SUMMARY
An API (Application Programmable Interface) is a bunch of code that takes an input and gives you an output
API companies with decent penetration tend to do pretty
There's a lot of scope to build Infrastructure APIs in India with the continual adoption of smartphones and the internet
As an engineer, companies building Infrastructure APIs are my favourite category of startups. But before I delve into Infrastructure APIs, I will define some terms for those of us who aren’t technical:
- API: An API (Application Programmable Interface) is “a bunch of code that takes an input and gives you an output”. This is the simplest definition that I read on Justin Gage‘s newsletter Technically (Read more if you want a longer answer to What an API is)
- Infrastructure API: These are a specific type of APIs that “developers to integrate products and services directly … [rather than having to] wrangle their finance + legal departments to work with a supply of fragmented vendors” [from Aashay Sanghvi’s piece on API companies here.]
So what are some examples of Infrastructure API companies? Here’s a pretty decent compilation of some of the more popular ones (in the US):
Infrastructure APIs are the future of tech.
– @plaid (banking)
– @stripe (payments)
– @marqeta (card issuing)
– @twilio (communication)
– @okta (identity)
– @dwolla (ach)
– @truepill_rx (pharmacy)— Blake Robbins (@blakeir) April 10, 2019
What About India?
Some of the early Indian API companies were in sectors where America produced some of the biggest API companies (Payments- Stripe, Braintree; and Communication- Twilio). The earliest two Indian companies that I could find were PayU (Payments) & Exotel (Communications), both founded in 2011. ecommerce was still in a nascent state at this point (Flipkart had existed for a couple of years, Amazon hadn’t entered India yet), so online businesses hadn’t completely scaled up by this point.
What’s The Case For Infrastructure APIs?
With the growing number of internet & online-business, there have arisen a certain number of core services each of these companies require (payments, communications, identity amongst others). It’s also not always the easiest to build out these services internally and while it’s an important part of the business it might not be a core component of the company. The added headache of legal & compliance work makes a very strong case for Infrastructure APIs. And since a lot of companies require these services (and with high switching costs), API companies with decent penetration tend to do pretty.
Current Wave Of API Companies In India?
Over the last couple of years, there has been an explosion of tech-enabled companies in the country. We have seen a lot of activity in several sectors (Fintech, ecommerce, and others) as well as major platforms that have emerged (WhatsApp, Jio). And as a second-order effect, companies have emerged building APIs to make it easier for these new companies to launch. A couple of notable ones are:
- Setu: APIs for building financial tech companies
- Delhivery: APIs for scheduling deliveries (Delivery as a Service)
- Razorpay: APIs for collecting payments from users
- Digio: APIs for signing documents digitally & doing KYC digitally
- Kite Trade: APIs for building trading platforms
- Happay: APIs for issuing cards
Why Build In India?
So why does it make sense to build API companies for India in India when the Twilios & Stripes of the world still exist. There must be a reason why the US companies took a while to launch in India when Razorpay and PayU have thrived. Firstly, India isn’t always top-of-mind for these global companies and they likely don’t have the local expertise in terms of connections with the ecosystem and compliance/legal knowledge. Local companies would likely always be able to build and grow faster and can then look to expand in the SE Asia market after capturing the India market.
Future Of Infrastructure API Companies In India
I think there’s a lot of scope to build Infrastructure APIs in India with the continual adoption of smartphones and the internet, new tech-enabled businesses coming up, and the ecosystem around the entire industry. The Account Aggregator (AA) spec is going to lead to companies implementing the spec and providing their APIs for other to build on top of. A couple of other ideas I’m interested in are:
- Building translation APIs for Indian languages as with increased internet penetration applications will need to be available in local languages at scale (when currently they’re usually only available in 2 or 3 and more in some very rare cases)
- APIs that let applications embed audio or video conversations within their platforms. Could be useful in social or gaming applications as video is becoming a more important part of online social experiences. Exotel already has an app-to-app calling, but no one has really built something akin to Daily in India.
- Data pipes for personal health data. Essentially similar to Account Aggregator APIs but for health data instead of financial data. Companies could build out new ecosystems on top of this. Doctors could request data from their patients through their phones and make recommendations based on that.
- Human Capital as a Service: This is an idea I’ve had for a while, but I think it could make a lot of sense to be able to get a real human to complete tasks and for enterprise companies to trigger those actions through APIs. I think the closest western equivalent is Scale which does this for data labeling. A lot of Indian startups are very operationally heavy, so it would be interesting to see if they can leverage human capital as a service to accomplish some of those tasks.
I think this is probably one of the best times to build an Infrastructure API company in India. We’ve gotten to a stage where there is a booming startup industry in the country with some large-scale companies. Local companies have the upper hand when it comes to legal/compliance expertise and knowing how companies in the country work. And in the future, they can relatively easily expand in the South East Asia market after gaining a presence in India.
[The article was first published on Substack and has been reposted with permission.]
