The browser that you are using right now is sending data back to a corporation about your browsing history.
The toolbar that you installed is collecting data to sell to another corporation.
The link shortener is selling your clicks.
The free web analytics provider is tracking your session.
The free font hosting service is tracking your page views.
The web email provider is parsing your email for keywords.
Your social network knows every relationship you have.
We trust Corporations with this data because we “know” the information is being used to serve us advertisements and we are told it’s to make our web experience better.
We do not know what the Government is using the information for.
This unknown drives us to fear.
There are 1,026,000 Computer Programmers in the United States.
They make up 0.7% of the workforce.
Computer Programmers is very vague category. Let’s say 25% of them develop for the web, so there are 250,000 Web Developers.
Of Web Developers, how many have the problem you are trying to solve? Let’s say 10%, so there are 25,000 Target Developers.
Of Target Developers, how many know that you exist? Let’s say 25%, so you have 6,250 Knowledgeable Developers.
Of Knowledgeable Developers, how many will you lose to competition or building it themselves? Let’s say 66%, so there are 2,062 Customers.
On average you charge a Customer $50 a month to target the smaller developers that will most likely use your product in the beginning.
You will make $103,100 a month and $1,237,200 a year.
Maximize percentages and price accordingly.
One of the things we forget at a startup is that we are only as good as our last success. Who cares if you founded the company, you were the first employee or you built the best tech.
We need to always strive for better. Better people, better leads and better product. Nothing that gets us to success like a better today and better tomorrow.
Remember that when you show up tomorrow.
This is an image that I find helpful when thinking about where a customer fits into the early stage graph.
The Y axis is API Volume and the X is Company Size with larger companies to the left. The assumption here is that there is a high correlation between API volume and company size.
This is a vast generalization, but it’s still helpful. We’ve found that there is a power law here as well. In that the largest companies will make exponentially more requests than smaller ones.
There are 4 Zones: Never, Elephants, Self Service and Marketing.
If your API is too core to the business, it’s highly unlikely that a company will ever rely on you. We will never sell product to Google, Facebook or Twitter because their technical expertise is too high and they will always build it themselves.
Never sits right next to Elephants, so sometimes it’s hard to tell them apart. It’s important to look at their business early before spending too many cycles on a Never.
The catch here is that they would be your largest paying customers.
Large organizations that will take 6-12 months from initial contact to when you start seeing revenue. When you do see revenue, it will be 10x-100x of a self serve plan. One elephant could make you profitable overnight.
Sadly, going after elephants is super high risk and will probably crush you if you invest too much too early. These are high touch environments and if you have never done it before you will lose a bunch along the way (we’ve been there).
An Elephant is a large organization with more than 150 employees and they also will use your API at a high volume. That last part is important as we have some very large companies that use very few requests. If we go in there with a $20k contract, it’s never going to happen. We generally view this as a way in the door for a larger organization.
This is by far the best market to sell into when you are first starting. Low touch and can generate a significant amount of revenue to keep you going in the early days.
They are generally pretty technical, so they don’t require a ton of support.
The common trait is they will be small shops with less than 50 employees. Generally a startup with little revenue, but your product fills a gap that they are unable or unwilling to build themselves.
Self service will start out as 100% of your revenue, but as you grow, move closer to 50% or 40%. You will get better at bagging elephants.
You will find that a bunch of users will want to use your product, but will never pay. The idea of Freemium in the API market is getting developers to try the product. When they hit production they “should“ hit your usage limits and start paying.
There will still just be a ton of users that will never hit this limit, so your goal should be to turn these users into Marketing material.
Mixpanel does this with the “Powered by Mixpanel” and CrazyEgg attributes some of it’s early growth to that same concept.
Build tools that rely on your product that hit a larger market.
Embedly has a Wordpress plugin that has been downloaded almost 50,000 times. We also built a chrome plugin for Twitter that got us a ton of press coverage.
The break points will change for every company, but it’s worth taking a good look at where a customer lies before approaching them.
"How are you going to get to a 100 Million in revenue?"
This question is asked far more often during a pitch in Boston than the rest of the United states. While this is not a universal truth and there are a few variations, inevitably the music will end and Jack will come out of the box with this question.
Jon Steinberg of Buzzfeed has a great post about this, it’s much the same as “Where do you see your business in 5 years”.
In reality we work everyday to get to the next milestone. Instead of thinking about what life is going to be like at 10/50/100 million in revenue, we think what’s life going to be like tomorrow.
I can tell you that Front End APIs are going to be a billion dollar business and Embedly is already a leader in the space. Unless you see the vision, Jack is going to be disappointed.
Call it short sighted, call it lack of strategy, but in reality we are only as good as what we do today as it moves the needle for tomorrow.