Mashery and Layer 7 Get Acquired: Who’s Next in the API Ecosystem?

With Intel’s agreement to purchase API management provider Mashery and CA’s agreement to buy competitor Layer 7, the API ecosystem seems to have finally caught the consolidation bug.
This is big news for us here at OpenView Labs, having worked closely with Mashery since OpenView made its first investment in 2011. But the acquisition isn’t just a good sign for us as investors, it’s also a vote of confidence by a couple of old-school companies that the Application Programming Interface (API) is the future of application infrastructure.
In a world where internet access is ubiquitous and more and more applications are being accessed through multiple clients, API’s aren’t just for mashups anymore, they’re core architecture. This has big financial implications on anyone who has hitched their wagon to the standard.
Who is that exactly?
Glad you asked. While there are thousands of companies that offer and consume APIs, really only a handful task themselves with developing and building functionality on top of the standard itself. Some are large companies like IBM with a relatively small API product.
But it’s the pure-play API companies that really stand to gain from Intel’s vote of confidence, and that may see a spike in interest from potential acquirers.

7 Companies in the API Ecosystem Set to Catch a Ride on the Wave of M&A Interest

Apigee

Apigee may not have taken kindly to Mashery CEO Oren Michels’s comments that they are ‘Pepsi’ to Mashery’s ‘Coke,’ but their close competition actually makes Apigee the biggest external beneficiary of the Intel-Mashery deal. They’ve raised capital and grown employee count aggressively in the past year or so, and I have to think they’re looking for a similar result.
Apigee should have plenty of suitors. Many legacy hardware manufacturers like HP and Dell are trying to reinvent themselves as software companies, and are still mostly on the outside looking in at the API movement.

3scale and Apiphany

3scale has been around a bit longer than Apiphany, but I group them together because in contrast to Apigee and Mashery, they’re lighter, self-serve API management solutions relative to the enterprise-level agreements that Apigee and Mashery typically shoot for. While their revenue picture may be a bit behind Apigee and Mashery, the model has great potential as APIs move downstream into the SMB segment.

ProgrammableWeb

As the most comprehensive directory of APIs on the internet and a central authority for API-related news and commentary, PW has not only helped accelerate the API movement but has also been one of the only sources documenting it. For instance, at last count PW’s 8,922-strong directory of APIs is up 56% from the same date last year. It’s not too much of a reach to see PW and its somewhat surprising owner, Alcatel-Lucent, realize some market value from the increased prominence of APIs.

IFTTT, Zapier, and Mashape

All ~10 person startups, this group is the new generation of VC-backed efforts to make APIs more accessible to the masses, blending the flexibility of APIs with consumer-grade usability. By democratizing the marketplace for APIs, they‘ll increase the reach of APIs and the benefit to their creators. They’re very early stage – with the biggest, IFTTT having raised $7m — but appear to be in the right place at the right time to capitalize on the growing use of APIs.
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Are all of these companies headed for an acquisition on the scale of Mashery? Probably not.
But as the movement continues to turn the heads of big players with deep pockets, the funding and acquisition opportunities available to this ecosystem of companies should continue to strengthen.
I know I’ll be watching.