Podcast Summary: Merge’s Unified API Bet in the AI Era | This Week in Startups E2033

Date: October 25, 2024
Host: Alex (standing in for Jason Calacanis)
Guest: Shinzi Ding, Co-founder of Merge

Overview

This episode of This Week in Startups dives deep into API complexity, SaaS integration, and how Merge is aiming to become the universal unifying layer for B2B data in an increasingly fragmented and AI-driven business software landscape. Alex interviews Merge co-founder Shinzi Ding about the company’s founding, product evolution, the state of integrations today, AI tailwinds, growth strategy, and the future of API-centric businesses.

Key Discussion Points & Insights

1. The Problem of API Fragmentation

• APIs are table stakes: Every SaaS company offers APIs, but the explosion of unique, custom APIs has made integration costly and labor-intensive.
  • “Companies like Twilio just a couple years ago nearly turned SaaS on its head by offering their products via an API.” (01:37, Alex)
• Integration becomes a bottleneck: Lack of integrations led to lost deals, as customers prioritized features like seamless data flow across tools.

2. Merge’s Founding Story

• Shinzi and co-founder Gil met at university in New York, with Gil excelling in technical execution and Shinzi gravitating toward finance and business.
  • “Gil would always do what he said he would do. And that's super, super, super rare.” (03:38, Shinzi)
• Both experienced integration pain first-hand: Gil as a head of engineering forced to build integrations solo, Shinzi as chief of staff witnessing lost revenue and mounting engineering overhead in maintaining integrations.
  • “If we didn't build these integrations, we couldn't close deals...but building these integrations were going to be super expensive....It's not like you can just build it and let go of it.” (07:47, Shinzi)
  • “They built it into the wrong API because some API providers can have multiple APIs for different functionality. They spent three weeks on it, ripped it out. I had to do it again.” (09:34, Shinzi)

3. Why Merge, and Why Now?

• Market shift: Existing tools like Zapier, Workato, and Tray.io put the burden of integration on the customer, not the vendor. But as software fragmentation exploded (companies now average around 200 vendor tools), expectations shifted toward vendors delivering these integrations natively.
  • “With Merge, it's free distribution and again, we're helping create an ecosystem around their product.” (29:05, Shinzi)
• Merge’s core idea: One API (with category-specific data models) to integrate with thousands of SaaS products, reducing roadmaps for vendors and complexity for customers.

4. Product Deep Dive

• Normalized Data Models: Merge’s API normalizes data within categories (CRM, HR, recruiting, etc.) so that adding a new provider (like Salesforce, Oracle, Workday) is easier and onboarding new customers is fast.
  • “Every source of truth, the data model is very, very similar...fundamentally there are core common models that everyone just boils down to.” (15:34, Shinzi)
• Integration Observability: Merge provides visibility and debugging tools for customer support and engineering, surfacing errors, API behaviors, and customer-side misconfigurations.
  • “We actually call it integration observability...We built a lot of tooling in our dashboard...so you can search like for Alex's name, if Alex came through or not.” (24:50, Shinzi)

5. Building the Integration Ecosystem

• Evangelizing Early: Gaining partnerships with large providers required intense networking and explanation, especially as a 5-person startup.
  • “You have to do what you have to do to get in front of the C-suite.” (17:56, Shinzi)
• Now a Distribution Point: Merge has become a must-have for smaller software vendors seeking exposure and seamless integration for their customers.
  • “All these companies will come to us and they'll be like, hey, I'm a 50 person CRM company and I really want them to integrate with us. So can you please build an integration with us so that our logo will show up on their website?” (29:05, Shinzi)

6. AI Era and the Impact on Merge

• AI = More Data, More Integrations: The AI boom creates strong tailwinds for Merge, as AI products crave wide, deep, proprietary data sets—often requiring piping in data from multiple SaaS tools.
  • “We've been seeing a lot more companies going from using mostly just one or two categories to all seven categories...the more data you have, the better the insights you have.” (35:07 & 35:10, Shinzi)
  • “As my CRO says, it's always good to be lucky. So we have been very lucky.” (35:21, Shinzi)
• AI Experimentation: Product Blueprint lets users suggest new integrations, leveraging AI to map documentation to internal schemas, though sandbox/account complexity remains a blocker.

