What do Investors Look for in API Startups?
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Transcript of What do Investors Look for in API Startups?
What do Investors
Look for in API
Startups?
@rodrigoMrz API days Mediterranea
About us
@PointNineCap ● Berlin-based, 2011
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● Seed & Series A
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● Europe & North America
● 65% SaaS investments
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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
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
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
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
Great Market
Big Market Urgent&Recurring need Competitive environment
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Great Market (ii)
Financial Services
Business data
Proprietary data
Pro Translation
Translators
Marketplace
@rodrigoMrz
Great Product
Building block Technically complex
Unfair advantage
Maintenance reqd
Unique assets
Great Product (ii) It Took 14-Months To Build
Stripe's Infrastructure
@rodrigoMrz
Great Team
Deep knowledge
Technical skills Communication skills
Dev evangelism
Fundraising
@rodrigoMrz
Great Team (ii)
Deep knowledge
Technical skills
Communication skills
Dev evangelism
Fundraising
@rodrigoMrz
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
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
Thanks
www.pointninecap.com + Some say we have a pretty cool newsletter! ;)
Follow us on Twitter @rodrigoMrz | @PointNineCap