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Vertical APIs as Core Product
- 1. The Vertical APIOpportunity Zak Schwarzman
- 2. 2 Definition: § Application ProgramInterfaces (APIs) expose some of an application’s internal functions to the outside world Which means? § Application A can now access Application B’s functionality by simply inserting a few lines of code Example, please. § Twillio has built integrations with hundreds of telecom carriers. Using Twillio’s API, any developer can enable her app to make phone calls via these carriers using a few lines of code What Is An API?
- 3. 3 "APIs are the'nervous system' of our new digital world. Being able to share services and data through interoperable APIs is crucial to establishing modern, digital ecosystems in any industry. This is especially true in industries where competition or regulation has created fragmentation, such as in telecommunications, healthcare and travel.” - Chet Kapoor, Apigee CEO What The Big Deal?
- 4. 4 API Proliferation IsExponential § The number of open (publicly available) APIs grew from ~0 to 13K in the past 8 yrs § Will more than double to > 30K in the next 2 years 0 5000 10000 15000 20000 25000 30000 2006 2008 2010 2012 2014 2016 NumberofAPIs Year Open API Growth
- 5. 5 The API ExplosionIs Transforming Software Development § With APIs, software development resembles assembling puzzle pieces rather than writing a novel from a scratch – APIs enable one company to solve a difficult software development challenge (e.g. cloud storage, in-app email, payments processing) and let other companies access that solution, rather than re-solve the same challenge during their own development process § The result is a new software development paradigm characterized by: – Rapid development – Dramatically lower build costs – Niche products/solutions
- 6. 6 Opportunity: API AsCore Product Within the broader API economy, an investment opportunity exists for startups offering APIs as their core product API Management Platforms APIs Create Ecosystem Around Product APIs as Product
- 7. 7 APIs as Product:Horizontal v. Vertical Vertical Horizontal APIs as product companies come in two flavors: • Horizontal: Solve a general software development challenge shared across a range of industries (e.g. Stripe/Braintree: payment integration) • Vertical: Solve an acute pain point shared by developers within a particular industry The investment opportunity is particularly under-exploited for startups that offer vertical-specific APIs as their core product
- 8. 8 Horizontal APIs –Template For Success § Validates the API As Product model – Hundreds of millions in VC funding – Hundreds of millions in exits § But the horizontal opportunity has been well mined Funding to date $77.9M from IPO pending, $100M+ ARR, $100M+ VC funding Acquired by for $800M Acquired by for $70M
- 9. 9 Vertical APIs –Emerging Investment Frontier § Proven venture scale opportunity – Yodlee (APIs for fintech development) $75M IPO 10/14 § But minimal VC funding to date – Most startups have raised < $3M, many $0 – Many new entrants in past 24 months
- 10. 10 § Opportunities concentratedin 3 verticals – Healthcare, Financial Services, and Education – Large + fragmented + data security issues + startup activity § Startups solving 3 vertical-specific challenges: – Share: read from/write to industry data systems – Store: regulation-compliant cloud storage – Compute: industry-specific backend-as-a-service Vertical API Market Breakdown
- 11. 11 Vertical API MarketMap Healthcare Finance Education Share EligibleAPI Validic KarmaData Singly (acq) Standard Treasury Plaid Clever Learnsprout InBloom (closed) Store Truevault Catalyze InBloom (closed) Compute Aptible Catalyze Hippostack Doctrly Yodlee (IPO) Standard Treasury Plaid Teech.io (UK) Zzish (UK)
- 12. 12 Vertical APIs inFinance Financial Services Industry FinTech StartupsVertical APIs • $3B FinTech VC in 2013, up 3x in 5 years • Startups req access to core fin services functions/rails to build on • Demand for fin process automation • Wealth of financial data = new potential FinApps • $485B global fin services tech spend • Incumbents under pressure to innovate (e.g. mobile, BTC, P2P), disaggregation of traditional fin services • Complex, intertwined user base • High data sensitivity • Aggregate, standardize, enhance data • Expose core banking functions as service • Secure data storage/ sharing
- 13. 13 Yodlee § What: APIsprovide data aggregation, account verification, money movement, and analytics § Founded: 1999 § IPO: $75M IPO 10/14 § Funding: $125M total § 2013 #s: Subscription fees from 15M consumers; 27M API calls/day; $70M rev; $1.2M loss in 2013 Overview: A modular suite of APIs that provides data and functionality for financial institutions/fintech cos to build FinApps ranging from SMB banking to consumer wealth management. Health Fin Edu Compute Store Share Use Case: Xero, (cloud-based SMB accounting solution) used the Yodlee API to integrate with live data feeds from 10K+ banks/acct sources to provide Xero customers a single ledger view of their finances.
