Visibility Is the New Moat

Venture capital, and the companies we support, couldn’t exist without moats. Startups never have the advantage of incumbency, nor scale - so finding companies that have something to protect against imitation and replication has been the only way to turn a good idea into an actual business.

But what are those moats? And have they, too, been disrupted?

The story we’ve told ourselves for a generation now is that the strongest moat is created through the combination of proprietary code unlocking some sort of network effect. That could be the direct network effect of Facebook, where every new user makes the product better for everyone. Or the two-sided marketplaces where buyers attract sellers and vice versa (e.g. Airbnb, Uber). Or where tools become industry standard, such as Figma, Salesforce, or the data flywheels, where usage generates data, which improves the product, driving more usage (e.g. Spotify, Google).

AI, I think, has broken a lot of this logic in two different ways. First, AI start-ups simply cannot hope to access the same network effects. Most begin as single-player tools, often replacing existing workflows or automating intellectual labor rather than creating new networks - so most of the time adding users doesn’t make the product meaningfully better for the next.

Second, and more fundamentally - the commodificaton of the code itself. Code has become less proprietary - it’s far less expensive to develop software, and therefore software has become, in a sense, less proprietary in general.

So what does that leave?

Visibility may be last remaining moat in software.

Sometimes it’s a known founder - someone who has access to capital and their track record leads venture money to front-run company execution. Sometimes it’s a Stanford pedigree. Sometimes it’s being loud on Twitter. Or it may be, simply, being socialized in the right places: living in San Francisco, joining a fellowship, or ending up in the right WhatsApp group.

But with everyone on the same AI thesis and barriers to entry near zero, the ability to capture attention has never been more important. At the same time, those very low barriers mean it has never been easier to build and ship code that has real value - which makes this moment the most exciting moment to be a builder (and an investor).

The paradox is that both can be true: differentiation is harder than ever, but winning still comes down to visibility.

Visibility is where momentum starts, and where defensibility eventually kicks in.

I’m a General Partner at Chapter One, an early-stage venture fund that invests $500K - $2M checks into pre-seed and seed-stage startups.

If you’re a founder building a company, please feel free to reach out on Twitter (@seidtweets) or Linkedin (https://www.linkedin.com/in/jamesin-seidel-5325b147/).