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Value is created through innovation, but how much of that value accrues to the innovator depends partly on how quickly their competitors imitate the innovation. Innovators must deter competition to get some of the value they created. These ways of deterring competition are called, in various contexts, barriers to entry, sustainable competitive advantages, or, colloquially, moats. There are many different moats but they have at their root only a few different principles. This post is an attempt at categorizing the best-known moats by those principles in order to evaluate them systematically in the context of starting a company.

I am going to try to be focus on only the barriers that seem to have structural causes. This excludes things like management talent, founder vision, company culture, and the like. These things are often not imitated, but not because they are not imitable: in many cases they are simply indications of an apparently rare competence. And while competence may be the ultimate competitive advantage to an individual, it is the property of the individual, not the company. (There are some things about company culture that are more than individual competence, and we’ll talk about them later.)

Last in this lengthy preamble: I am not inventing anything here, I am categorizing. Every business strategist seems to have a list of moats–Porter, Rumelt, Helmer, Greenwald, Mauboussin, etc. all the way back to Adam Smith. This post is less interested in the catalog of moats or the advantage a particular moat confers; it is more interested in attempting to isolate the underlying mechanisms that moats have in common to determine the difficulty a startup might have in establishing a barrier against competition.

A word of thanks: I started this process by thinking out loud on Twitter and got a ton of useful feedback. People who contributed, not necessarily in order of importance: @varma_ashwin97, @BrentBeshore, @vpmishra01, @shearic, @allafarce, @CeoNunneley, @amontalenti, @KyleJudah, @trbouma, @aortenzi, @nw3, @CookedDoug, @clearingfog_III, @Zenomercer, @DickeySingh, @khaledealy, @DavidShrier, @harshagopi1, @wminshew, @CantHardyWait, @nikillinit, @kerryritz, @rtrpkovski, @harshagopi1, @modestproposal1, @SwitchCost, @simonbayly, @ric0seq, @tek_fin, @Rick_Zullo, @dhaber, @jmelaskyriazi, @JonahCrane, @jrfuisz, @msitver, @ErikThomson7, @wardleymaps, @nlpnyc, @jpvisto, @mdawes2, @emrahyalaz, @anglebalancing, @LeonardoDCruzJr, @evolvable, and @chriskeating. And, of course, (though not on the Twitter) the inimitable Justin Singer. (If I missed you, let me know, Twitter threading is awful.)

In high school economics you learned that in perfect markets there is no excess profit, companies compete it away. But when an innovation that creates a better product or a cheaper way of making the product comes about, the innovator can reap some of the innovation’s value as excess profit. This excess only lasts until competitors catch on and imitate the innovation. One of the strategic tasks of an innovator is to deter imitation for as long as possible.

This applies not just to companies in established markets, but to startups that are creating new markets. If a startup is manifestly successful, if customers are rapidly adopting their product, then more established companies and other entrepreneurs will quickly move to imitate them, taking some of the innovation’s value and ultimately eliminating the excess profit the innovator can capture. Startups too must try to deter imitation.

An innovation is a type of competitive advantage (though not all competitive advantages are innovations) and the strategic job is to make that competitive advantage sustainable over timeCompetitive Advantage: Creating and Sustaining Superior Performance”, Collier Macmillan, London, 1985; 2nd edn, Free Press, New York and...