Morning, this is the Status Code. Your no bs friend who talks about APIs.

This week, I will tell you about the latest funding updates for Q2, Postman’s trend report on API-first products, and more.

Pour yourself a cup of coffee. It’s going to be great.

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Let’s go after the funding updates.

What did Q2 look like for API-first companies?

GGV Capital is big on APIs. They have backed Agora, Authing, Pinwheel, and several other companies.

But that’s not the important part.

They publish a quarterly funding report for the private API-first companies. They call it “the API-first index.”

For the API-first index, they are tracking 150 API-first companies. But the index covers the top 50 private companies based on total funding.

Last quarter (2022 Q2), API-first index companies raised $600M. And they closed eight rounds, bringing the total funding to $13.2B.

Although we don’t have concrete data for 2021 Q2, we know that API-first index companies raised $5B in 2021. We can estimate that 2021 Q2 funding was around $1B.

So, Q2 numbers have dropped. But API-first companies are not an anomaly.

Crunchbase shows that the total VC funding for North America has fallen 28% in 2022 Q2 compared to the same period last year.

Picture courtesy of Crunchbase

Please, Santa 😢

Please, please?

What’s sexy with APIs right now?

Our friends at Postman wrote a 2022 API Platform Landscape report with several golden nuggets.

Companies are adapting to new realities in API development. And, API-first startups greasing the wheels are sprouting.

Here are the new trends:

Move towards the API-first: Unsurprisingly, companies are following the Bezos mandate (making business components independent and using APIs to communicate with each other).Coinbase is one of them. But they take it up a notch.

In his letter to software engineers, Brian Armstrong, their CEO, demanded his team communicate via APIs instead of meetings.

He directed his team to:

1. “publish APIs so that other teams can benefit from what they’re building without ever needing to schedule a meeting.”

2. “productize their services and allow other teams to use them in a self-service way.”

If you want to know my honest opinion, frankly, I will do anything to avoid meetings. So I preach it.

Rise in cloud usage and abstraction of infrastructure

The use of cloud architectures (and hybrid cloud providers) is increasing.

And large companies are abstracting their infrastructure through APIs - similar to how AWS was born out of Amazon.

On a side note, this supports L'Oréal’s initiatives of providing external APIs so developers can build applications on top of their internal services.

We covered in the previous edition of our newsletter:

APIs as products

Companies are treating APIs as evolving products.

They realize it is no longer sufficient to just put a gateway before a data source.

Developer experience matters and multiple startups are supporting this trend. Use Readme for documentation. Postman for API Testing and Automation. Data Dog for Application Performance Monitoring.

I could go on, but for your sanity, I will stop.

The explosion of gateways options

Traditionally, the API management category focused more on gateways (a controller layer at the entry point so you can do stuff like authenticating or rate-limiting your API) than tools helping harness the power of APIs.

Now, companies treat APIs as building blocks, not as an afterthought.

And different kinds of APIs have different infrastructure needs.

So, gateway vendors get the new picture and provide more options for the developers. They also give access to programmable gateways through APIs, like the rest of the cloud infrastructure.

Alternative to REST

gPC and GraphQL are growing as an alternative to REST.

And multiple companies are hopping on the train to build infrastructure around these protocols.

Shift-left approach to API security

Companies realize a shift-left approach is necessary for their APIs.

This means moving testing, quality, and performance evaluation early in the software development process. To the left side of DevOps.

Ready to move along with the tailwind of the API Management market?

The growing use of APIs has a cost: growing API dependencies (product/service depending on external APIs for their functionality).

As the number of API dependencies grows, it will require better coordination across groups, backend systems, and consumers. This means an increase in maintenance costs.

Moreover, API portals are getting difficult to use. And what about the reuse of APIs? Consumers are saying no.

These problems add up. No wonder teams are taking more time to deliver new APIs, integrations, and services than before.

So, technology leaders are begging for solutions to improve their team productivity and decrease the time to market.

And like I always say, there is an opportunity where there is a problem. 

No wonder the API management market is growing.

Reports estimate it will grow to $5.1 billion by 2023, up from $1.2 billion in 2018. That’s a compound annual growth rate of 32.9%.

Not bad, eh?

In the book Strategy Beyond the Hockey Stick, Chris Bradley notes: “if your industry is moving up the Industry Power Curve (average growth in economic profit across all companies in the industry), you’re likely to move along with the tailwind.”

The force is strong with this one.

See you next week!