The 7 Most Powerful Moats For AI Startups

This idea of moats is so pervasive and so important.

It is interesting how moats have just become much more discussed by aspiring startup founders now than they were pre-AI.

What is going to prevent you from being basically subject to infinite competition?

Like, a moat is inherently a defensive thing, and you have to have something to defend (laughs) otherwise, like-

If you had nothing to defend.

Yeah. If you have nothing to defend, don't worry about your moat.

Welcome back to another episode of The Light Cone. Today, we're going to talk about moats. So, in your head, you might be thinking about barbarians storming your gate.

(laughs)

You've got this little startup, and you've got every other company out there who wants to come and eat your lunch. Uh, and you know, right outside your castle is a moat that keeps them away. Jared, when you were going to college campuses, this isn't sort of this trivial thing that people are thinking about. It's actually, uh, something that keeps them from starting companies right now.

Yeah, this is a question that we got from a lot of very smart college students on, on our, on our recent call ships. And basically, their question is like, they don't see how these new AI agent companies, like a lot of the ones that we've talked about on, on this podcast, could have moats. Um, it plays into this meme of, like, the ChatGPT wrapper that, like, all of these companies could be easily cloned. And so they can see how you could build a business that makes some amount of revenue, but they don't really see how you can build a long-enduring business. And so, I think it's actually not true. I actually think these businesses do have quite deep and interesting moats, but they're not totally obvious what they would be. So, I think this is an interesting topic for us to, to explore.

At our recent AI startup school, backstage, I had this exchange with Sam Altman that I thought was kind of funny. You know, we spend a lot of time thinking about, you know, make something people want, very simple maxims that are sort of anti-business school. And yet, this idea of moats is so pervasive and so important. We sort of remarked how funny it is that, uh, one of the more important books to read these days is actually business school fodder, um, this book called The 7 Powers. So, today, we thought that we would actually go through those seven powers. What are they? What are some concrete examples and ways that a startup founder who's just starting out, uh, could or should be thinking about these things from real-world examples that we've seen?

So, Diana, can you tell us a bit about this book?

This book was written by Hamilton Helmer, who taught at Stanford Economic School, and was published in 2016. And the book title was The 7 Powers: The Foundations of Business Strategies. And a lot of the examples are more with the era of, uh, internet companies from the 2000s. So, a lot of the examples are like Oracle, Facebook, Netflix, which is a older generation. So, we want to do a bit of a reboot right now, how it applies now, 2025, with AI.