Looking back to move forward

David Peterson
Angular Ventures
Published in
3 min readApr 25, 2023


With each passing week, it becomes clearer just how much of an impact generative AI will have on the future of software, and how little we know about what that future looks like.

For those of us who live and breathe technology, this is both wonderfully exciting and wildly disconcerting.

As an example, I was catching up with a former Airtable colleague a few weeks ago. He’s an extremely talented engineer. Has a killer product instinct. And I’ve never seen him more excited than when he’s talking about the latest LLM-powered app he’s hacked together. But he is, unabashedly, incredibly anxious as well. Why? Because he doesn’t know what to build. No idea seems defensible these days. New applications can suddenly become features. Infrastructure can be easily subsumed by incumbents. How can you decide what to build when the ground is shifting underneath you so quickly?

In times of dislocation, such as this, I find it helpful to go back and read the contemporaneous thoughts of people I respect during previous moments of uncertainty…which is how I found myself reading old posts from Fred Wilson’s blog over the weekend.

There’s a lot of great content from A VC in the mid-to-late 2000s. The rise of the cloud meant the cost of producing software fell precipitously (sound familiar?), and Union Square managed that uncertainty better than almost anyone.

There’s one post I keep coming back to. It’s called “The Dental Software Story” and in it, Fred recounts why Union Square’s very first thesis was all about investing in “networks.”

He tells the story of a software entrepreneur that builds a comprehensive dental office management system called Dentasoft. Dentasoft is expensive, but it takes off, hits $100M ARR, and goes public. A few years later, some young entrepreneurs built a competitor to Dentasoft called Dent.io. Dent.io is modern, mobile-first, and one-fifth the price. Dent.io starts stealing customers from Dentasoft. Around this time, an open source community crops up to build an open source version of dental office software. A hosted version pops up and becomes very popular with forward thinking dentist offices. And so on.

The moral of the story is that software alone is a commodity. As Fred wrote: “[t]here is nothing stopping anyone from copying the feature set, making it better, cheaper, and faster. And they will do that…[Back in 2003, w]e saw the cloud coming but did not want to invest in commodity software delivered in the cloud. So we asked ourselves, “what will provide defensibility” and the answer we came to was networks of users, transactions, or data inside the software. We felt that if an entrepreneur could include something other than features and functions in their software, something that was not a commodity, then their software would be more defensible.”

There’s something so comforting about the way history rhymes. Yes. Software is a commodity. And at this moment, as the cost of building software trends toward zero, never has that been more true.

So, what matters now is what has always mattered: First, do you have a unique customer insight? And second, can you leverage that insight to build a business that has line of sight to some sort of durable, competitive advantage?

There are many paths to building a sustainable competitive advantage. Network effects work. You might also benefit from cost advantages. Or perhaps high switching costs or high barriers to entry. There isn’t just one way to get there.

But I think we all convinced ourselves, over the past few years, that you didn’t need to do it at all. Maybe a good customer insight is enough, we’d say. Perhaps product sense is all that is needed, we’d argue. Indeed, the cost of building software had grown so much that we convinced ourselves that capital itself was a moat. I’m not sure if that was ever true. But it’s certainly not true any more.

So if, like my friend, you’re feeling a bit anxious, go read some old posts from Fred. He’ll remind you that we’ve been here before. And sometimes the best way to figure out how to move forward is to look back.