An entrepreneur buddy of mine shared that probably the most invariable (and overused) questions he will get requested is what the “moats” are for his start-up. He described the query as a crutch that VCs go to after they don’t know what different inquiries to ask.
As my buddy put it:
“Extra troubling is that they’re searching for a silver bullet and coaching a technology of entrepreneurs to over optimize for a “silver bullet” vs. serving to them construct sturdy cultures. There is just one sustainable moat in my thoughts and that’s tradition. Anything could be purchased or labored round (together with patents).”
I discovered his normal method the moat query very insightful:
“I reply with there are exhausting moats and tender moats and the latter are extra necessary. What I imply by tender moats are the 1,000 little issues we do this make us higher than our competitors (whom now we have persistently been beating regardless of charging 3-10X the worth). Within the vein of tradition eats technique for breakfast, I’ve been telling folks it’s simpler to dodge one large arrow than a thousand little ones.”
The moat principal was famously popularized by Warren Buffet in a 1995 Berkshire Hathaway shareholder assembly and expanded upon within the years since. As Warren put it:
“What we’re looking for is a enterprise that, for one cause or one other — it may be as a result of it’s the low-cost producer in some space, it may be as a result of it has a pure franchise due to floor capabilities, it could possibly be due to its place within the customers’ thoughts, it may be due to a technological benefit, or any type of cause in any respect, that it has this moat round it…
“However we are attempting to determine what’s retaining — why is that citadel nonetheless standing? And what’s going to maintain it standing or trigger it to not be standing 5, 10, 20 years from now. What are the important thing components? And the way everlasting are they?”
Extra lately, Elon Musk critiqued the concept of counting on moats to compete. As Elon put it:
“I believe moats are lame…In case your solely protection towards invading armies is a moat, you’ll not final lengthy. What issues is the tempo of innovation–that’s the basic determinant of competitiveness.”
Listed below are just a few associated cartoons I’ve drawn over time:
“If advertising and marketing saved a diary, this could be it.”
– Ann Handley, Chief Content material Officer of MarketingProfs
