Over the past several months I have been doing some thesis building around the API economy. I want to pause to share some initial thoughts, and to solicit your feedback.

1. The Vertical API Opportunity
Zak Schwarzman

2. 2
Definition:
§ Application Program Interfaces (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 Is Exponential
§ 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 Explosion Is 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 As Core 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 concentrated in 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 Market Map
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 in Finance
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: APIs provide 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: APIs to 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 in Healthcare
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: Instantly create & 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.

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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: HIPAA compliant 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: Handles HIPAA 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.

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Aptible
§ What: PaaS manages 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 in Education
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: SIS data 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-backend as 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: A backend 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.

28. Thank You