How Startups Use APIs to Beat Established Players

Guest Author
Dec. 14 2012, 08:00AM EST

This guest post comes from Will Lovegrove, CEO of Datownia, a startup that helps businesses share data with developers.

"Two start-ups working together are like two drunks leaning on each other for support".

I first heard this phrase from a former CEO of a successful start-up company who had previously built his business up from scratch ten years ago and sold it for tens of millions of dollars. At the time I agreed with him. But now I'm not so sure. I think the emergence of API technology as a strategic component of a start-up’s business strategy means that 2 start-ups working together can achieve more than just giving each other mutual support.

API technology is making the combination of start-up technologies possible. Start-ups innovatively disrupt established businesses with new services or models. One of their key challenges in the early stages of their company’s life is to gain adoption with customers or business partners. APIs provide a very good way of exposing their product to potential customers and partners in a way that is relatively quick and easy for other companies to adopt.

My friend's simile may be true in cases where the start-up is principally focused on serving established companies and industries with technology solutions that help them become more efficient, or increase their profitability, or bring about substantial savings. In this this scenario there is little benefit for the start-up in working with another start-up. They should be entirely focused on selling to established businesses. Of course, APIs have a role to play in this scenario too as they make it easier and more effective for the large business to integrate their systems into the start-ups technology solution.

But in situations where the start-up is bringing a disruptive technology to market things are slightly different. Working with another start-up who is also bringing a disruptive technology to market could mean the disruptive power of the start-ups is extended. This combined disruptive power may also not be entirely obvious until they have been combined and are unleashed.

Let me illustrate this point with colorful example. Do you know the film "The man with the Golden Gun" staring Roger Moore as James Bond and Christopher Lee as Scaramanga - the eponymous villain from the title? There is a scene in the film in which Scaramanga builds a gun, his Golden Gun, from a series of common artifacts which he has in his pockets: cigarette lighter, pen, money clip, business card box, cigar box and so on. He then shoots the victim (much to the victims surprise). I cannot think of a better analogy: a powerful and disruptive technology is created right under the victims nose by assembling a series of other non-obvious technologies together, with lethal effect. By the time the victim has seen the threat it’s too late to take action.

Bringing this back to the world of technology start-ups, my point is that new disruptive technology does not have to be invented from scratch. It may not be possible for one small company to create a highly disruptive technology in isolation. Instead, it could be created by combining tools and products that are already in the workplace, in a non-obvious way, to bring about something revolutionary or disruptive.

For a great example of this in practice look to Box. Box is a document storage and collaboration platform that is disrupting Microsoft’s Sharepoint market. Box has created a platform API by which other start-ups can leverage Box’s platform capabilities immediately. In return Box is able to extend its value proposition through its partner apps faster and into more channels and business sectors than it possibly could hope to with its own resources. The result is that Microsoft’s product is being outgunned – by a bunch of start-ups.

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