How important is a business moat? Learn from AND1

??How important is a business moat for startups?

I watched the AND1 Untold documentary on Netflix last weekend with my husband (which was an added bonus hearing his stories of what the league represented to him growing up in NYC).

It was fascinating to watch the story of how quickly AND1 was able to build an amazing league and revenues - they had the streetball player talent, a fresh new culture in basketball, and the fan support. A potential empire was starting to build (heavy advertising opportunities with games, merchandise, tv shows, etc).

And just like that a business with $200M in revenue plummets dramatically, almost overnight, because Nike lifted the standout parts of the brand and doubled-down with a creative commercial and a multi-million dollar ad spend...

I can't help but think about the conversations I'm having with founders about the need for a moat - so many think about this as an after thought but its important. There were a lot of other challenges with AND1 that we could discuss (leadership, player contracts, etc.), but when it came to their moat, the first mover advantage, the brand, and their unique differentiators didn't pass the test beside a behemoth company like Nike. The AND1 executives in the end had a fire sale to have any type of meaningful exit.

3 pieces of advice for founders on the moat:

????Yes - you need a moat. IP is great and but even if you don't have IP (yet), you should be thinking about how your business will dominate the market and retain market share when copycats emerge.

??Just because no one is there now doesn't mean they won't come - if you do all the amazing things you're saying you will accomplish, then trust me, they'll be direct competitors and most likely indirect competitors that also take notice and start to build competitive products or bite your brand. If your brand is your moat, it needs to be incredibly strong to survive challenges. Do the homework and invest time to think about future-proofing what you're building.

??Don't overestimate first mover advantage - the right competitor with a huge budget can overcome this (watch the documentary for an example).

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