- 14. 14 Standard Treasury § What:A set of APIs that ease the integration of banking services for small businesses and startups § Founded: 2013 § HQ: San Francisco § Funding: $2.7M Seed, 5/14 Overview: Helps banks become digital services providers by offering their core financial functionality (e.g. transfers) via API. Makes it easier for businesses to deal with banks and startups to incorporate bank functionality. Health Fin Edu Compute Store Share Use Case: Using the Standard Treasury API, Wells Fargo customers and third-party developers can programmatically interface with the bank to process electronic checks, book transfers, open/close accounts, and exchange foreign currency.
- 15. 15 Plaid § What: APIsto access banking/ credit card data for accounting, auto tax, and expense management apps § Founded: 2012 § HQ: San Francisco § Funding: $2.8M Seed 9/13 Health Fin Edu Compute Store Share Overview: The modern API for banking data. Plaid allows developers to programmatically interact with banks and credit cards. Integrate in minutes and get high-quality transactional and account data from financial institutions. Use Case: Betterment uses Plaid’s bank integrations to verify new users’ account and routing numbers during onboarding. Enables instant account access vs. 2-3 days wait with traditional dual deposit verification.
- 16. 16 Vertical APIs inHealthcare Healthcare Industry HIT StartupsVertical APIs • $2.5B HIT VC in 2013 • Startups building for diverse users/use cases • Patient/provider/payer data access a universal challenge • Consumer info useful for enterprise applications • Shared dev requirements (e.g. HIPAA compliance, data standardization, interop) • Fragmented and diverse customer base • $55B HIT • Array of central data stores (EMR, 1000s of insurance cos) • New, complementary data from wearables, med devices, etc. • HIPAA net expanding, penalties up • Aggregate, standardize, enhance data • Read/write to central data stores/peers/ wearables • HIPAA compliance • Commonly requested dev features as a service
- 17. 17 Eligible API Overview: Instantlycreate & retrieve healthcare financial transactions to over 2,000 insurance companies including: eligibility, policy, coverage, authorizations, claims, payments and more. Health Fin Edu Compute Store Share § What: Aggregates, standardizes, and integrates w insurance company data systems § Founded: 2011 § HQ: San Francisco § Funding: $2M Seed 1/15 Use Case: Kareo, whose practice management cloud software is used by 25,000 healthcare providers, uses Eligible API to interface with insurance companies and process thousands of of patient eligibility transactions per day.
- 18. 18 Validic API § What:Aggregates/standardizes data from health apps and devices § Founded: 2010 § HQ: Durham, NC § Funding: $5M Series A, 8/14 Health Fin Edu Compute Store Share Overview: Validic is a cloud-based technology platform that solves the accessibility and integration challenges for healthcare organizations by providing a one-to-many connection to digital health technologies Use Case: Using the Validic API, a wellness company can access its population’s fitness activity and clinical data across dozens of wearable devices and mobile health apps to offer incentives for exercise and compliance.
- 19. 19 Human API § What:Aggregate, standardize, and organize health data from various tracking devices and health apps, single sign on § Founded: 2013 § HQ: Palo Alto § Funding: $6M Series A 1/15 Health Fin Edu Compute Store Share Overview: Human API is the easiest way to integrate health data from anywhere, enabling users to securely share their health data, regardless of how that data was recorded, processed, or stored. Use Case: A provider of individualized weight loss programs (coaching, meals, evaluations) uses Human API to integrate with and track data from client’s wearable devices.
