In my last post I discussed how companies could issue technical equity to their customers and third party developers. By allowing customers and developers to build extensions to your platform with APIs and SDKs you make can effectively make them shareholders that have a vested interest in your long term success. The process starts with your technical IPO – the day that you enable the general public to program on your platform. But unlike a true IPO in the capital markets your offering can never be oversubscribed. As many people as your infrastructure can support can begin to build on your platform.
One of the fastest ways to start issuing technical equity is to offer a public API that can access functionality or data residing in your platform. These APIs can be embedded in SaaS applications and cloud services built by third party developers. Users of the APIs have made an investment in your technology platform much like buying shares of a stock. If you scale back on development or go out of business they have to find another way to replicate the functionality in your API. In other words, they would lose the equity value of their investment.
A more sophisticated approach to building technical equity is to offer a Software Development Kit (SDK). Through the SDK outside developers could build new applications that extend the functionality of your platform. Along with the SDK you would need to offer a marketplace that allows these third party developers an easy way to advertise and sell these apps to your existing base of customers.
Outsiders that build upon your SDK have made a deeper investment than those who simply access an API. These stakeholders have taken the time to learn your unique programming environment. They are not only technical shareholders, but they enjoy the possibility of dividends as well. Each instance of their application that is sold on the marketplace generates immediate royalties in the form of revenues.
Of course, customers could use the SDK to build extensions to your technology as well. Customers are unlikely to build applications that could be listed on a marketplace for resale. Instead they are likely to build unique functionality to support their specific business needs. The ability to add these unique extensions creates a competitive advantage for customers. And more importantly it reduces the workload of your of programmers, because it is functionality that you no longer need to build yourself.
Customers who build upon your SDK (or access your APIs) have made an investment in your platform. And they are now shareholders in your platform with a vested interest in your success. The benefits for you as a vendor are considerable. Customers with technical equity are less likely to consider switching to an alternative vendor. The more extensions they build the bigger of a shareholder they become.
Unlike shareholders in the capital markets, holders of technical equity cannot easily unload their ownership position. These developers could switch to another platform and sell their stock, but they would do so at a loss.