The bigger the opportunity, the more general the audience, the juicier the B2B market, the greater the risk.
Time was when Jasper was valued more highly than OpenAI. Now it’s flagging and OpenAI is headed for 12 digits…
- e-commerce app is a thin ChatGPT wrapper for the shopping experience but their moat is their products and supply chain details
- video game using LLM NPCs and other dynamic experiences but their moat is something else like incredible graphics or being based on some known IP
- any business based on curation or archival of past LLM responses or interactions, moat could be some quality of that particular data, like other data businesses
Short answer: Yes I think so.
(Still assuming you are using OpenAI) if your solution implementation has 2% prompts and AI specific stuff and 98% other functionality while AI is still central to your solution then you have possibly a moat. Seems existing systems adding AI are long term AI money makers.
Then there is the example of OpenAI etc; too costly to reproduce simply by not having enough compute.
Besides technical moats, you have client base moats; for instance, a trivial to implement application, like say, Resend (where you can find tons of open and paid alternatives for) did their marketing well (until they got hacked a few times that is) which gave them a moat and they still have some of it. Here is where large incubators give you some advantage; they use circlejerk to give you a lot of clients (their other companies and their clients) from the start.
Then there is a regulatory moat which is common in banking, healthcare etc; you need certificates in distinct regions etc. That makes it harder to compete without having a lot of money.
IP moats; maybe there are patents which competitors would need to work around. I'm against software patents however, they do exist and can hinder competitors to compete directly.
These are all moats which hinder competitors coming up. If a large company wants to compete with your software solution, they can copy it and go after your market. Usually they will look at your moat and just buy you out giving them the moat.
But yes, it is why VCs want you to grow as fast as possible at any cost; to 'take the market' so you have a moat in one or more of the above so in the end it's too much work to catch up and you'll be bought (exit).
Solely on technical merit, it is expected that AI will remove this moat completely over time, but we are not there yet. We don't know what software will look like at that time anyway; probably not really recognisable vs now.
Even if you've plugged in OpenAI, there's a lot of ops work that goes into monitoring and managing output quality, reliability, and continuous improvements at scale.
Soon enough every company will be an AI company. So to create a moat it could be a case of creating a company that wasn't possible before AI that has the characteristics to create a moat - imagine something like a personal cooking assistant that links up with your health apps and buys your groceries for you, optimised for your health - add a yearly subscription for next-day delivery and you have your moat.
A lot of AI startups that are building on top of OpenAI are effectively building a feature, a small very specific solution for a small use-case. Most of those are going to fail when OpenAI or some other entity with a product will add that feature to their product.
But, if you solve a real large pain point that has value and use LLMs via OpenAI to add 1 or more features to your offering which allows it to solve that pain point more effectively and differentiate from competitors, then you have a moat.
But you can build a product connected to OpenAI fine. Anthropic uses a similar API. Most of the smaller LLMs will also copy the same design so switching is cheap.
It's probably not a smart idea to be completely dependent on OpenAI either. They're down all the time, can ban you on a whim, and their customer service is inaccessible.
The OP question was about LLM based companies using OpenAI api's. Most (almost all) of these are thin wrappers with some prompting; most of the ones introduced here on HN or Reddit, I can outperform in minutes. I try them all to see if someone is doing something interesting, but 99% are not, they just took some SaaS starter and added AI in there and threw it on social media. Even the ones that went somewhat further are still just doing straight forward things that can be replaced trivially inside the OpenAI playground. That's no moat at all. It looks flashy but...