeat’s CloudBeat conference, I’ll be leading a panel with Sam Schillace, SVP of Engineering at Box, Jeff Lawson, Cofounder and CEO of Twilio, and Jim Frankilin, CEO of SendGrid, and we can continue the discussion there.

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