7. Go-to-Market and Business Model

• Pricing: Merge offers generous self-serve plans (three free accounts, $650 for up to ten). The real value is often much greater, especially for enterprise customers.
  • “For $65 seems to be like it's priced at roughly 1/1000 of the potential value for them.” (47:44, Alex)
• Distribution strategy: Heavy investment in events, in-person meetings, and thought leadership; go-to-market has become more sophisticated, but education is still needed.
  • “This was a big year of experimentation...we've just been meeting a lot of people in person now.” (46:09, Shinzi)
• Efficient Growth Philosophy: Despite raising significant capital ($74.5M to date, $55M Series B), Merge remains capital-efficient, with much of its Series B unspent.
  • “Just because merge was going to be an expensive business to build...I would much rather just never have layoffs.” (39:02, Shinzi)
  • “We've always been pretty careful about it...not definitely not spending all of it.” (38:35, Shinzi)

8. Financial and Operational Maturity

• Early investment in finance and operations (hiring a CFO-equivalent at employee #10) positioned Merge to navigate uncertain markets, pricing evolution, and customer expansion more effectively than peers.
  • “If you hire a really good finance team, they can be revenue generating for you...strategic in how you expand to different products, regions, cost compensation...” (37:02, Shinzi)

9. Growth Metrics and Customer Profile

• Substantial Growth: From 2,500 companies in 2022 to 16,000 self-serve organizations by late 2024, with ~400 enterprise customers. Mix has shifted from small startups to larger enterprise clients, with financial services now in play.
  • “We have like, I think like 16,000 self serve organizations on the platform...Free, free and paying. We have around like 400 enterprise customers...” (41:33, Shinzi)
• Enterprise Upmarket Motion: Most revenue growth is in the enterprise segment, with large deals pulling up ACV.

10. The Future: Beyond APIs, Toward Data Infrastructure

• Merge’s ambition is to be the universal B2B data interchange, not just “Merge API.”
  • “That's why we hate when people call us Merge API, because it's really just merge...Eventually, wherever your customer's data is, we want to be able to pull it and export it in whatever format that you want.” (52:44, Shinzi)

Notable Quotes & Memorable Moments

• On the challenges of early integration building:
  “Some API providers can have multiple APIs for different functionality. They spent three weeks on it, ripped it out. I had to do it again.” (09:34, Shinzi)
• On opportunity cost and maintenance:
  “Once the integration is live, the engineers actually had to keep helping answer customer success questions... then a lot of the times it's end user error.” (10:24, Shinzi)
• On the AI boom:
  “The more data you have, the better the insights you have.” (35:10, Shinzi)
  • “The AI boom, even though it is not exactly what you guys have been working on, it is providing a nice tailwind to the business.” (35:14, Alex)
• On being a distribution platform for vendors:
  “If you're like a new source of truth and you're trying to compete with like HubSpot or Salesforce, it's really hard to get that roadmap time from every single vendor...with Merge it's free distribution.” (29:05, Shinzi)
• On capital efficiency:
  “We always wanted to be really conservative...haven't even touched our Series A by the time we had fundraise...I would much rather just never have layoffs.” (38:35 & 39:02, Shinzi)
• On merge's long-term vision:
  “We hate when people call us Merge API, because it's really just Merge, because, like, wherever your customer's data is, like, we want to be able to pull it and export it in whatever format that you want eventually.” (52:44, Shinzi)

Important Timestamps

• [03:38-07:39]: Merge’s founding story, integration pain highlighted.
• [13:23-15:34]: Why Merge? Gaps in existing integration solutions and the vision for a unified API.
• [16:31-17:17]: How many SaaS tools do businesses actually use today? (Spoiler: easily over 100)
• [24:50]: "Integration observability" and product reliability as a key differentiator.
• [29:05]: Merge as a distribution channel for upstart SaaS vendors.
• [33:38-35:21]: The impact of AI on Merge’s business; AI companies need more integrations and unique data.
• [37:02-39:02]: Early investment in finance ops, cost controls, and lean scaling strategy.
• [41:33-42:59]: Growth metrics: from startups to enterprise, 16,000 orgs on platform.
• [46:09]: GTM experimentation: events, education, and IRL meetings.
• [47:32-49:15]: Simple, transparent product pricing and value discussion.
• [52:44]: Merge’s ambition beyond APIs: data movement infrastructure.

Conclusion

This episode provides a rich look at why SaaS integrations matter, how seamless data flow underpins next-generation AI products, and how Merge is methodically building the bridge between hundreds of business software tools—while scaling efficiently and eyeing a long-term infrastructure play that could outlast any one product cycle.

Shinzi Ding’s candid, precisely detailed answers underscore both the gnarly engineering and business tightrope needed to pull off a company like Merge, and the potential for it to become one of the foundational B2B infrastructure companies of the next decade.

For More: Listen to This Week in Startups, E2033: [Podcast Link]
(Merge’s story starts in earnest ~02:34, API evolution and vision from ~13:23, business/finance from ~35:26)