1/ We spend a lot of time @2048vc ventures talking about API business models .

They come in several flavors.

Aggregators and
Adapters .

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2/ The simplest way to think about Aggregators is that they are pulling together a bunch of Data , typically from many sources , and then make it available for consumption either in raw form or some sort of cleaned up , transformed format.

3/ Examples of this sort of business are companies like @RatioCity (search and analytics for cities) or @SkyWatchApps (API for earth observation data) or http://dathic.com  (API for demographic information).

They pull together data and offer an API and compute layer.

4/ On the other hand Adapter API pattern is very different. They take data in and then perform complex tasks .

Adapters hide complexity of underlying system behind a simple API call.

5/ Examples of Adapter API pattern include big companies like @twilio @stripe @plaid and some of the @2048vc companies like Tangram Vision and Walnut.

6/ Both Aggregators and Adapters have strong moats through hiding complexity behind simplicity.

In Aggregator case, the moat comes from compiling, cleaning, and transforming data across many sources.

In case of an Adapter, the moat comes from pushing data to many sources.

7/ Even though data is critical piece in both API use cases, just data alone is not enough to create moat. You need to do something cool with the data. You need to compute. Otherwise you are just a dumb pipe and it is easy to replicate.

8/ At @2048vc we hold a strong belief that APIs are eating the world, and API-based businesses across different businesses are going to rise and become dominate as we are marching towards higher order, less manual and more automated web and life.

9/ If you are building an API based business, we'd love to hear from you.

If you have thoughts and ideas on API based businesses please tweet back!

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