- 20. 20 Catalyze § What: HIPAAcompliant platform as a service and backend as a service, available via APIs § Founded: 2013 § HQ: Madison, WI § Funding: $2M Seed 11/13 Health Fin Edu Compute Store Share Overview: Catalyze offers two products: a PaaS that provides a HIPAA-compliant alternative to AWS; and a mobile backend as a service comprised of a set of APIs to build HIPAA compliant mobile apps. Use Case: The VA and Blue Shield of California use Catalyze PaaS for cloud hosting, without having to worry about HIPAA configuration, maintenance or auditing. Health app developers use Catalyze’s mobile backend to add compliant user management, data storage, and secure messaging.
- 21. 21 TrueVault § What: HandlesHIPAA compliance, allowing for HIPAA complaint data storage in days instead of months. § Founded: 2013 § HQ: Mountain View § Funding: $3M Seed 3/14 Health Fin Edu Compute Store Share Overview: HIPAA compliant database as a service, which provides a secure API for healthcare apps to store patient health data. Use Case: Weave and Rocky Mountain Health Plans use TrueVault APIs to store and search protected health information in any file format, saving the time/money of building a compliant app stack in a traditional cloud storage environment.
- 22. 22 Aptible § What: PaaSmanages servers, network topology, security, backups, permissions. Compliance engines generate docs, audit trails, reports to show HIPAA compliance. § Founded: 2013 § HQ: SF (via NYC) § Funding: $120K Seed 8/14 Health Fin Edu Compute Store Share Overview: Heroku for HIPAA compliance. Full backend as a service to securely host and deliver web and mobile apps. Language/framework agnostic, Git-based workflow, Docker containers move/run services, HIPAA compliance engines. Use Case: Enterprises, web and mobile development teams can use Aptible to rapidly develop and deploy apps with the cost efficiencies of the public cloud, while maintaining security, privacy and HIPAA compliance.
- 23. 23 Karmadata § What: Aggregates,standardizes, and links healthcare data from public and private sources § Founded: 2011 § HQ: Hingham, MA § Funding: NA Health Fin Edu Compute Store Share Karmadata is a collection of the world’s healthcare data, all standardized, linked, and accessible in one place. The data is standardized into common healthcare entities enabling users to visualize and simply query the world’s healthcare data Use Case: App developers can incorporate health data visualization, search, analysis and feed functionality into their products.
- 24. 24 Vertical APIs inEducation K-12/ Higher Ed EdTech Startups Vertical APIs • $1.25B EdTech VC in 2013, up 35% YoY • Not just rip and replace central systems, lots of niche solutions • Access to SIS/peer data increases functionality, speeds dev/distribution • Shared dev requirements (e.g. compliance, analytics, communication) • $13B EdTech spend in 2013, up 10% YoY • Pressure/mandate to innovate/adopt tech • Student data locked in legacy Student Info Systems (SIS) • New, complementary data from 3rd party EdTech cos • CIPA/COPPA/FERPA data reqs • Aggregate, standardize, enhance data • Read/write to SIS/ peers • Reg compliance • Commonly requested dev features as a service
- 25. 25 Clever § What: SISdata ingestion, data normalization/validation, and a secure API available only to district- authorized vendors. Expanded to single sign on. § Traction: Deployed in 30K+ schools § Founded: 2012 § HQ: San Francisco § Funding: $30M Series B 12/14 Health Fin Edu Compute Store Share Overview: Automates the secure transfer of student information between schools and software vendors. Replaces manual, vendor-specific processes with an API that gives vendors secure access to student data in legacy school information systems. Use Case: Clever powers single sign on for the Miami-Dade school district’s student application portal. Clever normalizes vendors’ sign on procedures, auto-populates/ updates class rosters and cuts new vendor integration from 1 month to 1 day.
- 26. 26 Teech.io § What: Cloud-backendas a service for EdApps. Ed-specific functionality like student registration, assignment creation, grading and Ed-specific analytics, including activity, duration § Founded: 2013 § HQ: Italy/UK § Funding: $40K Health Fin Edu Compute Store Share Overview: Develop education apps in hours. A backend and development platform, delivered via API, for creating beautiful education apps faster and hassle free. Use Case: Developer creates an astronomy photo quiz app using open source images from NASA. Developer uses the Teech.io platform to power backend, automate game mechanics, incorporate learning analytics, and track users.
