Moats Need Ecosystems to Scale Quickly
by Brian Balfour on August 17, 2025
Brian Balfour believes we're at the cusp of a new distribution platform emergence, likely centered around ChatGPT, creating a rare growth opportunity that hasn't existed in years. This represents a critical moment for companies to gain competitive advantage through early adoption.
The core insight from Balfour's analysis is that building a great product is necessary but insufficient for success. The real separation between winners and losers comes from building great distribution. As he puts it, "startups is a game of trying to get distribution before the incumbent can copy." This escape velocity game has become increasingly difficult as incumbents copy faster, organic distribution channels shrink, and AI accelerates competition.
New distribution platforms follow a predictable four-step cycle: First, market conditions create fierce competition with no clear winner. Second, a player identifies their moat and presses their advantage by establishing a third-party platform that offers distribution in exchange for ecosystem participation. Third, the platform eventually closes down through monetization, absorption of key use cases, or suppression of organic distribution.
This pattern has repeated across Facebook, Google, iOS, and LinkedIn. The cycles are getting shorter, giving companies less time to capitalize on opportunities. Balfour emphasizes that companies cannot opt out of this game: "It ends up being a prisoner's dilemma... there is no opting out of the game. You have to play the game." If you don't participate, competitors will, and customer expectations will shift accordingly.
For startups and growth teams, this means making focused bets rather than spreading resources thin. Late-stage companies can afford to place multiple bets, but startups must choose one platform and go all-in. When evaluating platforms, prioritize retention and engagement depth over user numbers, consider user quality and monetization potential, analyze the value exchange, and factor in scale.
Most importantly, while planning your entrance strategy, simultaneously develop your exit strategy. As Balfour warns, "Knowing once again that that last step is going to come at some point in the future... you immediately need to move towards okay, what's my exit plan here." This means finding ways to own critical parts of the user experience, accumulate specialized data, or create micro-network effects that persist beyond platform dependency.
The opportunity to disrupt incumbents through new distribution channels is significant but fleeting. Companies that recognize this pattern and act decisively stand to gain disproportionate rewards, similar to how Zynga leveraged Facebook's platform or how early adopters capitalized on previous distribution shifts.
Brian Balfour, Founder and CEO of Reforge