In an age where AI models are commoditized, how do you build a real, defensible moat for your SaaS business? I'll share the counterintuitive truth about where long-term value is created, and it has nothing to do with having the 'best' algorithm or the most data.
The Reality Nobody Talks About
A lot of the advice on SaaS moats rests on assumptions that made sense five years ago. The world has moved on.
The first thing to understand is that most founders overthink this and underspend on execution. I've seen this play out across dozens of companies. The pattern is unmistakable.
Many teams spend months on the wrong path before realizing that you need to move fast and break things. Once they make the switch, everything changes.
The Framework That Actually Works
Here is a simple framework for evaluating SaaS moats. It's not complicated, but it requires discipline.
Step 1: most founders overthink this and underspend on execution
This is where most people go wrong. They skip this step entirely and jump straight to execution. Don't do that.
Step 2: simplicity beats complexity every time
Once you have the foundation right, this becomes much easier. I've watched founders struggle with this for months when the answer was staring them in the face.
Step 3: Iterate relentlessly
Nothing works perfectly the first time. The companies that get SaaS moats right treat it as an ongoing process, not a one-time project.
The Counterintuitive Truth
In SaaS moats, the best practitioners often do less, not more.
The lesson: the best solutions are often the simplest ones. It sounds simple. It's incredibly hard to execute.
What I Tell Founders
Before deciding anything about SaaS moats, start with three questions:
What's your timeline? Because the right approach for a company with 6 months of runway is very different from one with 3 years.
What have you already tried? Most founders have tried something. Understanding what didn't work is often more valuable than knowing what might.
Who on your team owns this? If the answer is "everyone" or "no one," that's your first problem to solve.
These questions seem simple but they reveal a lot about where a company actually stands.
This connects to broader themes around AI pricing models, usage-based pricing, SaaS metrics that I've been thinking about a lot lately.
Wrapping Up
I've shared a lot here, and I know it can feel overwhelming. But you don't need to get SaaS moats right on day one. You just need to get started and keep improving.
Founders who do well at SaaS moats tend to share one trait: they're relentlessly practical. They don't chase perfection. They chase progress.
That's the mindset I'd encourage you to adopt. Start where you are. Use what you have. Do what you can. And keep pushing forward.
As always, I'm rooting for you.
Frequently Asked Questions
Q:How can I apply this thinking to my own situation?
Start by identifying the core principle behind the opinion, not the specific example. Then ask yourself: does this principle apply to my context? If yes, test it in a small, low-risk way before going all in.
Q:What's the most common pushback you get on this?
People often push back by citing exceptions or edge cases. And they're usually right that exceptions exist. But building a strategy around exceptions rather than patterns is a losing game for most founders.
Q:Do all experts agree with this view?
No, and that's fine. The best ideas in business are often contrarian. I share my perspective based on my experience and data, but I encourage you to seek out opposing viewpoints and form your own conclusions.
Q:What experience informs this perspective?
This perspective comes from over a decade of building companies in Silicon Valley, two successful exits (RemoteTeam to Gusto, MovieLaLa to Gfycat), and investing in 234 startups including Anthropic, OpenAI, and Scale AI. I write about what I've lived.