- 27. 27 Zzish § What: Abackend for EdApps with features like personalization algorithms, gamification, teacher dashboards, content pushing § Founded: 2013 § HQ: UK § Funding: $120K Health Fin Edu Compute Store Share Overview: A modular backend as a service platform for building amazing mobile learning apps. Use Case: An edtech developer can use Zzish APIs to incorporate features like content pushing, adaptive testing, teacher and student facing analytics, and multi- level provisioning to speed dev time, lower costs, and streamline deployment.
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Editor's Notes
- #9 What do GoInstant and DataSift do?
- #14 B: Wealth advisory firm building a client dashboard must manually integrate w brokerages, build analytics tools to help clients visualize and act on portfolios A: Firm uses a single Yodlee API to integrate w all brokerages, and another API to incorporate data visualization, analytics, and recommendation functionality.
- #15 B: A developer wants to build an app that allows users to automate monthly payments, would have to integrate with each individual bank A: Standard makes it simple for developers to integrate banking functions from various banks, allowing users to easily automate repetitive tasks
- #16 B: Rambler allows users to track their spending based on geographic location and view transactions on a map, has to integrate individually with various banks, credit cards, and debit cards A: Use the Plaid API to integrate standardized banking, credit card, and debit card data seamlessly, allowing the developer to focus on building the features of the app
- #18 B: Over 20,000 health care providers use Kareo to help them process eligibility transactions. Previously Kareo would have had to integrate individually with over 2,000 health insurance providers A: Kareo uses Eligible to access standardized up-to-date data to help process thousands of eligibility transactions per day
- #19 B: A leading corporate wellness company that wants to give customers incentives for healthy living, develops an app to engage users in this program, needs to individually integrate/standardize data data from variety of wearables/health apps A: Build for Validic, automatically receive standardized data from all applicable health data trackers, can now focus on building out user experience features
- #20 B: The Welle is a game where the characters reflect the player’s actual fitness and healthy activities. The developer would have to integrate with each health tracker individually and then standardize the data across the different devices A: Build for Human, automatically receive standardized, organized data from all applicable health data trackers, allowing the developer to then focus on building the front end features of the game, the core components of the app
- #21 B: A developer wants to build a healthcare app that accesses medical records and health insurance information, has to first build HIPAA compliant infrastructure including storage, user management, access controls, and healthcare data models A: With Catalyze the developer to get all the infrastructure needs up and running on day one, giving him significant time and money savings, allowing him to devote his resources to building the frontend features of the app
- #22 B: A developer wants to build a wellness monitoring app that stores data from medical records and health trackers, has to develop HIPAA compliant storage within the app A: Integrate the TrueVault API into the app and in days have HIPAA compliant data storage
- #23 B: A developer building a healthcare app that involves storing patient data has to develop features that manage HIPAA compliance around risk assessment, polices and procedures, training, ops, and incident response A: The developer pays $40K/yr for the Aptible platform which handles all of the HIPAA compliance, saving time + 1 engineer + 1 compliance officer
- #26 B: Grade book software requires school admins to import new class rosters at the beginning of each semester. Admins must then transfer final grades from gradebook to students’ records in the school’s/district’s central SIS at semester end. A: School/district integrates w Clever API for free. Grade book can be quickly deployed, all roster and grade imports happen continuously and automatically in the background, info in both systems is always up to date. provides K-12 schools free integration w their legacy school information systems (SIS). By building for the Clever’s API, third party EdTech developers can then instantly access student data from any permissioned SIS.
- #27 B: A developer looking to build an education app has to spend months building both a standard backend and Ed-specific backend functionality like student registration, grading, tracking features. A: Developer uses the Teech.io backend saving time and money, enabling the developer to focus on building out the core features and content of the app
- #28 B: A teacher/developer looking to build an EdApp has to build gaming features, adaptive learning algorithms, analytics, classroom-level dashboards, etc. from scratch, can then get to their special content/sauce A: Teacher/dev mixes and matches Zzish backend modules, allowing the developer to focus on building out the core features and content of the mobile learning app