Moats are a set of characteristics (competitive advantages) a company has that makes it hard for other companies to compete. In practical terms, the way I think about this is 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. Tech will become an even weaker moat. Code will start to become a commodity.

What’s your moat?

One of the most common questions I’ve received while pitching investors (or founders receive in general) is ‘What’s your moat?’.

As a first and inexperienced founder, my head was doing paralleling thinking. On one side, I wanted to find a convincing way to explain why the tech we were building was unbeatable, or the features we planned to launch were game changers. But none of this matters.

On the other hemisphere of my head, I was seized with one question: ‘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?’

For me, 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 an extremely strong 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. In fact, 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.

Should entrepreneurs always look to solve ‘problems’?

At that time, Spotify was not solving an actual, existing problem. It made the experience 100x 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.