According to a recent Forrester report, application programming interface (API) management is a fast growing, albeit, relatively recent IT concern. The issue has gained significant importance due to the growing adoption of mobile applications as the means for consumers to shop and access a company’s goods and services. The market is led by CA Technologies, which entered the sector in 2013 with the acquisition of Layer 7 Technologies. But Apigee is also making its mark felt.
Palo Alto-based Apigee was initially founded under the name SONOA Systems by serial entrepreneur Raj Singh. Prior to setting up Apigee, Raj had established and sold several technology startups. He set up StratumOne Communications, a chip maker for wide area networks, which he sold to Cisco. He then followed it up with InterHDL, an EDA tools maker for chip design, which he sold to Avant. Next, he established a Java processor company called Advancel Logic, which he sold to Noise Cancellation Technologies. His biggest success came when he set up Wide Area Network focused company Fiberlane Communications, which was later split to Siara Systems and Cerent Corp. Siara was bought by Redback Networks for $4.3 billion and Cerent by Cisco for $6.9 billion.
SONOA systems was initially set up in 2005 as a semiconductor firm. But the company went through several pivots before they saw the business opportunity in managing APIs. Once they realized that behind every smartphone, mobile app, and connected experience there was at least one API that needed to be managed, secured, analyzed, and scaled, they zeroed in on the API management space. Today, they have created an ‘API economy’ for the cloud, building off open source.
Apigee’s product suite is comprised of three core offerings. The Apigee Edge is their API management product that enables businesses to use APIs to securely share data and services across multiple devices and channels. Apigee Insights is a predictive analytics tool that helps businesses improve customer service on a real-time basis. The product discovers meaningful customer behavior across multiple channels and integrates it with the customer’s profile to predict the next best action. Finally, the Apigee Link is geared toward helping device makers create API connectors for the rising adoption of Internet of Things.
Apigee has seen rapid customer growth in the past years. Their customers include 20 of the Fortune 100 companies. They have brands like BBC, Adobe, AT&T, eBay, Chegg among their customers. Their platform has been sold to customers in over 30 countries around the world. Revenues have increased significantly as well, from $27.6 million in 2012 to $52.7 million in 2014. But during the same period, losses have increased as well from $8.3 million in 2012 to $60.8 million in 2014.
Till recently, Apigee was venture funded with $173 million in funding from investors including Vilicus Ventures, Wellington Management, Pine River Capital Management, BlackRock, Focus Ventures, Sapphire Ventures, In-Q-Tel, Third Point Ventures, Bay Partners, Accenture, Norwest Venture Partners, and Juniper Networks.
Earlier this quarter, Apigee went public on the Nasdaq by selling 5.1 million shares at $17 each to raise $87 million. Their stock had risen to $20.50 soon after listing, but has fallen below list price levels. It is currently trading at $14.06 with a market capitalization of $409 million. Apigee has an interesting product and customer portfolio and at its current price, it would make an attractive acquisition target within the industry, potentially for a player like CA or BMC.