I will build an app store on top of it: On SaaS APIs


There is one thing that many new startups seem to be ok with, and I see a clear pattern to this: It is alright to share my users, as long as I own them.

For quite some time, monolithic software was built – shielding the user from anything and everyone. The model: Selling a license, and even building a SaaS platform that would grant permanent or temporary access to the software to each user that was attracted. Then came the REST API. Today, I would claim that 7 out of 10 companies I meet per week feature an API as the core element of their offering. Many of them not only grant access to data, but actually provide direct access to the customer.

It is fascinating to see that many models today even rely on outsourcing a big chunk of their value proposition to outsiders. And by outsiders I don’t necessarily only mean the crowd / community – but companies living of it. One used to call this “releasing unfinished software” – today it is called “opening feature seats to others” or “focussing on the core USPs”.

This leads to a mesh of software: dropbox / mailchimp / shipping providers / payment gateways / user-reactivation / SEO optimization / cross selling … the list seems endless. And all this is available everywhere.

But where does this lead to? How do offerings differentiate?  If I can include the same service provider via an API (or App Store as it is called mostly) into any shopping software, into any blog software, into any SaaS platform in general – how do I differentiate? Well ultimately in the core offering – and in acquiring users the best possible way.

As a VC, I see great successful companies banking on this method. The more successful companies have already opened themselves to outsiders (even Microsoft seems to be doing it lately), actively improving the product offering through docking on through an API. However, “yeah, I will build an app store on top of it and then my business model makes sense” seems only intellectually intriguing. It does not make sense for everyone. And I believe the ones that understand that will be the winners of the next generation of SaaS companies.

I love how companies are now sharing users, enabling better products through APIs. We will see where this leads to, but I believe that understanding how to own and keep the user will become even more important in the future, where SaaS platforms can easily share a good part of the product USP by docking on the same external service providers.
  • Christian Thaler-Wolski

    Three years ago there were a handful of APIs available, last count someone did was more than 11,000 and the release pace is inreasing. The possible number of permutations is mind-boggling and businesses will be build soleley on meshing APIs.

    • simonschmincke

      Wow – thanks for quantifying this!