Thanks to APIs, a new generation of startups that are built almost entirely on third-party APIs is emerging.
Dubbed "No Stack Startups" by venture capitalist Andy Weissman of Union Square Ventures, these nascent companies "focus on the last mile of value they provide, the one thing they can excel at better than anyone else." The plumbing required to do that is left to other services.
Weissman points to several companies as examples of No Stack Startups. Stefan’s Head uses Twilio and Stripe to deliver product offers through SMS and accept credit card payments. Text Rex distributes restaurant recommendations via SMS. And Weiguofang is a Chinese fruit vendor that conducts business through the popular WeChat service.
In his blog post Weissman explains:
Some characteristics all these share is that they use other platforms and APIs (or protocols, in the case of SMS) to cobble together a service and in doing so rely almost wholly on those platforms and APIs for every function of the business other than the one they can be the best at. And, maybe more importantly, they all are using those other platforms to define their users' experiences.
On the latter point, Weissman notes that many No Stack Startups are using third-party front ends, like Facebook, and don't even have their own websites or mobile apps. This might not allow for the creation of superb experiences, in part because services like Facebook weren't designed for all purposes, but they are probably "good enough" because the experiences offered by companies like Facebook have been market tested.
A Real Thing, or a Pipe Dream?
APIs aren't new, and platforms like Facebook have been around for years. So why are No Stack Startups only coming into their own now? Weissman continues by suggesting that it's the growth in the number of API-centric companies that are "really, really good." Thanks to companies like Stripe and Twilio, which offer robust, well-documented APIs that are either free or affordable to get started with, developers have access to more core functionality than ever at their disposal. Infrastructure and back-end services that previously would have required a large investment of time and money to replicate are now available with integrations that can take as little as a few hours or days.
Because of this, Weissman says that "it feels like it is an amazing time to be a creative entrepreneur utilizing emerging no stack techniques."
But the no-stack approach isn't without risk. "It is wholly unclear how to measure the sustainability of the no stack approach via the full stack approach," Weissman admits, referring to an alternative approach under which startups seek to build, own and control as much of their products as they can. Intellectual property has historically been a big part of the value technology companies create, so No Stack Startups that are essentially mashups of other services may find it difficult to create the kind of value startups with greater technology assets can.
There's also the issue of network effects. As more and more developers build on top of third-party services, those services become more and more sticky, and thus powerful. This is particularly true for services like Facebook and Instagram, which serve as the interface layer for many No Stack Startups. Network effects are good for the Facebooks and Instagrams of the world, but they might not be good for developers who find themselves completely vulnerable to their whims. As Twitter, LinkedIn and others have demonstrated, there are no guarantees when it comes to public APIs, and companies built on the most vulnerable APIs could literally be put out of business overnight.
None of this means that there isn't a place for No Stack Startups in the greater startup ecosystem. There likely is, although the size of the market is quite uncertain. But even if the concept of a pure No Stack Startup proves to be unrealistic in most cases, it's worthwhile for startups to reflect on the concept as they consider how much they need and should build internally. Given the proliferation of high-quality APIs that can get them to where they need to go faster and cheaper, it's likely that many startups will simplify their stacks and choose to do more with less using third-party APIs.