Transcription
I think more businesses are going to die in the next 5 years than have in the last 50 years. And I'm pretty worried.
See, since selling my startup, my main job is investing in founders at the VC firm I run, L7B. And what I'm seeing right now from entrepreneurs and the pitches I get has me extremely worried for existing companies and for people like you building the future.
See, historically, starting a business meant you had to get resources like technical expertise, employees, capital, servers, you name it to actually start the business. And that was a huge hurdle that stopped 99% of ideas from ever becoming real businesses.
But that has really changed, especially in the last few months. AI and these coding agents have essentially compressed what used to take years into days. And now you can build a pretty good product with no funding, no team, and honestly like not a whole lot of knowledge. You can just ask AI for some ideas, vibe code a thing together in your weekend and it's real. It works. Like if you haven't tried it, try cloud code, try lovable. You can build a real app in a couple hours.
And that sounds great. But it's actually extremely dangerous for people building right now. See, the playbooks that actually made people rich during the last kind of 50 years have been relatively simple businesses. If you break something down like Instagram, it's really just an app where you can take a photo and share it with your friends. But now with AI, anyone can build these products. And this has really shifted the business playbook in ways that I think most people are not aware of.
So in this video, I'm going to walk you through six ways you can actually defend your idea and build an unkillable business using something we call moes. Now moes are just ways to keep people out of your castle back in the day. And the way I would describe it today is the larger your moat and the taller your castle walls, the harder it is for people to storm it. And what you want to do is you want to build a moat and a castle so tall that people look at your moat and your castle and say that it's a thousand foot wall. I can never climb that and they just go and take some other castle.
And the six modes that I'm going to cover are the most reliable modes that you can use as an entrepreneur. Uh if you get two, you're pretty good. Like people will not be able to mess with you. In fact, the last two that I'll share are the exact modes that I used for the business that I sold for 9 figures. It was we literally just had these two modes and they did everything. But you can pick and choose based on your business.
So, the first moat you can build is what's called a brand moat. And the best example of a brand moat is Coca-Cola. I mean, think about Coke as a business. There are so many other soft drinks that have come and failed, tried to replace Coke as the default drink, but Coke still dominates the field. Literally, if you're watching this, you can go buy the ingredients and make identical Coke yourself. Go try to sell it, though. No one will buy it because Coke doesn't own the formula or the taste. They own the brand. What they've done is they've built a feeling, a lifestyle, and identity around people that drink Coke. And honestly, brand moes are one of the most powerful modes you can build. In fact, Warren Buffett has basically exclusively invested in brand-based moat businesses for decades. And coincidentally, he's a major holder in Coke because of this. Coke pays him, I think, billions a year now in dividends cuz he owns so much of Coke cuz he understands the brand moat.
Now, the simple formula for building a brand moat is you take your product and you associate it with desirable traits your target audience wants in their lives. So, for Coke, they run a lot of ads where it's beautiful women in bikinis and they're running with their men and they're going to the beach. They're having fun at parties. It's all these things that people want in their lives. They want connection. They want fun. And Coke constantly says, "Hey, you want to feel that feeling? Buy a Coke. You want to feel that feeling? Drink a Coke." And so, they're building that over time.
But Coke actually combines another moat that really makes them sort of this unstoppable business which is a distribution mode. So a distribution mode simply means that you have an unfair advantage in how you get your product in front of people. And the best way to think about this is imagine two products. Both are equal in price, equal in quality. Everything else is the same. The product with the better distribution will win every time. And Coke knows this very well. So, what they do is they actually send reps out to every restaurant, especially when you open a new restaurant. And they say, "Hey, congrats on opening the new restaurant. Uh, I think you need some fridges for drinks. Why don't we put some fridges in your business?" And of course, what are those fridges stocked with? Coke. And so, right away, as soon as you open a business, Coke is the first person knocking. They are getting in that distribution locked in from day one.
And very quickly now, we've seen distribution modes become one of the primary ways that brands win in today's environment. Like if you look at brands today, they're not signing celebrities for these sort of one-off campaigns, many brands are signing influencers as long-term ambassadors because they know that if they have a group of influencers that is constantly pushing their product, that is distribution where they're distributing their marketing and thus their product because they've locked in those influencers and so they can't promote competing products. These are distribution modes.
So the third mode you might want to use is what's called a data mode. And what this means is that you have access to some sort of proprietary data and as you get more data, your product improves over time. And so let me give you an actual example so you can see how this works. Uh imagine an AI powered cancer screening company. The AI looks at someone's cancer screens and it determines does this person have cancer or not and what type. Simple business, maybe not simple to build, but you get what I mean, simple to understand.
