In a space like AI where everyone uses the same models and tech moats are rare, competing on technology is futile. The winning strategy is to ignore the competition, focus intensely on a narrow ideal customer, and build an amazing product vision tailored specifically to their needs.
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Founders often mistakenly market "AI" as the core offering. Customers don't buy AI; they buy solutions to their long-standing problems (e.g., more leads, better service). Frame your product around the problem it solves, using AI as the powerful new tool in your solution space that makes it possible.
Investor Stacy Brown-Philpot advises that to win large enterprise deals, an AI startup must create a solution so compelling it beats the customer's internal team vying for the same budget. The goal is to access the core 15% budget pool, not the 1% 'play money' budget.
With AI commoditizing the tech stack, traditional technical moats are disappearing. The only sustainable differentiator at the application layer is having a unique insight into a problem and assembling a team that can out-iterate everyone else. Your long-term defensibility becomes customer love built through relentless execution.
Since LLMs are commodities, sustainable competitive advantage in AI comes from leveraging proprietary data and unique business processes that competitors cannot replicate. Companies must focus on building AI that understands their specific "secret sauce."
In a competitive landscape, the winning long-term play isn't a marketing land-grab. The founder of Simple AI argues for focusing relentlessly on building the best-in-class product, as sophisticated buyers will compare options and choose the superior technology.
Startups like NextVisit AI, a note-taker for psychiatry, win by focusing on a narrow vertical and achieving near-perfect accuracy. Unlike general-purpose AI where errors are tolerated, high-stakes fields demand flawless execution. This laser focus on one small, profound idea allows them to build an indispensable product before expanding.
As AI commoditizes technology, traditional moats are eroding. The only sustainable advantage is "relationship capital"—being defined by *who* you serve, not *what* you do. This is built through depth (feeling seen), density (community belonging), and durability (permission to offer more products).
YC Partner Harsh Taggar suggests a durable competitive moat for startups exists in niche, B2B verticals like auditing or insurance. The top engineering talent at large labs like OpenAI or Anthropic are unlikely to be passionate about building these specific applications, leaving the market open for focused startups.
Now that generative AI is accessible to all, claiming "we have AI" is table stakes. The real competitive advantage lies in clearly articulating what the AI *does* for the user to create a differentiated product experience and value proposition. The key question is always, "So what?"
When competing with AI giants, The Browser Company's strategy isn't a traditional moat like data or distribution. It's rooted in their unique "sensibility" and "vibes." This suggests that as AI capabilities commoditize, a product's distinct point of view, taste, and character become key differentiators.