When competing with an established leader, focus on creating an immediate 'wow' moment in a painful process. Using AI-native onboarding to automate cap table creation turns a multi-day task into a delightful, minutes-long experience that incumbents struggle to match.

Prepared realized it couldn't win against GovTech incumbents on their terms of sales relationships and lobbying. Their strategy was to fundamentally shift the competition. By offering a free, easy-to-use product, they forced the purchasing decision to be about technology quality, an arena where they could excel.

Traditional SaaS switching costs were based on painful data migrations, which LLMs may now automate. The new moat for AI companies is creating deep, customized integrations into a customer's unique operational workflows. This is achieved through long, hands-on pilot periods that make the AI solution indispensable and hard to replace.

Startups often fail by making a slightly better version of an incumbent's product. This is a losing strategy because the incumbent can easily adapt. The key is to build something so fundamentally different in structure that competitors have a very hard time copying it, ensuring a durable advantage.

A slightly better UI or a faster experience is not enough to unseat an entrenched competitor. The new product's value must be so overwhelmingly superior that it makes the significant cost and effort of switching an obvious, undeniable decision for the customer from the very first demo.

Traditionally, startups attack the mid-market due to the complexity of enterprise products. Serval's founder argues GenAI enables small teams to build feature-complete, enterprise-grade platforms quickly. This unlocks a go-to-market motion of directly displacing incumbents from the start.

An AI-native service provider goes directly to the end customer, bypassing intermediaries. They offer a superior result (e.g., faster, cheaper cybersecurity) at a lower price, making the switch an easy decision by solving the entire problem.

Amplitude's CEO explains how incumbents counter "feature-not-company" AI startups. They rapidly build the startup's core functionality, give it away for free, and leverage it as a powerful lead generation tool for their existing business, commoditizing the startup's value proposition overnight.

Shure challenges EOR giants like Deel by re-architecting their manual back office with AI agents. This vertical integration creates a moat, as incumbents with established processes and reseller models cannot easily adopt this approach without cannibalizing their existing business.