The Founder's Defensibility Guide

Most of the founders we met in the last 12 months had AI as a key enabler and most of them quickly discovered that advisors and investors were giving the same painful feedback: this looks like incremental innovation, it’ll soon become a feature in a larger product. Look, you’re a great team and traction is impressive, but your current product is doomed. We won't invest.

Some of them took these opinions and processed them as regular feedback: they regrouped with their key people and quickly came out with a strategy to use their runway in a smarter way.

This mini-guide is for you, it stems from what we've learned. I hope it can help you, before it’s too late.

Introduction: the feature graveyard

Every AI startup founder's nightmare: you're crushing it, users love your product, growth is accelerating—then Google announces your entire company’s value prop as a checkbox in their next update.

This keeps happening.

Jasper watched ChatGPT eat their lunch. Dozens of "chat with PDF" startups quickly vanished when Claude and ChatGPT added file uploads. Grammar checkers got absorbed into Google Docs.

The pattern is brutal and predictable.

In April 2024, Sam Altman, OpenAI CEO, even gave a clear warning: if you’re building on top of our AI models thinking that they will not improve that much… "we're gonna steamroll you".

But not every startup becomes a feature.

Some AI companies build real moats. They create value that incumbents can't or won't replicate. They solve problems so specific, complex or regulated that a feature checkbox could never compete. They build network effects, proprietary data advantages or industry expertise that takes years to develop.

This guide helps you figure out which type you are, before it's too late.

In the next 10 minutes, you'll:

• Audit your startup's true defensibility by asking yourself 6 groups of questions

• Get a brutal reality check on your vulnerability to incumbent features

• Identify specific strategies to build real moats based on your current position

• Create a 30-day action plan to strengthen your defensibility

You may discover that you don’t need to hire more data science rockstars. This isn't about having better AI. It's about building a business that survives when everyone has the same AI.

Let's find out if you're building a company or just a feature with a pitch deck.

The 10-minute defensibility audit

🚨 Red flags: you're likely to become a feature if...

The "Wrapper" Test

• Your product is essentially a UI on top of GPT/Claude/Gemini

• You could rebuild your core functionality in a weekend hackathon

• Your "moat" is prompt engineering or API orchestration

• You're solving a general-purpose problem (e.g., "chat with your documents")

The "Distribution" Test

• Your target customers already use Google Workspace/Microsoft/Salesforce daily

• You're competing for the same budget line item as incumbent products

• Your growth depends on SEO/ads for generic keywords

• You have no unique distribution channel or partnership

The "Speed" Test

• An incumbent could ship your feature in a cycle of a few weeks

• You have no regulatory or compliance barriers

• Customer switching costs are near zero

• You're not integrated into any critical workflows

💚 Green flags: you have real defensibility if...

Domain Complexity

• It would take 6+ months to understand your customer's problem deeply

• You need specialized licenses, certifications or clearances

• Your team has 10+ years of industry experience that matters

• Customers need extensive training to use your product effectively

Integration Depth

• You're 5+ integrations deep in customer workflows

• Ripping you out would break multiple business processes

• You handle mission-critical data with custom schemas

• You've built proprietary hardware or firmware components

Network/Data Effects

• Each customer makes your product better for all others

• You have exclusive data partnerships or generation methods

• Your product gets smarter with proprietary usage data

• Customers contribute to a shared resource (marketplace, dataset, etc.)

The defensibility pyramid

Rate yourself 1-5 on each layer (1 = weak, 5 = strong)

          / Regulatory/Legal Moat....Score: ___

        / Network/Data Effects.......Score: ___

      / Deep Technical Integration...Score: ___

    / Industry-Specific Expertise....Score: ___

  / Unique Distribution Channel......Score: ___

/ Basic AI/Product Functionality.....Score: ___

                               TOTAL Score: ___

Evaluate your score

• Total 20+ → You likely have real defensibility

• Total 15-20 → Mixed signals, focus on strengthening weak layers

• Total <15 → High risk of feature-ification

What you can do

If you're at high risk (score <15)

1. The Pivot Decision (Do within 3 months)

   • Can you verticalize into a specific industry?

   • Can you add a physical component?

   • Can you target a regulatory-heavy segment?

2. The Speed Play

   • Grow faster than incumbents can react

   • Get to $10M ARR before they notice

   • Sell early if you get acquisition interest

3. The Partnership Hedge

   • Become the incumbent's partner, not competitor

   • White-label your tech

   • Position as "powered by" rather than "replacement for"

If you're moderately defensible (score 15-20)

1. Double Down on Strengths

   • Pick your strongest layer and 10x investment there

   • Build switching costs aggressively

   • Create proprietary data advantages NOW!

2. Add Defensibility Layers

   • Pursue regulatory approvals/certifications

   • Build marketplace/network components

   • Develop industry-specific features incumbents won't build

If you're highly defensible (score 20+)

1. Growth Over Defense

   • You've earned the right to focus on growth

   • Raise on your story, not your tech

   • Consider expanding to adjacent verticals

The Honest Questions Every Founder Must Answer

1. The Acquisition Test: "If Google offered to acquire us for $20M today, would we take it?"

   • If yes → You probably know you're a feature

2. The Customer Truth: "Do our customers love us for our AI, or for everything else?"

   • If it's the AI → You're vulnerable

3. The Complexity Test: "Could a talented engineer understand our business in a week?"

   • If yes → Your knowledge moat is too shallow

4. The Switching Test: "What would it actually cost a customer to leave us?"

   • If <$10k and <1 month → You need more lock-in

Your 30-Day Action Plan

Week 1: Complete the audit honestly 

Week 2: Interview 10 customers about switching costs 

Week 3: Map out 3 defensibility strategies 

Week 4: Pick one strategy and commit resources

Remember: OpenAI doesn't win by having the best chatbot, tools, model, API. They win by being the infrastructure everyone builds on. The question isn't whether you're building something cool. It's whether you're building something that can't be commoditized.

Final Reality Check

If you're spending more time worrying about OpenAI's next release than talking to customers, you've already lost. Real moats are built in the messy details of customer problems, not in model capabilities.