Why Google Is Snapping Up This Startup for $625 Million

September 8, 2016, 2:15 PM UTC
Fortune Brainstorm TECH 2016
Fortune Brainstorm TECH 2016 MONDAY JULY 11TH, 2016: ASPEN, CO 2:30 PM TILTING THE SCALE ON CLOUD COMPUTING Diane Greene, Senior Vice President, Google Interviewer: Andrew Nusca, Senior Editor and Co-chair, Brainstorm TECH, Fortune PHOTOGRAPH BY KEVIN MOLONEY/Fortune Brainstorm TECH
Photograph by Kevin Moloney — Fortune Brainstorm TECH

Google just announced it is buying Apigee, a specialist in application programming interfaces (APIs), for approximately $625 million in cash.

The acquisition was disclosed in a blog post by Google (GOOG) senior vice president Diane Greene as well as another explainer by Apigee chief executive officer Chet Kapoor on Thursday morning.

Apigee makes software to manage APIs, which are basically the communication conduits by which different applications talk to each other.

The availability of published APIs means that a software developer can cobble together different mini-services already available—such as Google Maps meshed with Twilio (to add SMS messaging) along with other capabilities—to make something new and different. APIs, in short, let developers use other apps as building blocks for their own applications.

Greene highlighted some of Apigee’s more prominent customers, including Walgreens (WAG), AT&T (T), Bechtel, First Data, and Live Nation.

“The addition of Apigee’s API solutions to Google cloud will accelerate our customers’ move to supporting their businesses with high quality digital interactions,” wrote Greene. “Apigee will make it much easier for the requisite APIs to be implemented and published with excellence.”

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Apigee went public in April 2015, and its shareholders will receive $17.40 per share in cash. The transaction is expected to close by year’s end.

The Apigee deal comes amid a flurry of activity among software companies catering to developers—especially those who help businesses connect applications. Twilio (TWLO), for example, pulled off a successful IPO in late June.

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This news should be also particular interest to Mulesoft, another venture-funded startup and “unicorn” that sells application programming interfaces linking cloud applications—frequently services from Salesforce (CRM), ServiceNow (NOW), and Workday (WDAY)—with legacy databases. Mulesoft claims more than 1,000 business customers, including Coca-Cola (KO), Unilever (UL), and General Electric (GE).

In the past, companies were forced to write custom software code for this purpose, MuleSoft CEO Greg Schott told Fortune in mid-August. “We’re building out what we call an application network,” he said. “The idea is that when you turn on a new [software as a service] application, you know that the right data is being exchanged.

Mulesoft was valued at $1.5 billion after a $128 million funding round in May 2015. Greg Schott has said the company passed $100 million in revenue for its 2015 fiscal year and is on pace to double that amount this year.

Fortune contributor Heather Clancy contributed to this report. The story was updated to add Schott’s quote.

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