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What do Investors Look for in API Startups?

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An shorter introduction to APIs Startups from a Venture Capital point of view.

Starting with the major characteristics of API startups from business model point of view, and how do investors evaluate API startups.

As presented in APIdays http://apidays.io/

What do Investors Look for in API Startups?

  1. 1. What do Investors Look for in API Startups? @rodrigoMrz API days Mediterranea 
  2. 2. About us @PointNineCap ● Berlin-based, 2011 ● 45mEur ● Seed & Series A (500k-1mEur) ● Europe & North America ● 65% SaaS investments Search as a Service Translation as a Service CMS as a Service Alerts as a Service Helpdesk as a Service Forms as a Service @rodrigoMrz
  3. 3. Agenda APIs from Investors’ POV What do investors look for in APIs Startups: ● Great market ● Great product ● Great team ● Great business As-seen-in VC: Examples and Trends @rodrigoMrz
  4. 4. APIs from Investors’ POV APIs as core We  APIs APIs ecosystem APIs as by-product APIs as strategy +100 +bn +100 Funds Exits Rev @rodrigoMrz
  5. 5. APIs from Investors’ POV Marketing Potentially low cost of acquisition Because: a) inbound: developers as proactive customers b) referrals: word of mouth works well Churn Potentially high lock-in Because: a) “don’t touch what works” Conversion rate Potentially high conversion Because: a) Developers do their own research b) APIs solve “tough” problems c) Usually somebody else paying Competition Potential commoditization Long-term threat, because: a) Developers building developer tools b) Hard to build brand in back-end Competitive advantage Technically challenging Because: a) Scalability issues b) Good tech people are hard to find (+ expensive)      @rodrigoMrz
  6. 6. What do Investors Look for in API Startups* ● Great market ● Great product ● Great team ● Great business Great Market Great Products Great Teams Great Business + traction helps! * As always @rodrigoMrz
  7. 7. Great Market Big Market Urgent&Recurring need Competitive environment @rodrigoMrz
  8. 8. Great Market (ii) Financial Services Business data Proprietary data Pro Translation Translators Marketplace @rodrigoMrz
  9. 9. Great Product Building block Technically complex Unfair advantage Maintenance reqd Unique assets
  10. 10. Great Product (ii) It Took 14-Months To Build Stripe's Infrastructure @rodrigoMrz
  11. 11. Great Team Deep knowledge Technical skills Communication skills Dev evangelism Fundraising @rodrigoMrz
  12. 12. Great Team (ii) Deep knowledge Technical skills Communication skills Dev evangelism Fundraising @rodrigoMrz
  13. 13. Great business Increasing complexity in APIs business models Right pricing • Freemium • Pay-per-use / Subscription • Price tiers Right go-to-market • Enterprise • Self-service • Inside sales @rodrigoMrz
  14. 14. As-seen-in VC: Examples & Trends Fragmentation of Stacks API prototyping Vertical Enterprise APIs Data Aggregation APIs’ Consumption for Dummies Programable web @rodrigoMrz Dev Building Blocks
  15. 15. Thanks www.pointninecap.com + Some say we have a pretty cool newsletter! ;) Follow us on Twitter @rodrigoMrz | @PointNineCap rodrigo@pointninecap.com

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