Sci-Fi Tech Learnings: Moats (Part 2)
|Adam Draper||Oct 4, 2019|
This seems like a good time to talk about moats.
Venture Capitalists love to talk about moats. I wish it stood for something like “Massive Orange Ale Tenants,” ….
Reader: “Adam, is that the best you could come up with.”
But no, moats are the same now as they were in the Medieval times, it represents a gap between other kingdoms and your own. In the past they used a physical barrier, now the gap represents how much time it would take to tear down the barriers, or how much money would it cost to catch up.
“Massive Opening Arranged Around Terrain.” - there, I got closer, “MOAAT.”
There are four types of startup moats: Regulatory, Technical, Informational and Distributional… is Distributional a word? Spellcheck did not correct Distributional… it plays.
If you are doing something innovative/interesting, eventually the government figures out how to regulate you, or around you. At my first company, it took 18 months to apply for and receive a broker dealer license to transact private securities. That is a regulatory moat! 18 months of work/ so much money to lawyers, just to be able to do the business you wanted to do!
The down-sides of regulatory moats is the burden of cost, and compliance, generally up front. However, if you are willing to work, and sustain a good relationship with the SEC/FDA/FINRA, whatever regulatory body you would be working with, this Moat can allow you do amazing things.
These moats enable the most market capture for the savvy few who get through the gates.
Will continue on describing different types of moats tomorrow.
By Adam Draper
I ponder as a VC.
It's a quick one minute read to make you think, smile, or laugh.
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