With all the continued talk about the SaaS apocalypse and the challenges facing software in the age of AI and “vibe coding,” last week on the podcast 20VC, startup investor Gokul Rajaram shared his eight moats for sustainable software companies. Similar to other frameworks around what makes a business durable, these are presented in the context of software and cloud. Let’s take a look at the eight moats for software: 1. Data Software companies with proprietary data have a clear advantage. This data can come from reaching a critical mass of customers or from exclusive agreements with third parties. Even in the age of vibe coding, where building software has less friction, some products are 10x better or only possible because of proprietary data. 2. Workflow Workflow refers to software that is mission-critical to running a business. Examples include accounting systems or e-commerce platforms. The more deeply embedded the software is in daily operations, the harder it becomes to replace. 3. Regulatory Companies in industries like financial services and healthcare often face heavy regulatory requirements. These include things like money transfer licenses or approvals to integrate with government systems. In some cases, only a limited number of players are allowed. In others, approval requires significant time and capital. 4. Distribution Getting software into the hands of customers is often expensive and time-consuming. Some companies build strong distribution advantages. For example, Apple’s App Store controls how billions of devices access software. Distribution is one of the hardest moats to build and one of the most durable once established. 5. Ecosystem Ecosystems emerge when a product becomes a platform and third-party developers build on top of it. Well-known examples include Salesforce .com and Shopify, each with thousands of integrations and add-ons. This moat takes significant time to develop and typically only happens once a platform becomes the clear leader in a large market. 6. Network Network effects are especially powerful in marketplace-driven software platforms that connect buyers and sellers. These often combine software functionality like ratings, reviews, and pricing with mechanisms to solve the chicken-and-egg problem. Over time, the value of the network compounds faster than user growth and eventually becomes the de facto standard. 7. Physical Infrastructure While software is often viewed as asset-light, some companies rely on physical components such as devices, equipment, warehouses, or data centers. If a product requires hardware and you have a million devices deployed, switching costs and customer stickiness increase dramatically. 8. Scale Some software companies achieve scale across multiple dimensions including geography, employee expertise, and customer base. This makes it difficult for new entrants to compete. This is especially apparent when startups try to displace incumbents or expand into adjacent markets with well-established vendors. When thinking about these eight moats, one approach is to assign a point or partial credit for each category and then total the score. Moats are a critical component of building a sustainable business, especially for software companies. Entrepreneurs would do well to evaluate their ideas through this lens, recognizing that most of these moats take significant time, effort, and success to build. Achieving one or two is difficult. Achieving three or four is rare. Companies that reach four or more are best positioned for long-term, durable success. That said, entrepreneurs should not limit themselves only to ideas that check multiple moats upfront. Instead, they should understand how software is evolving in the age of AI, where barriers to entry are falling, and be intentional about how they build defensibility over time.