Moats in the Atmosphere

In the wake of the Atmosphere Conference, all discussion of business models and funding got me thinking and no better way to think through something than to write about it.

Not trying to pick on @hipstersmoothie.com by quoting his posts here to disagree with them. They were the posts that got me thinking the most and that is undoubtedly a positive indication.

Underlying all of these potential investments is the idea that building on atproto is an advantage compared to other options. If it's not, then any product or business will be succeeding in spite of being built on atproto or doesn't need to be and there isn't much point in having this discussion at all.

Given that, in spaces that lend themselves to atproto apps, you could actually make the argument that all non-atproto businesses aren't investable because they are inevitably going to lose out to their atproto competitors.

Now, it's possible that what this means is atproto has rendered all social media-adjacent software businesses uninvestable because it will all end up being lifestyle businesses unable to scale appropriately.

However, the conclusion that software won't scale well enough to merit investment and instead investors will turn their capital to other industries that scale better feels like something that can be rejected as a reductio ad absurdum. Software startups are so investable precisely because they scale better than anything else.

That being said, I do think Andrew is onto something with the idea that the nature of atproto doesn't mesh with the general thesis of VC tech investing over the past few decades, that as he says, a few huge players that have won. VC firms are all built on the idea that you can make 99 investments that fail as long as the 100th one succeeds and returns 1000x to make up for all the other losses.

Rather than atproto startups being uninvestable, I think it's possible that it's just not investable at the most extreme end of the spectrum with very few successes that result in massive returns. But, if that's the case and the underlying thesis that atproto confers advantages proves correct, then it may actually be the case that atproto breaks the extremely high risk, extremely high reward VC business model.

Described another way, it makes investing in software more like investing in almost everything else rather than an extreme outlier. Which, when you think about it, doesn't seem so crazy at all.

Community Moats

This reply from further down in the thread presents an interesting idea. Perhaps the moat isn't around any company or app, but rather around the lexicon.

The network effects of the shared lexicon certainly do create a moat (or additional moat).

It also provides a way to, in essence, bet on a technology rather than a specific company. If an investor is convinced that standard.site is the future of long-form publishing, then they can make multiple bets on that by investing in leaflet.pub, pckt.blog and offprint.app .

That is not much different than a VC who thinks bitcoin is the future and invests in many crypto-related businesses. Sometimes that larger bet about a certain technology being the future is a bust, like renting scooters that were randomly left on the sidewalk. Sometimes it's correct and you end up with one dominant player in a market like Uber or Airbnb.

I am with @hipstersmoothie.com that the lack of a data moat makes it much harder for any one of those to end up as the overwhelming standard.site winner that returns an absolutely massive multiple for early investors.

However, I think he underestimates the impact that this has on the risk. One major risk factor in investing in one of the standard.site companies is that in a winner-take-all market, they could do everything very well and still lose out to a competitor who does everything even better. Not being able to do that do competitors also means competitors in that space can't do it to them.

Perhaps instead of 1 of 100 investments returning 1000x, investors will need 1 of 10 to succeed and each return 100x.