Value is created through innovation, but how much of that value accrues to the innovator depends partly on how quickly their competitors imitate the innovation. Innovators must deter competition to get some of the value they created. These ways of deterring competition are called, in various contexts, barriers to entry, sustainable competitive advantages, or, colloquially, moats. [Taxonomy of Moats - Reaction Wheel]
The recent VC meme that "speed is a moat" is incredibly annoying to me because it's self-defeating and the VCs definitely know that it's not true.
And yet, they push it and for good reason: speed as a habit is critical for iterating and building actual competitive advantages.
Nonetheless, it's ridiculous.
To save some first time founder from mistaking speed for building a lasting business, let's dismantle the meme.
Speed is discovery, not defense
Speed is table stakes for early-stage startups. It's a necessary condition for finding competitive advantages, but it's not sufficient for sustaining them.
Speed is like a search algorithm, not a destination.
Real moats have structural foundations
This isn't controversial, it's foundational.
Michael J. Mauboussin's comprehensive analysis of thousands of companies confirms what strategy research has shown for decades: sustainable competitive advantages require structural barriers that protect incumbents.
Generally speaking:
- State power: patents, regulations
- Special know-how: tacit knowledge, trade secrets
- Returns to scale: network effects, economies of scale
- System rigidity: switching costs, integration complexity
Why the confusion matters
Ask yourself: "what would stop a competitor with more resources from copying what you've built?"
If the answer is "nothing," you have speed, not a moat.
Speed without structural moats creates brittle businesses. Competitors can enter with better products, deeper pockets, or superior distribution.
The companies that survive aren't just the fastest, they're the ones that used their speed to build something competitors can't easily replicate.
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