Welcome to the TechCrunch Exchange, a weekly newsletter on startups and markets. It is inspired by the daily TechCrunch+ column from which it takes its name. Want it in your inbox every Saturday? Register here.
API-first companies aren’t new, but I’ve been paying more attention to them since TechCrunch Disrupt 2021, where I moderated a panel discussion with Plaid CTO Jean-Denis Greze. Plaid is a fintech company, yes, but it’s not just in fintech that API solutions are on the rise – and helping solve a wide range of problems. — Anne
API-first company tracking
I was going to try defining API-first startups, when I noticed that alexander already had. And since that’s no small feat, I’ll keep the same scope: what I’m talking about today is “any startup that delivers its core value proposition through an API – Twilio, for example – or which is designed to use APIs to facilitate a particular data transfer — AgentSync, etc.
The above definition comes from an article on the API Early Ventures Index launched by GGV Capital, a multi-level venture capital firm whose areas of focus include “finding the most promising software companies that sell APIs”.
GGV’s thesis on API-led startups has already led the company to back Authing, Pinwheel, Mindee, Stream, and Agora, the latter of which went public in 2020. And outside of GGV’s API-focused portfolio, Auth0 , was acquired by Okta for the modest sum of $6.5. billion, giving the company yet another reason to follow other private companies using a similar approach.
GGV’s index leaves out exit companies and ranks the 50 private API-led companies that have raised the most funds. Lacking an IPO, Stripe tops the list, while AI/ML startup Deepgram is the latest to make the cut, having raised some $56 million in funding to date. In total, according to GGV, the top API companies in its index have raised $12 billion in funding, including $5 billion in 2021 alone.
Around 40% of GGV’s API-First index is made up of fintech companies. That’s a lot, but it also shows there’s room for developer-focused companies in other spaces. The promise of API companies, writes GGV, is to “fundamentally simplify software development” — and there’s no reason this should be limited to banking or payment solutions.
You could also argue that fintech was very emblematic of the first wave of API companies, paving the way for a more diverse range of API-led startups. For example, former Plaid employees launched Stytch, an early API passwordless authentication platform that raised a $90 million Series B round last November.
“I understand why a16z says every company is a fintech company, but I think there are other areas that need our attention,” Jorge Madrigal says TechCrunch. He and his co-founder Alex Hernandez are building Vivanta, a first API company focused on health data.