I recently went to an investor panel to hear how fundraising has changed in the age of AI, and one thing was made very clear: AI has made entrepreneurship extremely accessible, which is great for access, but diluted for investment. What hasn’t changed, and has actually become even more critical, is that a business worth investing in has a strong moat.
A ‘moat’ is a phrase used to describe your differentiator. What makes your product the best? How will it survive amongst competitors?
One thing the investors made clear is that they don’t feel confident investing in products that are just GPT wrappers, which makes sense. If your product is just an overlay of another product, why is that special or even safe? What’s to stop the GPT company from building your product as part of their ecosystem? Back in the day before AI was commercialized, a similar issue were companies that were reliant on other companies to run the core parts of their product. If anything ever happened to those other companies, they’d collapse. Not a smart investment.
Realistically, most companies are GPT wrappers because most people aren’t technical. They’re experimenting and innovating to the capacity that they’re able to, hoping to build and launch something undeniably good.
So what IS a moat these days?
Access to building is no longer a moat. Anyone can build what looks like your competitor in a day now. They can collect the same data, build similar features, and market themselves to your same customer. Not impressive, and also not enough to make you worry. Building something that works really well and will last is. But in order to know it works well and won’t die as a trend, you need users. How do you get those?
A moat today is going to be who you are, your audience or network, the trust they have with you, your credibility, your expertise, and your product’s reach. Keep in mind, this has always been a moat, it’s just weighed so much more heavily now.
So if you are building a product, or planning to, you need to prioritize the old rule book. Create an online presence, get consistently involved with events and communities that allow you to grow your network, and push your name and product out there. Regardless of whether you’re hoping to raise or not, these are things you should be doing to increase awareness around what you’re building.
I know this because I’m doing it right now. As someone who launched a successful bootstrapped business once and gained credibility because of it, I’m practicing these same moat strategies with my new business, Sift Skills. Although I’m building in a space adjacent to Black Tech Pipeline, I have to build a reputation with a new audience that trusts me, my experience, and my expertise to deliver the best solution to a major problem they have.
So what have I been doing? I make accounts on all event platforms that bring awareness to startup and networking events happening in my city. I get involved with the startup and entrepreneur community. I made a goal to attend at least one event per week, whether it’s a pitch competition, networking event, or panel. I show up, show my face, meet people, and tell them what I’m building. The more you attend events, the more you also get invited to.
I stay active in online communities, especially Reddit. I post opinions and updates on LinkedIn and interact with people seen as leaders in the space I’m trying to break into. This newsletter is even a distribution channel. Come to our table to say hi and test Sift Skills yourself in-person on May 26th here. See? 😉
My take on moats in the age of AI is this: first, you don’t need to build something with the goal of getting investment. You can bootstrap an incredibly good product without it. If your bootstrapped product is a wrapper that has users and revenue, it can still catch an investor’s attention regardless of what they say on panels or in articles. At the end of the day, a good product is a good product, and people are going to want in.
Since you are the moat, this isn’t the era to be shy, and it isn’t the era to be inconsistent with relationships either. Be intentional about meeting your users where they are, ask them questions, talk about how you’re helping them on every channel you’d find them on, build community, stay active, and be kind.
And remember, your moat won’t save you if your product sucks. People don’t want to attach their hard earned money to something that only looks like it works, regardless of how much they like you as a person. Whatever you’re building needs to be valuable and do what it says it does, and do it well.
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