I see founders clinging to the idea of a "moat" like a life raft. They tell investors, "Our data is our moat," or "Our network effect is our moat," believing they are building an impenetrable fortress around their business.
Let me tell you something different. In the age of AI, that fortress is made of sand.
The nature of a defensible business has changed. The old moats haven't vanished, but they are no longer static assets you can pile up in a vault. Your real moat is your velocity. It's not what you have; it’s how fast you learn and weave that learning back into your product.
Here is how the ground has shifted.
Data is now about feedback.
The old rule was simple: whoever has the most data wins. A massive, private dataset was the ultimate advantage. That world is gone. Large language models have turned the world’s public information into a commodity. Your static lake of data is now just a puddle.
The real advantage isn’t the data you possess; it’s the data your users generate every second. This is the flowing river of feedback that tells your AI what works and what’s valuable. Your defense comes from the speed and quality of this loop: a user acts, the data flows, the model improves, the user has a better experience, and so the cycle continues.
Network effect is now about intelligence.
The old network effect connected people to people. Each new user made the platform more valuable for everyone else. The new network effect connects users to the AI. Every interaction makes the core product smarter for every single user, instantly. Your product becomes a collective intelligence that sharpens with every click. A competitor can’t just copy your features; they would have to replicate the cumulative intelligence your users have built.
Distribution is now about workflow.
The most powerful moat has always been distribution, but AI changes the game. You are no longer just selling a product to a user; you are weaving an agent into their deepest, most critical workflows.
This is the ultimate defense. When your AI is central to how a company runs its sales team, manages its supply chain, or writes its code, you are no longer a tool they use. You are the system they operate within. The cost of switching isn't about moving data; it's about re-engineering their business. You have become a cornerstone.
The only question you should be asking instead: "If our product vanished tomorrow, how big of a hole would it leave in our customers' workday?"
The size of that hole is your only moat.