GGV says API-first startups are here to stay, especially FinTech ones

API-first companies aren’t a new thing, but I have been paying more attention to them since journalist Disrupt 2021, where I moderated a panel conversation 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 great range of problems. — Anna

Tracking API-first companies

I was going to take a stab at defining API-first startups, when I noticed that Alex already had. And since it’s no easy feat, I’m going to keep the same scope: What I am talking about today is “any startup that either delivers its main value proposition via an API — Twilio, say — or is built to use APIs to facilitate a particular data transference — AgentSync, etc.”

The definition above comes from a post on the index of API-first companies launched by GGV Capital, a multistage VC firm whose areas of interest include “finding the most promising developer-first software companies commercializing APIs.”

GGV’s thesis on API-led startups already led the firm to back Authing, Pinwheel, Mindee, Stream and Agora, the latter of which went public in 2020. And outside of GGV’s portfolio, API-focused Auth0 was acquired by Okta for a whopping $6.5 billion, giving the firm yet another reason to track other private companies using a similar approach.

GGV’s index leaves exited companies aside and ranks the 50 API-led private companies that have raised the most funding. For lack of an IPO, Stripe tops the list, while AI/ML startup Deepgram is the last one to make the cut, having raised some $56 million in funding to date. In total, GGV says, API-first companies in its index have raised $12 billion in funding, including $5 billion in 2021 alone.

Beyond fintech

About 40% of GGV’s API-First Index consists of fintech companies. That’s a lot, but it also shows that there’s room for developer-first companies in other spaces. The promise of API companies, GGV wrote, is to “fundamentally simplify software development” — and there’s no reason why this would 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 instance, former Plaid employees launched Stytch, an API-first passwordless authentication platform that raised a $90 million Series B round last November.

“I get why a16z says that every company is a fintech company, but I think that there are other areas that need our attention,” Jorge Madrigal told journalist. He and his co-founder Alex Hernandez are building Vivanta, an API-first company centered on health data.