Polovets: Moats determine long-term margins and prevent zero-margin decay
Leo Polovets · 20VC: Why Warm Intros Are Mostly Dumb, Why Ownership is Built On First Check and 4 Crucial Elements To Make Cold Inbound Attractive with Leo Polovets, General Partner @ Susa Ventures · Nov 12, 2018 · at 13:00
Leo Polovets, General Partner at Susa Ventures, explains to host Harry Stebbings why competitive moats and defensibility are critical for sustaining company profit margins over time.
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“Well, I think the reason that moats are important is that they basically determine your profit margin over time. So if you build something that no one else can build, you can make 20 or 50 or maybe even 90% margins. But if what you're doing is easy to copy, then your margins go to zero over time. And so, because for example, like, let's say you have 20% margins and somebody might come in and say, oh, this is really easy to copy. I'd be happy with 15%. So let me just do that. And then, you know, the next person comes in and says, well, this is easy to copy and I could do fine with 10%. And so over time, like your margins just get squeezed down to zero. And having a moat that prevents that is really important.”
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