With my first startup, we were the first solution in the market. But, it didn’t take long for copycats to appear. In fact, within months I caught wind of a gentleman in Atlanta that had all but copied the exact verbiage from our website and used that to apply for acceptance into an accelerator program. As any scrappy founder should do, I went to the accelerator’s local meetup and called him out for it publicly. I didn’t have a whole lot of options. Why? Because there was very little about our business that was defensible. We had a proprietary matching algorithm that my partner had written. But that was it. There was nothing else so unique that it was hard for people to mimic. In fact, today, companies such as Bumble have similar products.
By the time I had moved on to my second startup, I had learned my lesson. This time the business model was much more defensible.
Why Defensibility Matters
As a startup founder, one of the key strategic areas to focus on is finding ways to increase the defensibility of your business model. By defensibility, I mean creating something that you are able to protect. Investors call this “creating moats”.
Social media is a good example of where defensibility is necessary. Instagram has copied virtually every feature that Snapchat offers. They were able to do this because there is nothing proprietary about those features. They weren’t defensible.
For a more recent example look to Clubhouse. When the social audio app hit the market it saw exactly what every startup founder could hope for, massive growth. What happened? Existing social media apps, like Twitter, and new ones, like Call-in, created similar products.
So, why does this matter? The more easily defensible your business model is the better your chance of holding off competitors and/or copycats.
Examples of Defensibility
There are numerous ways to create a defensible business model. Some are harder to pull off than others.
Intellectual property - being able to have issued patents, copyrights, and trademarks are some of the best ways to protect your business. One note, however. They only stop a competitor from exactly copying your business model. They can still create similar, yet different enough, versions.
Technology - the technology you use in your solution can create a moat for competitors. For example, not everyone will understand how to leverage artificial intelligence (AI) and machine learning (ML). In my second startup, the loan decision engine I designed used both AI and ML. That was 5+ years ago before their use was widespread.
Execution - one of the best ways to protect your idea is to out-execute the competition. When a business is growing rapidly it becomes harder for new entrants to come into the marketplace. Unless they have a big wallet. Since the execution of the model falls to the team I could have easily labeled this “Team” instead of “Execution”.
Brand - a few years ago, branding was all the rage. You couldn’t open up Twitter without reading a post about personal branding. Still, it is just as important today for startups to excel at creating and promoting their brand. When consumers get used to using a brand it is harder for them to switch to a new one. For example, I’ve had an Xbox for years. I don’t think I will ever be a Playstation user. I’m committed to the Xbox brand. For better or for worse. Even though I know Playstation’s sports games are better.
In a perfect world, a startup founder will have found a way to create multiple moats of defensibility. Not only does that help to keep the competition off their back, but it has another benefit. Startups that are more defensible are more attractive to investors. Which will make fundraising easier.
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