So how does this business actually become a data mo? Well, over time, what would happen is this business would likely look at thousands, if not millions of screens, and they would train the AI to determine, was this real cancer or was it a false positive? And after they get to millions of scans, they can probably predict it with nearperfect accuracy, probably even better than doctors. And what this does is it creates a massive data mode where a new entrant coming in has no scan data to use. They may be able to buy some, but they don't have first party access to proprietary scan data. And what happens is the new entrance is just less accurate and therefore no one wants to use a new entrance, so they constantly go with the same company.
Uh, another example, actually, I didn't have this in my sort of notes, but uh, Google is a really good example. Google just has the best search results, and by having the best search results, more people use it. Uh, and therefore, they get better data on what makes good search results. and they keep growing their data mode to where now like of course Google's just the default search engine that we use. And so data modes are really powerful because if you can get data that compounds over time, you literally just block out all competition and next thing you know like SEC is suing you for being a monopoly and all these amazing problems that you probably want as a business cuz you're so successful.
For the fourth note, I'll use another Google product example. Uh because they're sort of, you know, maybe you call them too big to fail, but uh actually what I would say is, you know, a lot of Google products today are too big to leave. Uh and an ecosystem mode is literally the best way to do this. An ecosystem mode simply means that your product becomes a platform that everyone else is building on or around.
And so, let me give you a thought experiment. Uh imagine you're an entrepreneur today and your job is to create a YouTube competitor. I would reckon that you probably actually can't because of the way ecosystems work. See, all the creators are on YouTube and all the viewers are on YouTube. And so creators want to publish on YouTube because they know they'll get more views. People want to go to YouTube to look at the creators cuz they know all the best creators are there. And so if you have a new platform with no creators and no viewers, neither side wants to go there. And so you'll constantly have this issue where even if you get a few early adopters, they will eventually just give up, get frustrated, and go back to YouTube.
Salesforce is the same. Um it's this frustrating example from my own personal life. Uh one thing you learn when you build a startup uh in the B2B sales space is that over time every VP of sales has worked with Salesforce. And as your team grows and you hire these amazing VPs of sales, they will come in and they'll be like, "Where's my Salesforce dashboard?" And then you hire really good account executives and they're like, "Where's my Salesforce dashboard?" And the next thing you know, you're switching to Salesforce. It literally happens to every single company because there's this entrenched ecosystem where everyone's just used to using Salesforce and so everybody keeps using it. It was very annoying for me. I used to pay six figures a year for Salesforce, but that's how powerful an ecosystem mode is.
Now, let me tell you about the modes that I actually used in my business and that allowed us to sort of keep out competitors and build a very successful business. So, the first is actually called a compliance and legal mode. So a compliance or legal mode simply means that you haven't gone through regulatory or legal processes that others can't shortcut.
So my own example is we were selling software to car dealerships. And in the US the sales of automobiles are extremely regulated. There's federal laws, there are state laws and then there's sort of like can even be zip code laws. And there's compliance that changes whether you're selling a new car, a used car, a Toyota or a Ferrari. And so there's a lot of really painful uh legal tape that you have to go through just to be able to do what we did. And it cost us hundreds of thousands of dollars and years of my life figuring this stuff out just to be able to build our software and sell it. And yes, AI can draft up the docs. AI can tell you what to do. But AI can't meet with lawyers, meet with government officials, and actually get the approvals you need in these sort of businesses. It's painful. It sucks. But by building a business in a regulated space, you do build a barrier that keeps competitors out. And that will not go away in the AI age.
And then our sixth mode, which my business also combined with our legal mode, is a hard-coded IP mode. And what an IP mode is is it essentially means that you have built some sort of proprietary logic in your software that handles complex real world systems. So again, using my own company as an example, we basically sold software to dealerships that took what was a 3 to four hour process to buy a car and could literally turn it into minutes fully online, no salesperson involved. And so to do that, we have to integrate with the car dealership, with the local registration at the DMV, uh what's known as the DMS in the dealership, the CRM, the FNI office, all the different legal paperwork, the headquarters if it's a Toyota or if it's Lexus or, you know, Honda. We have to do all that. And we have to do that for all 50 states, every zip code, every make, model, trim ever made, used and new. Let me tell you, that sucks. It's so hard. Again, years of my life figuring this out. Uh, and you can't just copy that. You have to try that, test that. We literally would like basically live in the dealerships to understand how it all puts together and try to automate it. It took us years to figure it out. You can't replicate it quickly. And it allowed us to keep out new entrance.
So, like I said at the beginning, you can win with just two of these, but if you get all six, you are unstoppable. Now, if you like this video and you want to learn how to build your own multi-million dollar business, I made a video that walks you through it step by step from no idea to a live business with paying customers. You can do it in 90 days. That video has been watched by almost a million people.