I got a good question from an entrepreneur the other day about the importance of moats: Do you need to have one, how defensible is it, do patents matter? Here are a few thoughts on the topic.

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Differentiation

I do believe successful founders usually have a unique insight on the market. This could be serving a different target customer segment, focusing on a unique product feature, or solving a traditional pain point in a novel way. In markets where everything is exactly the same, the market ultimately gets commoditized and price goes down. But if you have a unique view on the world, you get a first mover advantage to establish yourself, as well as a value proposition that stands out from the competition.

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Competition

It is important to understand how your competition operates (for purposes of differentiation above), but be careful spending all your time worried about competitors. Early in a startup, seeing “no competition” can be dangerous. Either you don’t understand the market or potential customers may have a hard time understanding you. Some competition is good to help educate the market. But be careful getting into a product feature war by adding numerous features just to be competitive. Instead, find your area of differentiation and be 10x better there. Then continue to think about how you can stay ahead of the competition. That could be how you are mission critical embedded in your customer’s workflow, your data/analytics, or any other strategies that would be hard for competitors to replicate.

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Patents

There are some high-tech markets where this might matter. But for the vast majority of startups patents can be a waste of time and money. I would rather spend time getting customers and building my business.

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So yes you ultimately want to have a unique view of the market that allows you to have focused success. Long term that does need to be sustainable, but many things can change in the long-term. It’s always good to have a big vision, and be able to adapt along the way based on what the market is telling you and the opportunities that arise.