What is a "Moat"?
Why the best companies have a dynamism to them and how to spot it early
As part of my weekend curiosity reading I found recently published research on something the author called “Cognitive Capital.” TLDR — moats are dynamic things that are actively evolved over time, not a singular breakthrough that sustains the company. From the piece:
“Competitive strategy traditionally emphasizes defensive "moats" such as patents, scale, or market power, yet such advantages often erode over time…firm endurance is better explained by cognitive intellectual capital and its integration into organizational architecture…[we] reframe competitive advantage as a dynamic, cognitive, and architectural property of the firm rather than a static defensive position.”
I’m not sure the above is particularly groundbreaking, but I think it’s the PhD-speak version of what VCs mean when they say “it’s all about the team.” We are, of course, broken records about this (see here, here, and here).
Armed with this information, what can one do about it? Overweight exceptionally strong EQ diligence relative to technical diligence. Find ways to determine whether this team can play the “middlegame” exceptionally well (to quote a recently viral piece). These people are rare. When you find them, lean in!
Hi Mike! I think moats such as patents and proprietary features provide an advantage at the early-stages of a startup. However, as they scale the sustenance of the company depends more on the execution capabilities of the founder. Great founders continue to innovate to ensure their moat evolves with the problem they're customer is facing. Moats are dynamic but I think this is rather well-established and its always the team's credibility that matters.
I write on VC and Startups in the LegalTech sector. I've written a post analyzing the whitespaces for investment opportunities in LegalTech for 2026. Would love to get your thoughts on it!
https://harshithviswanath.substack.com/p/three-legaltech-whitespace-plays?r=4y4gfu