These Yale graduates raised $27 million to create the Universal Commerce API
SMB service providers need access to SMB data to serve them effectively, but data is fragmented across many different systems and communication media, leaving a massive multi-billion dollar market that needs a solution. Rutter, a universal commerce application programming interface (API) startup was founded by Peter Zhou and Eric Yu to act as a data bridge between SMBs and service providers. The San Francisco-based startup recently raised a $27 million Series A led by a16z.
Charley Ma, Managing Director of Fintech at Ally and angel investor at Rutter, says, “I invested in Rutter because I was really impressed with the pace of iteration of the product and the team that Eric and Peter have built in no time! I was also very excited about the product surface offered by their data integrations to their entire customer base – there are many opportunities to create deeper integrations and solutions for their customers and thus extend the LTV as well over time !
Frederick Daso: What were some of your biggest lessons as you pivoted and iterated into what Rutter has become today?
Pierre Zhou: Only work on issues with potential clients and team members you are passionate about. Startups rely so much on momentum that if you work on things that don’t energize you, even if they turn out to be successes, you’ll never go through with it because you weren’t passionate enough about it .
Treat every idea as an experience. People often get attached to what they’re working on, and it’s a big hit when things don’t work out. It’s common for startup ideas to fail, and failure doesn’t necessarily make you look bad as an operator. Treat failure objectively as a learning experience and move on to the next one.
The market is the ultimate litmus test. It’s important to have a strong belief in whatever you’re working on, but your product lives and dies on whether people will use it or buy it at the end of the day.
Daso: How did you come up with the concepts of open and closed markets, and how did you use this framework to define new markets in which Rutter can expand in a scalable way?
Zhou: Open and closed markets come from conversations with many customers and many different markets. You can roughly judge an open/closed market by the ratio of companies with an open problem to companies with a solution. The higher the ratio, the more open the market – we’ve developed the intuition for this by trying to sell a ton of different products and seeing, through hundreds of customer conversations, how many positive reviews we’ve received per product.
Daso: It’s clear that SMB service providers need business data from SMBs and so have gone ahead and built their own integrations. Beyond the initial realization of these internal solutions, were they maintainable from a long-term engineering perspective?
Zhou: There are constant maintenance costs that result from the different styles of platforms these SMBs can be on – sometimes the platform is self-hosted like WooCommerce or Magento which means that each SMB built on top can run a different version, each with its own API, firewall, or customizable nuances. Other times the SMB is on a platform that is not self-hosted and all SMBs are running the same latest version, which means you need to make sure your integration is always up to date.
Daso: What is unique about financial services that made them ideal clients for Rutter to approach first as a bridgehead market?
Zhou: They have concise requirements, represent a large initial market, and are so cutting-edge that we were convinced that working with them was the fastest way to iterate and improve our product.
Daso: What were the key features of Rutter’s API design that you needed to ensure were “stable” before getting the product into the hands of a diverse group of startup customers?
Zhou: The baseline is that no matter what, the API should always be up and running – our data infrastructure is so critical to our customers that if our product fails, it causes their product to go down. So we spent a lot of time making sure our system was tolerant to faults (which are inevitable). Beyond that, we needed to make sure that all ways to fetch and write data worked, so we tested these endpoints extensively. It’s inevitable that a first product will start to crack under explosive pressure, so we started logging requests early on to make sure we could respond instantly with a fix the moment someone submitted an API request that returned an error.
Daso: All founding teams have conflicts within them. What techniques did you learn as Rutter positively evolved to leverage conflict at all levels of the business?
Zhou: Communication is essential, and it is important to solve problems as soon as they arise. The worst thing you can do is let a problem escalate and become unbearable down the road.
Make sure the team is aligned on values - everyone gets along when things are going well, but in tough times the team is tested on what matters to them. If the team cares about similar things (personal growth, learning, etc.), it’s easier to make decisions.