Menu

Venture Deep Dives: API-First Companies

Learn how APIs (Application Programming Interfaces) have become the backbone of digital transformation in the 21st century

API-Deep-Dive illustration
Written by

Peter MacEwan

Published on

Read

2 min

Our “Deep Dives” series explores vital aspects of burgeoning VC sectors with one of AV’s ~50 investing experts. This week, AV Senior Principal Brook Stroud explains how APIs (Application Programming Interfaces) have become essential tools in our digital age, and why the most successful API-first companies can hold enormous value.

API-first companies are among the most vital and fast-growing investment sectors. But if you mention the acronym outside of a room of software developers, be prepared to receive more than a few blank stares.

At the same time, APIs are everywhere — from social media to payment gateways, weather services, mapping, messaging, e-commerce, cloud storage, and media streaming.

In this Deep Dive, Brook Stroud — Senior Principal for Congress Avenue Ventures and Ring Ventures — helps clear up the mystery and reveals the “magic” of APIs.

Topics include:

  • Defining what an API is and what “API-first” companies do
  • Exploring the market size and potential growth
  • AV’s investment thesis when evaluating the potential of API startups
APIs provide the “picks and shovels” of our modern digital age — delivering core infrastructure or software building blocks, so developers can build without needing to code everything from scratch.
Brook Stroud
Senior Principal, Alumni Ventures

AV’s Deep Dive into API-First Companies

See video policy below.

View Fund Performance
Login to our secure data room.

Schedule a Call to Speak with Us
Ask questions important to you.

API Deep Dive Highlights

An API (Application Programming Interface) is like a bridge that allows different software to communicate and share information or do certain tasks together. It simplifies the inner workings of systems and gives developers a consistent way to access and use the features and data of another application, service, or platform. APIs are vital in connecting various software and services, making them work better and improving the user experience in many industries.

An API-first company is one that puts APIs “at the core of its business,” according to Stroud. It focuses on creating APIs to make it easy for developers to build on its platform and integrate its services with other applications. This approach fosters collaboration and seamless interactions with other software systems.

The demand for products and services provided by API-first companies has exploded in recent years. Stroud points to a Rapid 2022 State of APIs survey that found that some 70% of developers indicate they will increase API usage this year, while 63% note that they utilized APIs more in 2022 than they did the previous year. Among companies, nearly 40% of those with 10,000+ employees have more than 250 internal APIs, while roughly 64% of the smallest companies (those with 1-50 employees) use up to 10 internal APIs.

As the use of APIs grows, so does the value of companies providing them, says Stroud. Top API-first companies and their recent estimated valuation are: AWS ($1.5- $2T), Google Cloud ($235B), Auzure ($100B), and Striple ($100B).

Stroud’s Deep Dive also outlines factors AV considers when evaluating potential API-first investments such as:

  1. Are they offering essential solutions?
  2. Are they embracing cutting-edge technologies such as AI?
  3. Are they continuously improving their services?
  4. Are they expanding their offerings to capture more market value?

Despite positive trends in cloud computing and mobile apps as well as recent innovations, API-first companies still face challenges in brand awareness and adoption, especially in competitive markets, says Stroud.

“However,” he adds, ”we remain optimistic about their potential to revolutionize industries and contribute to the ever-evolving tech landscape by staying innovative and market-focused.”

Contact [email protected] for additional information. To see additional risk factors and investment considerations, visit av-funds.com/disclosures.

Written by

Peter MacEwan

Peter has startup experience in both the nonprofit and business sectors, a BA from Wesleyan University, and an MBA from The Wharton School. Peter developed expertise building teams and strategic planning in the San Francisco Bay Area, driving growth across multiple seed- and early-stage companies (with many nights spent as informal adviser to a network of entrepreneurs). Peter has a passion for social impact and loves working with people who love what they do and strive to get better at it.

LinkedIn
Tagged with

Follow us

Follow us

Neither Alumni Ventures nor any of its funds are sponsored by, affiliated with, or otherwise endorsed by any university. For further details see our Legal & Privacy Policy.

Video Policy: By consuming this content I acknowledge that I may be considering an investment with AV funds for my own or my client’s account. I agree that information contained herein may not be relied upon or used for any other purpose. Offers to purchase securities are only made through formal offering documents, which describe risks (which are significant), terms, and other important information that must be considered before an investment decision is made. To see Important Disclosure Information, visit: https://av-funds.com/disclosures.

Testimonial/Endorsement Policy: Testimonials/Endorsements were provided by the participants without compensation, but each participant has a relationship with Alumni Ventures (AV) from which they benefit. All views expressed are the individual’s own and do not represent the experience of all AV fund investors or companies in which AV funds invest. Please note that testimonials are no guarantee of future performance or success. Any provider of an endorsement that is affiliated with a portfolio company Alumni Ventures has received investment funding from AV, and may in the future seek and/or receive additional funding from AV. This circumstance constitutes a conflict of interest. Providers of testimonials or endorsements were not chosen at random or according to any objective basis, but rather on the basis of their relationship with AV.

Investor Portal Update Policy: Investor portfolio data is updated once per quarter in the AV Investor Portal.

Alumni Ventures is America’s largest VC firm for individual investors based on the combination of total capital raised, number of investments, and number of investors of leading VC firms as reported by Pitchbook and other publicly available information reviewed by AV.

(1) Internal Rate of Return (IRR) for AV Funds is net of management fees and incentive allocations applied to amounts distributed to investors, and gross of incentive allocations applicable to unrealized gains on investments held by AV Funds. IRR for AV Funds includes uninvested cash, unrealized investments, and amounts distributed to investors. The IRR shown for the Russell 2000 indices are gross of fees because indices are not managed investments, and it is not possible to invest directly in an index. For additional information see av-funds.com/disclosures. All investment involves risk, including risk of loss. Past performance is not necessarily indicative of future results. For more information on AV Funds’ investment returns, please see here.

Not an offer to sell, or a solicitation of an offer to purchase, any security. Such offers are only made pursuant to the formal offering documents for the fund, that describe the risks (which are significant), terms, and other important information that must be considered before an investment decision is made.
To see additional risk factors and investment considerations, visit: https://av-funds.com/disclosures.

Please click here to view additional investor policies.

© 2024, Alumni Ventures. All rights reserved.