1Mby1M Deal Radar 2010: Mashery, San Francisco, California

Today’s Deal Radar turns to a new topic for the series, application programming interface (API) management. It’s a concept that some have termed “Business Development 2.0“. A growing player in this space, Mashery creates API management tools. APIs make it easier for software programs to interact. Mashery uses its products to help companies make a limited set of databases and software programs related to one or more of their products available to software developers. These new developers might be company employees, corporate partners, or outside coders who mix their new ideas with the native data they have from the company publishing the API to form a “mashup.”

The San Francisco–based company was founded in 2006 by CEO Oren Michels, board member Scott Rafer, VP of human resources Kristen Spoljaric, and chief architect Clay Loveless. Previously, Michels founded WiFinder and held executive positions at The Groundlings and Feedster.

Initially, the founders figured that Mashery would be a valuable service for small companies looking to expand their Web presence cost effectively. However, they quickly realized that larger companies, even ones with well-known brands, needed help as well. Offering APIs is complex, expensive, and time-consuming for any company, and API management generally falls outside customers’ core competencies.

Mashery believes that the market is wide open. Back in 1995, companies were told they should think about building a Web site. By the end of the decade, it was pretty much a given that a company needed a presence on the Internet. Today, companies are being told that they need a reliable and robust API infrastructure in place so they can provide services, information, or applications free or for a fee.

How do they do this, exactly? Mashery says that API usage can be “both obvious and obscure.” In a nutshell, APIs enable for the exposure of underlying pieces of data (product catalog, weather, train schedule, inventory, newspaper article, corporate profile, etc.) or pieces of functionality (reserve a DVD, add to cart, register for a service, search for an article, etc.) beyond a single application. For example, a retailer would develop an API to expand reach of its catalog beyond an official website. It would behoove the retailer to have its product catalog contained in aggregate applications, local product search applications, niche “find-a-product” apps (quite common in electronics), on topical websites or apps.

Soon, says Mashery, API sharing will be as ubiquitous as having a Web site. Everyone is going to have to do it to stay competitive in the increasingly collaborative, open marketplace. In this context, Mashery believes its market includes companies and organization in a range of industries. Right now, it’s focusing on e-commerce, geo-local (weather, real estate, local guides, etc.), media, business services, and government services because these segments have seen more rapid adoption of API management.

The company has eighty customers with 10,000 active API applications. It’s supported by 50,000 developers in its developer community. In the major target segments, clients include Best Buy, Netflix, Hallmark, and Shopping.com (e-commerce); Trulia, Hot Potato, CityGrid, and Quova (geo-local); and the New York Times, USA Today, Reuters, and the Guardian (media). As an example of an e-commerce site using a Mashery API, the Best Buy Remix API allows review sites and anyone else to incorporate product information and links to make purchases at BestBuy.com. At Best Buy, several technology developers are using Mashery as a gateway to access the API to the retailer’s online product database to develop new ways of getting Best Buy’s products before online consumers. One project has been working on a way for consumers to share audio files of product reviews through online communities. As another example, The New York Times API enables a range of applications—everything from an article search application to real estate listings to campaign finance data sorted by geography through Google Maps. One application, Reading Radar, uses the Times Best Sellers API and Amazon.com’s data to create browsable New York Times best-seller lists complete with images and links to further details.

Mashery’s API management system is offered on a yearly subscription basis, with optional professional services for an extra fee. The subscriptions, which start at around $4,000, are priced for enterprise clients, but Michels said in 2009 that the company was working on a solution for startups. The basic features of the system are API registration, access and self-service provisioning; key issuance and credential management; usage throttling and limiting tied to key, user, method, or group; intelligent caching of frequently used calls; and business rules configuration based on filters, parameters, and methods. The other main features are a metrics and reporting dashboard and community management tools. It can be scaled for communities of just a few developers to tens of thousands, depending on the client’s goals.

One of the company’s biggest challenges was the lack of an obvious conference, trade show, or event to showcase its solution and API management in general. The founders’ approach was to make it up as they went along, and they eventually created BAPI (The Business of APIs Conference). Mashery’s first two customers were scrambling to roll out their APIs because a competitor had beaten them to the punch. Shopping.com was Mashery’s first enterprise customer, and that put the company on the radar as a service provider that could help larger companies. That led to Best Buy and the New York Times, the flagship customers. They were important, says Michels, because they’re both known as cutting-edge companies that get it. The fact that these companies were rolling out APIs was a big boost in thought leadership within the industry.

Competitors include 3scale and Sonoa Systems. CloudSwitch provides a good overview of all three companies and of API management in the cloud. I covered Sonoa Systems in a previous Deal Radar; see the recommended readings. Sonoa is also a former client of mine. Apigee and WebServious are two self-service, freemium API management players.

Mashery has raised $13.7 million thus far: $3.6 million Series A with First Round Capital, led by Josh Kopelman and about twenty angel investors in 2006; a $4.6 million in Series B from First Round Capital, Formative Ventures, and The Accelerator Group in October 2008; and a $5.5 million Series C led by Cisco, 406 Ventures, and existing investors in February 2010. There are no plans for additional funding at this point. By the end of the year, revenues will be in the $5 million to $10 million range. Mashery is not yet profitable but is getting close.

Right now, the focus is on building a profitable, healthy, company. Going public is not as attractive an option as it once was. Mashery recognizes this and will be looking for larger companies who can help it to grow. But the company emphasizes that it’s just getting started and has a lot of plans.

Recommended Reading
Technology Review: Mashery (published by MIT Technology Review)
Deal Radar 2009: Sonoa Systems
Deal Radar 2010: Layer7 Technologies

This segment is a part in the series : 1Mby1M Deal Radar 2010