Every VC will think about or ask about your moats, the unfair advantages that stop competitors from quickly copying you. In a Series A coaching, a founder only named his moats when asked what a smart, well-funded team could do: five years of research, a co-founder with deep industry knowledge, and a community of over 400 buyers.
Today, I’d like to follow up on our last newsletter’s article about the most compelling three arguments and moats of your investment case (link):
Recently, I trained a founder to raise a bigger Series A round. There are a lot of great learnings from our coaching sessions, and here is one of them:
The founders’ pitch didn’t hint at the company’s moats – its competitive, unfair advantages that would prevent competitors from quickly replicating what the founders’ startup is doing.
So, I asked him about their moats. First, there was silence. He was thinking. I repeated: “What if a smart team with enough money would try to do what you’re doing?“.
That explicit question triggered what I wanted to hear.
“First”, he said, “we did serious, deep research on our topic for >5 years while we were working on (…). Our solution is based on that research”.
“Wow”, I said! That’s the juicy stuff I was looking for.
“Then,” he continued, “My Co-Founder worked in the (…) industry for 12 years – I don’t know anyone who knows the industry better and, most importantly, knows and speaks the language of our customers better”.
“Give me more of that!“, I replied.
Silence. He was thinking again. “What about your Go-To-Market strategy?“, I said. “Didn’t you tell me about this amazing community you built?“.
“Sure,” he said, “we built a community of (…) Leaders – who are typically the buyers and decision-makers in our product category, of more than >400 influential people, even before we founded our company. We’re regularly bringing them together at network events and have Slack community where they regularly interact”.
BAM (!!!)
A product based on >5 years of deep research. A co-founder who knows the industry and its customers inside out. And a community that is a unique and strong way to reach potential buyers. All things that can’t be easily replicated.
So, what is the moral of this story?
If you read our last newsletter, you may recall it:
First, every founder wanting to fundraise must know their startup’s competitive moats. For many founders like the one from my story, some things might feel so natural and normal that they don’t even realize what moats they have.
Think about everything that is hard to replicate. Prioritize your list. Pick your top 3. And then make sure that your top 3 moats are addressed in your pitch.
It doesn’t need to be one slide and you saying “Our 3 moats are…“. Sometimes, it’s just a subtle line you drop when presenting your product, your team, etc.
Imagine your solution slide. Imagine saying, “Our solution was built on the fundamentals of more than five years of research at (…).”
Imagine your team slide. Imagine saying, “My Co-Founder and CSO Dirk spent 15 years of his career in the (…) industry, selling products like (…) to customers that are now within our Ideal Customer Profile”.
Every VC will think about or ask you about your moats.
Think about it – ahead of them asking you. Prioritize it. Mention it. Hammer it into the brains of the VCs.
That will create a big appetite.
Frequently asked questions
What is a startup moat?
A competitive, unfair advantage that prevents competitors from quickly replicating what your startup is doing.
How do I find my startup’s moats?
Ask yourself what would happen if a smart team with enough money tried to do what you’re doing. Then list everything that is hard to replicate, prioritize the list and pick your top 3.
Do moats need their own slide in the pitch deck?
No. Sometimes it is just a subtle line you drop when presenting your product or your team, for example that the solution is built on more than five years of research.
What are examples of moats VCs find convincing?
In the coaching example: a product based on more than five years of deep research, a co-founder who knows the industry and its customers inside out, and a community of more than 400 buyers and decision-makers built before the company was founded.
