San Antonio—If you build it, will they buy your application programming interface?
Increasingly, it seems so.
With tech companies such as Uber and Lyft or Facebook and Instagram aiming to provide faster services to more people, a subset of companies has emerged that aims to provide niche software tools that are meant to take at least a bit of the load off those larger companies’ development teams. Companies are building application programming interfaces (APIs) such as messaging programs, file compressors, and payment processors that can be added to any Web or mobile application a developer is building, allowing the developer to focus on the core product.
“The reality is these developers should never build their own payment systems anymore; they should never build their own file management system anymore,” says Pat Matthews, the CEO of a San Antonio, TX, startup called Filestack that is building a business based on an API that helps upload documents and photos to new websites and mobile apps. Filestack was acquired by San Antonio-based investment firm Scaleworks in December.
The increasing interest in API-centric businesses was emphasized last month by the $150 million initial public offering of Twilio, which develops messaging software that tech companies can bolt on using an API. For example, Uber uses Twilio (NYSE: [[ticker:TWLO]]) to let its customers text and talk to drivers through the Uber app.
Filestack is one of hundreds of companies across the nation that are targeting developers who want to incorporate ready-to-go services in the application they’re writing. These services range from shipping offerings to weather buttons to better-known mechanisms such as payment systems from Stripe and Braintree.
With Filestack, developers can add an “uploader tool” to their websites or mobile apps by including two lines of code that Filestack has written, Matthews says. That tool lets end users upload photos or documents stored in the cloud—from more than 20 other cloud applications such as Facebook and Flickr or other storage platforms like Box and Google Drive—to an app.
Filestack, which renamed itself from Filepicker when Matthews took over as CEO at the start of this year, also allows developers to tailor its API to their needs. That allows for things such as design specifications, for example, so that any uploaded photo is edited in a uniform way, Matthews says.
The software “helps developers basically import and handle rich media assets, most of which are generated from end users providing that content,” he says.
Filestack’s customers start with a free plan initially, and then the cost can range from $49 to $249, depending on usage and add-on features, such as photo cropping or facial recognition, he says. After running through the fixed level of file downloads or content bandwidth, customers can pay for more upgrades. The company has gained customers such as Zenefits, Teachable, and Tilt, among others.
Yet this is not your typical startup, at least in terms of ownership structure. Matthews says that Filestack is in a growth stage—some months it is cash-flow positive, some months it is negative—and that the company has plenty of runway. That’s thanks to an undisclosed amount of cash from Scaleworks, a $30 million private equity fund founded this year by Rackspace co-founder Lew Moorman and entrepreneur Ed Byrne. Scaleworks acquired Filestack in December, and classifies itself as “venture equity” because it brings a venture capital mentality to a private equity acquisition strategy, Matthews says.
Filestack was founded in 2012 by MIT students who eventually won the grand prize at the school’s $100K entrepreneurship competition (the original name was CloudTop). The team entered the Y Combinator program in Palo Alto, CA, and then raised $1.8 million in funding from Andreessen Horowitz, Highland Capital, and SV Angel. The company was previously acquired by private equity firm Xenon Ventures in 2014, Matthews says. Byrne was a general partner at Xenon before starting Scaleworks with Moorman.
Filestack, along with larger companies like Twilio, is helping push forward what Matthews sees as a wave of companies looking to third-party developers of APIs, as they try to focus their own engineers on core business services. After it sold 10 million shares at $15 each in its IPO, Twilio’s stock traded as high as $38.34 per share last week.
“Their IPO is really shedding light on how powerful this new developer services market is becoming,”
Matthews says. Matthews worked for Rackspace (NYSE: [[ticker:RAX]]) for six years after his previous startup, Webmail.us, was acquired in an all-stock deal.
