The “boring” startup has a better moat than the cool one

Let's run a quick test. You've got $5,000 and two companies in front of you.

Company A is an AI tool that spins up gorgeous presentations in about ten seconds. The demo made you smile. You understood the pitch in one sentence. Company B does something with compliance plumbing inside digital health, and (be honest) you started checking your phone halfway through the explanation.

Almost every new angel reaches for Company A. We'd nudge you toward B.

Think about what the big AI labs did in the first quarter this year. One of them shipped something like 120 features in 90 days. Ninety days! And it puts a hard question in front of any early-stage bet you make: what stops a giant model from doing what your company does, for free, next quarter?

The answer comes down to one word. Is the company horizontal or vertical?

Horizontal companies cut across everything. The slide tool, the writing helper, the do-it-all assistant. They're easy to grasp and easy to love, and that's the trap. The same broad usefulness that makes them appealing makes them easy to copy. When the next model drops a hundred new features, a few of those features might just be your portfolio company's entire reason for existing.

Vertical, regulated companies are harder to flatten. Fintech. Digital health. You can't roll out of bed and code your way into those worlds. You need licenses. You need someone who actually understands regulatory workflows that took years to learn. AI can write code in a blink, but it can't grant itself a banking charter or fast-forward through the part where a human has to know the rules cold. That friction is the moat.

We've felt this firsthand. We hold a position that’s up 103x, and it's one we watch most nervously - precisely because it's horizontal. Real money, great company, but more exposed when the ground keeps moving. Our “duller” regulated bets are the ones that just keep chugging.

The unsexy verticals everyone skips usually come with friendlier valuations, because there's no crowd of angels elbowing in. So you get a better price on a sturdier business.