The marginal cost of producing software has basically gone down 1000x in the last 3 years.

So your moat as a software business is no longer your ability to produce software.

Your moat can only be one of two things:

1. You have some form of legacy distribution. If you have distribution already, the zero marginal cost of producing software will give you enough opportunities to build new products, sell into your existing customers, and grow your revenue.

2. The second option is proprietary datasets. All the public data in the world has been compressed into these LLMs. The companies that retain proprietary datasets will still have some power.

If you have UGC (user-generated content), you can structure and use it as RAG (retrieval-augmented generation) inputs for your own AI agents.

As the results from the agents improve thanks to your proprietary datasets, your product's utility will increase. This will attract more users and usage, who will provide more UGC for you.

This can become a positive reflexive feedback loop and a self-reinforcing flywheel.

Software startups without existing distribution that are not thinking about creating proprietary datasets are in for a real shock, real soon.