What is Defensibility (or Moat)?
Nexa Consultancy | Startup & Finance Glossary
Defensibility, often called an economic "moat," refers to a company's ability to maintain a sustainable competitive advantage over its rivals in the long term. This allows it to protect its market share and profitability.
Base Term for Startups: Investors are not just looking for a good idea; they are looking for a defensible business. A startup must be able to articulate what will prevent a larger, better-funded competitor from simply copying their idea and out-executing them.
Types of Moats: Sources of defensibility include network effects, high switching costs for customers, proprietary technology (patents), strong brand identity, and economies of scale.
Base Term Example: High switching costs create a moat for a SaaS accounting software. Once a company has all its financial data in one system, the pain and cost of migrating to a new competitor are immense, making them a very sticky customer.