I’ve seen a lot of pitch decks. As an angel investor with over 200 startups in my portfolio, including some names you might recognize like Anthropic, OpenAI, Scale AI, and Hugging Face, I get a front-row seat to the future. And right now, the future is all about AI.
But here’s the thing. The way everyone is thinking about AI is wrong. The old playbooks? They’re obsolete. The moats that used to protect a business, the things that made it defensible? They’re gone.
I’m talking about proprietary data and secret algorithms. For years, that was the holy grail. If you had a unique dataset and a clever way to process it, you had a business. But in a post-GPT world, that’s no longer the case. The big guys, the ones with the massive resources, have commoditized the models. You’re not going to out-algorithm Google or Microsoft. And with the rise of synthetic data, even unique datasets are losing their edge.
So, where does that leave the rest of us? How do you build a defensible AI startup in 2026? It’s a question I’ve been wrestling with, both as an entrepreneur who has built and sold two companies and as an investor who is constantly looking for the next big thing.
And I think I have an answer. It’s not about what you have, but what you build. It’s not about secrets, but systems. The new playbook for AI defensibility is about three things: network effects, brand, and building a system your competitors can’t replicate.
The Old Moats Are Gone
I remember my first startup, MovieLaLa. We were building a social network for movie lovers. This was back before the iPhone, before the App Store. We had to build everything from scratch. We had our own servers, our own database, our own code. It was a huge undertaking. And because it was so hard, it was also a huge moat. No one could just come along and copy us. They’d have to build everything themselves, too.
My second company, RemoteTeam, was a different story. We were building a platform to help companies manage their remote teams. This was in 2020, right when the pandemic hit. Everyone was going remote, and they needed tools to help them do it. We were in the right place at the right time. But we weren’t the only ones. There were a lot of other companies in the space. What made us different? We were acquired by Gusto, a 10 billion dollar company, because we built a system that was hard to replicate. We had a unique way of handling international payroll, and that was our moat.
But today, even that is not enough. The world has changed. The pace of innovation is faster than ever. What was a moat yesterday is a puddle today. You can’t just build a better mousetrap. You have to build a better system for catching mice.
The New Playbook for AI Defensibility
So, what does this new playbook look like? It’s not a secret formula. It’s a set of principles. It’s a way of thinking about your business that puts you in a position to win, even when the odds are stacked against you.
Network Effects
The first principle is network effects. This is the idea that your product or service becomes more valuable as more people use it. Think about Facebook or LinkedIn. The more people who are on the platform, the more valuable it is to each individual user. That’s a powerful moat. It’s hard to compete with a company that has a strong network effect.
In the world of AI, network effects can be even more powerful. Think about a company like Waze. The more people who use Waze, the better the traffic data gets. The better the traffic data gets, the more people use Waze. It’s a virtuous cycle. And it’s a moat that’s very hard to cross.
So, how do you build network effects into your AI startup? It’s not easy. But it’s not impossible. You have to think about how your users can contribute to the value of your product. Can they provide data? Can they train your models? Can they help you build a community?
Brand
The second principle is brand. This is the idea that your company has a reputation for something. It’s the reason why people choose your product over your competitors, even when your product is not demonstrably better. Think about Apple. People don’t just buy iPhones because they’re the best phones. They buy them because they’re Apple products. They’re part of a tribe. They’re part of a story.
In the world of AI, brand is more important than ever. There’s a lot of fear and uncertainty around AI. People are worried about their jobs. They’re worried about the future. They’re looking for companies they can trust. If you can build a brand that people trust, you have a powerful advantage.
So, how do you build a brand in the world of AI? It’s not about having a cool logo or a catchy tagline. It’s about being transparent. It’s about being ethical. It’s about being a good citizen of the world. It’s about telling a story that people can believe in.
Systems, Not Secrets
The third and final principle is building a system your competitors can’t replicate. This is the most important principle of all. It’s the one that ties everything together. It’s the one that will ultimately determine whether you succeed or fail.
What do I mean by a system? I mean a combination of people, processes, and technology that work together to create a unique and valuable product or service. It’s not just about the code. It’s not just about the data. It’s about how everything fits together. It’s about the culture you build. It’s about the way you work.
I’ve seen this firsthand. At RemoteTeam, we had a unique system for handling international payroll. It was a combination of our technology, our processes, and our people. It was something that our competitors couldn’t just copy. It was our secret sauce. And it was the reason why we were acquired by Gusto.
So, how do you build a system that your competitors can’t replicate? It’s not something you can do overnight. It’s something that you have to build over time. It’s something that you have to be intentional about. You have to think about every aspect of your business, from your hiring practices to your product development process. You have to build a culture of innovation. You have to build a team of people who are passionate about what they do.
The Future is Bright, But It’s Not Guaranteed
I’m an optimist. I believe that AI has the potential to solve some of the world’s most pressing problems. But I’m also a realist. I know that the road ahead is not going to be easy. There are going to be winners and losers. And the winners are going to be the ones who understand the new playbook for AI defensibility.
So, if you’re an entrepreneur who is thinking about starting an AI company, I have one piece of advice for you: don’t follow the old playbook. Don’t try to build a better algorithm. Don’t try to find a secret dataset. Instead, focus on building a system. Focus on building a brand. Focus on building a network effect. That’s how you’re going to win.
Frequently Asked Questions
Do all experts agree with this view?
No, and that's fine. The best ideas in business are often contrarian. I share my perspective based on my experience and data, but I encourage you to seek out opposing viewpoints and form your own conclusions.
How can I apply this thinking to my own situation?
Start by identifying the core principle behind the opinion, not the specific example. Then ask yourself: does this principle apply to my context? If yes, test it in a small, low-risk way before going all in.
How has this view evolved over time?
My thinking on most topics has changed significantly over the years. Early in my career, I held many conventional views that experience proved wrong. I try to update my beliefs when the evidence changes.
What's the most common pushback you get on this?
People often push back by citing exceptions or edge cases. And they're usually right that exceptions exist. But building a strategy around exceptions rather than patterns is a losing game for most founders.