Why Founders Are Afraid to Talk About MOAT? | Should Founders Work By Vision or Data? | VC Remote Jobs & More
Why Founders Are Afraid to Talk About MOAT? | Should Founders Work By Vision or Data? | VC Remote Jobs
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Why Founders Are Afraid to Talk About MOAT?
“Generational companies are not built on the latest technologies but in bold statements.”
You might wonder what it means - does it relate to MOAT? By the end of this writeup - you will get the real meaning of these bold statements. You will get an idea of how startups like Stripe/Airbnb/Spotify are perfectly aligned (their MOAT) with this statement….
“MOAT” - seems like a new word; in recent times, founders are afraid to talk about the MOAT of their startup.
They don’t want to recall as most startups or so-called AI startups don’t have a MOAT except those 2-3, you know who I am talking about. Let’s not recall those names but let’s rewind the time when founders/investors used to talk about MOAT. Most of the founders were afraid because they didn’t understand the real meaning of MOAT!!
Just remember it’s not any tech, AI-powered, some API or other things….. So
What’s The Moat For A Startup?
Moats are a set of characteristics (competitive advantages) a company has that make it hard for other companies to compete.
In practical terms, I think about this by answering the question, what can’t a company with $1B sitting in the bank just buy?
The answer? Many things: Community, Trust, Network Effects, Users, etc.
In the past, tech was considered a strong moat since it required large amounts of capital to be built. But the truth is, the level of defensibility provided by tech to startups is at an all-time low and decreasing faster than ever before. Defensibility at a product level is incredibly hard to achieve, let alone sustain.
Features aren’t moats because they can be replicated. And now, as AI starts to spill into software development, software’s marginal cost will dramatically decrease in the upcoming years.With AI Tech will become an even weaker moat. Code will start to become a commodity.
What’s Your Moat?
P.S.: The above Image is Just for fun! But Is this true?
One of the most common questions that every founder receives while pitching investors (or founders in general) is ‘What’s your moat?’.
Most of the tech founders try to find a convincing way to explain why the tech they are building is unbeatable, or why the features that they planned to launch are game changers. But none of this matters.
If you want to convince investors on MOAT of your startup. Just ask one question to yourself.
‘Why am I being asked this? What was Airbnb, Spotify, or any other successful company’s moat when they just were getting started? In their origins, what did they have that nobody else had?’
It is just one thing. “A bold statement on how the world should look like.”
“Generational companies are not built on the latest technologies but in bold statements.”
When these are being built, tech only plays a fraction in innovation. The engine that facilitates the creation of new companies is dreaming of better experiences.
Spotify’s moat
For many years the only option for streaming and downloading music was pirating (usually off Piratebay). People got used to scrolling through music pirating websites and were OK with clicking through spam and fake download buttons to get a new music album. It wasn’t a state-of-the-art experience, but it worked. If you wanted to hear a song, you could. As mentioned in the episode featuring Daniel Ek, founder of Spotify, in Reid Hoffman’s podcast Masters Of Scale, before the foundation of Spotify, ‘music lovers already had the world music at their fingerprints.’
Although seen as a technological breakthrough, Spotify was more of a powerful statement and an unparalleled experience. At the time, it wasn’t built with mind-boggling software. As far as tech goes, Spotify could have been created five years earlier. Spotify was a bold statement and a big bet. People weren’t unhappy with how they were listening to music. They were happy. No one imagined it could get better until someone did. People weren’t pirating music because it was free. It wasn’t an economic hurdle. It was instead a convenience one.
Daniel Ek did something genuinely bold. Although nobody was complaining about the current state of music, he dared to imagine an even better experience. Building a company in an industry where the vast majority is happy with what they currently have, requires an astonishing vision, and blinding determination.
And that was Daniel’s moat. Unlike tech, a vision (the act or power of imagination) or a statement cannot be bought.
Most of the founders don’t find a bold statement for their startup and fail to create a MOAT for their startup!!!
There is also one thing -
Should entrepreneurs always look to solve ‘problems’?
At that time, Spotify was not solving a true, existing problem. It made the experience 100 better, at least. But back then, nobody would have defined listening to music as a ‘problem.’
This is why, in my opinion, one of the most common tips for founders, ‘Talk to users’, should be taken with a grain of salt. Yes, talking to users can help identify customers’ pain points that may otherwise go unnoticed and provide valuable feedback on a product or idea. However, if founders delegate their entire creative process to potential customers, they automatically set a ceiling on what can be built based on users’ wants. And the truth is, people don’t know what they want until they see it.
There are millions of bold statements waiting to be realized. It just takes a brave mind to effectively see around themselves in non-obvious places where things can get 100X better.
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