What VCs look for in API startups, with Chris Birrell, Managing Partner at Func Ventures

Chris Birrell, an investor specializing in API startups, shares his insights on what he looks for before investing in API-enabled services. He discusses his background in computer science and his experience in the tech industry, which led him to become an investor. Chris introduces the 'SUPERIOR' Framework that he uses to evaluate API startups, focusing on attributes such as solving difficult problems, uncovering unique solutions, and pathways to profitability and exit. He also highlights the opportunities and challenges in the API space, particularly in the context of AI and globalizing businesses.


Keywords
API startups, investing, API-enabled services, Superior Framework, solving difficult problems, unique solutions, pathways to profitability, AI, globalizing businesses


Takeaways

• Investors in API startups look for companies that solve difficult problems in a scalable and economically viable way.
• The 'Superior Framework' is a matrix that evaluates attributes such as problem-solving, uniqueness, profitability, ecosystem, regional focus, impact, ownership, and regulatory tailwinds.
• APIs play a crucial role in the future of software development, particularly in the context of AI, blockchain, and IoT ecosystems.
• API startups need to consider the challenges of being substituted by competitors and focus on creating a compelling product and having outstanding founders.
• APIs that facilitate globalizing businesses and address specific regional challenges can provide unique opportunities.
• API startups should aim to be essential to the priorities and budgets of CIOs, especially in the context of increasing investments in AI.

Sound Bites

• "The API or the API platform needs to be solving a difficult problem in a very narrow and deep way."
• "Uncovering unique and novel solutions is a leading indicator of something important."
• "You've got to have a compelling enough product that doesn't stop those guys from spending money."

Chapters

00:00 Introduction: Investing in API Startups
07:08 The Role of APIs in the Future of Software Development
12:30 The 'SUPERIOR' Framework for Evaluating API Startups
20:47 Mitigating the Risk of Substitution in API Business Models
22:36 Insights from the apidays Singapore Conference
24:02 The Importance of Being Essential to CIO Priorities and Budgets
25:24 Conclusion and Contact Information