Many of the companies we help build initially look trivial. Today I signed a stock purchase agreement with a team building a mobile app that will take us ~2 months to build. Most of my friends at Cornell or outside of university could have built something similar.

But barriers to entry come in multiple forms:

(1) Access to buyers: the founder of this company has unique access to the customer base he is trying to reach. Access comes in a few forms. Does a founder have the necessary contacts needed? Is he/she a reputable person in the industry? Is he/she good enough at sales that meetings lead to closed deals?

(2) Technology: if the technology is great, difficult to build and time consuming, this creates a barrier to entry.

(3) Does the technology gets better and better over time, and as data is fed into it? For example, big data companies get better over time, helps them make better decisions and that barrier increases because of the critical mass and improvement it’s made. First party data is so valuable because of the barriers it provides.

(4) Network effect is similar to the above point. When a critical mass of users are on a given platform, it makes the platform better than the platforms of new competitors because those existing users likely won’t switch if they are sufficiently happy. The more users on the platform, the better it becomes, creating larger barriers over time.

(5) High switching costs: if a company builds a product deeply engrained into a business’ every day practices, training has been executed, etc. then switching to a new system will require IT costs, HR investment and brain damage.

(6) Slight customization also creates a barrier to entry. When companies like Palantir create products tailored to each client, it makes it nearly impossible for a client to switch vendors.

(7) Trust & Validation: Once a product is trusted by one key client, other major clients will be willing to sign on. Goldman Sachs rarely commits to a new product because they want validation from others that it works, that the company providing the product won’t go under, etc.

School districts are similar. They buy based on validation achieved via other customers — the nut to crack is getting those first customers who are willing to testify and serve as validation. Big companies care less about price and more about the assurance that a product will work.

Once a barrier to entry has been created, keep creating moats. Amazon has done an amazing job of using capital to invest in warehouses that make them literally unfair to compete with. Google continues to improve its search algorithm and build products that we rely on, making it hard for us to switch.

The important piece, though, is that even the most simple business problems can create barriers to entry. Just be deliberate in how you create those. For CoVenture, our barriers to entry are:

• Access to buyers (access to founders)
• Our tech team
• High switching costs
• Slight (or major) customization
• Trust and validation