A question for the investors: how important is defensibility to you when making an investment decision?

I’ve seen MVP’s built within weeks that start getting traction yet another person could come in, build a functionally-similar app too, and start doing the same thing. Thoughts?
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Jason Small and Kamil Rextin like this

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Roger ChabraTraction is the new IP. The more you have the more defensible your position.

9 hours ago   ·  6

1 Reply


Sandy ScottEverything is easily replicable in theory. This is why we say ideas are irrelevant and team and execution is everything. But let's assume you are right, if there are literally no barriers, nor ip/trade secrets/organizational capital, no network effects, then yes, the investment would be LESS attractive than one that has those things.

8 hours ago   ·  2
Sandy Scott

David CrowIan King if you want to go backwards in time, see: You're trying to determine which set of accretive milestones and the risks you need to knock down. Typically building the product, unless there is an inherent technical risk, is not in of itself an accretive milestone. See The goal is to figure out which risks you are addressing: * technical risk * go-to-market risk * customer risk * margin risk * business development risk * timing risk * etc The defensibility, the moat, is really about your assumptions. What is the hardest part to replicate? The functionality? The customers? As Sandy suggests no barriers, no network effects, no IP, no customers, well that's not very compelling.

8 hours ago   ·  2

2 Replies

David Crow

David CrowYou're trying to address 3 basic questions: 1. Is it a good idea? 2. Is this the team to make it happen? 3. Can I make "my money", i.e., necessary returns in the time frame? Is it a good idea? *** This is quantitative market demand (aka traction) for your product or service. How do you know that customers are willing to use or buy a product to solve their problems/desire? Are they willing to buy it from you? Are they ready to buy it now? Is the pain or number of customers growing? What is the growth plan? Ultimately this is about getting customers. Is this the team to make it happen? *** Have they done something similar in the past, i.e., is it probably they have been successful and learned how to be even more successful? If not is the team able to identify and knock down the most prominent risks? Can the founders find and convince amazing people to work with them? Can they move the needle -- see "Is it a good idea?" Do they assumptions about customers, market, product, etc. make sense? Can I "make my money"? *** This is up to the investor to determine. But you should understand who the investor is. what they like to invest in. What their typical investment size, stage, etc. If it is a fund, where in the lifecycle of a fund is it. See Damien Steel's post from the other week

7 hours ago
David Crow

Varun MathurJohn James Zupancic Roger put it well above that it is all about traction. I will bloviate on the same point.... I am not an investor but before I did my first startup, I was obsessed with the idea of protecting my IP. I filed trademarks, put up the nice shiny "Copyright" on webpages, asked everybody and their dog to sign NDAs and wasted several hours of my life learning about patents and filing a provisional patent application in the US. I cared too much about people stealing my idea and what potential investors might think because I had read on some blog that that is exactly what Hotmail's founder did. My insight into all this is that it is a colossal waste and the wrong approach. For consumer web, any investor who insists on defensibility of the idea based on IP is not an investor you should want, because going back in time that investor won't have been able to recognize the potential of a Uber or Airbnb - when both companies already had other well-funded competitors already doing what they started out to do (UberX vs Lyft; Airbnb vs HomeAway). If an investor is still failing the Uber/Airbnb hindsight test, perhaps best to stay away from such. You are better off talking about your idea openly, with everybody, because chances are there are several other people already working on it in different parts of the world, at various stages. Whatever feedback you can get and use it for product design/customer development is valuable. Your competitors in different parts of the world might not have ethical leanings -- they might view it as a anything goes approach. Having IP is meaningless if you don't have the resources to defend it. The only benefit of IP is if you are concerned someone else might prevent you from doing what you are doing - but I trust the big web companies will fight off the patent trolls and won't use their own to stifle the little guys. This is the IP I think matters for consumer web startups: facebook page name, app name on iOS and Android and registered trademark name. Everything else is a nice-to-have. To get traction, anything goes because that is how your competitors would operate, at least the ones who eat your lunch.

5 hours ago
Varun Mathur

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