Last year, a two-person team shipped an AI app in 48 hours. It attracted 500 users in its first week. Within three months, it was gone.
That story repeats every week now. The tools have changed the game: AI-assisted development environments, no-code platforms, and automated infrastructure pipelines mean anyone can go from concept to live product in days¹. But as the build gets faster, something counterintuitive happens — winning gets harder.
In contrast, companies in hard-to-enter spaces — where technical complexity, regulation, or capital requirements slow the build — often find that once they’re in, the path to scaling and sustaining advantage is far more straightforward.
This is the paradox shaping today’s AI economy: the easier it is to build, the more demanding it is to win.
From Horizontal vs Vertical to Hard vs Easy Build
In 2020, Andre Retterath proposed a framework²:
- Horizontal: Core AI technology that applies across industries.
- Vertical: AI tailored to a specific use case or domain.
Five years later, the framework still holds, but the language has sharpened:
- Hard Build: Deep technical expertise, scarce talent, and complex architectures.
- Easy Build: Application-layer products where AI has stripped away most entry barriers.
Hard Build: Barriers That Work in Your Favour
Infrastructure giants like Nvidia, Intel, AWS, foundation model developers like Mistral or Anthropic, and complex middleware such as hybrid databases remain hard to replicate³. AI helps them work faster, but doesn’t make them easy to copy. Once they achieve product-market fit, their scarcity of direct competitors makes customer acquisition and scaling significantly less noisy.
Easy Build: A Market Flooded with Look-Alikes
Application-layer companies — often “AI wrappers” around a core tool — can now be launched with platforms like Lovable, Bolt, or Cursor⁴. Entry barriers are minimal, so the market fills quickly with similar solutions. Standing out requires much more than a polished v1.
The Strategic Risk of Easy Builds
Speed Without a Moat
A novel feature today can be replicated tomorrow. When competitors move at the same velocity, only speed of iteration combined with sharp market focus creates lasting traction⁵.
Margins Under Early Pressure
Many AI application companies operate at thin or negative gross margins from day one. Replit’s margins, for example, have ranged from –14% to +36%⁶. In the SaaS peak years, anything below 60% was weak; now, these economics are the starting point for many.
Distribution as a Core Product
In easy-build markets, attention is the scarce commodity. The winners bake distribution into their model early: founder-led branding, active community building, content that educates and pulls users in⁷.
The Five Phases of the Easy-Build Game
Weekend Wonder – The MVP ships in days. Sign-ups spike. Churn follows just as fast.
Foundation Building – Early capital funds a leap in product stability and retention through high-calibre engineering hires.
Distribution Crunch – Without established channels, CACs rise sharply. Teams bring in growth expertise and experiment with new distribution.
Power-User Paradox – Heavy users drive engagement but inflate compute costs, especially in AI products tied to usage.
Margin Mastery – Survival hinges on pricing innovation, routing to cheaper models when appropriate, shifting repeatable tasks off-model, and negotiating provider terms⁸.
Why Hard Builds Often Lead to Easier Wins
Regulation as a Strategic Moat
In sectors like healthcare, finance, and energy, compliance requirements slow entry for all but the most prepared. Achieving certifications such as HIPAA or PSD2 opens markets that opportunistic clones cannot touch⁹.
Trust as a Built-In Advantage
In hard-built markets, governance, audit trails, and explainability aren’t add-ons — they are purchase criteria. In diagnostics or enterprise AI, a model without traceability doesn’t ship¹⁰. Building these capabilities deepens trust and raises switching costs.
Margins That Reward Survivors
Once adopted, hard-built products benefit from fewer competitors and higher switching costs. Infrastructure providers often maintain gross margins near 70%¹¹, giving them more pricing power and capital to reinvest.
Beware of Timing: When Hard Becomes Easy
The hard-built advantage is not permanent. As technology matures, tools and frameworks emerge that lower entry barriers. Cloud-native databases, for example, were once the preserve of a few deep-tech teams; today, template-driven deployments are widespread. Founders must continually assess whether their moat is eroding — and refresh it before the market floods.
A Tale of Two Strategies
| Dimension | Easy Build (Rapid App Layer) | Hard Build (Regulated or Deep Tech) |
|---|---|---|
| Competitive Intensity | High; many entrants | Low; barriers deter entry |
| Core Advantage | Distribution, brand, speed | Compliance, intellectual property, trust |
| Margin Structure | Often thin or negative | Higher, more durable |
| Strategic Focus | Content, community, margin optimisation | Compliance-as-product, governance, partnerships |
| Product Differentiation | Short-lived, quickly replicated | Longer-lasting, harder to copy |
If You’re in an Easy-Build Market
Specialise to Dominate a Micro-Market
Choose a narrow problem space and own it completely¹². Specialisation creates stickiness and word-of-mouth defensibility.
Engineer Margins from Day One
Design for cost efficiency early: route requests to cost-appropriate models, move frequent actions off costly inference, and use tiered pricing to match usage patterns.
Make Distribution Integral to the Product
Distribution isn’t an afterthought — it’s a feature. Community platforms, educational content, and direct engagement drive awareness and trust.
If You’re in a Hard-Build Market
Integrate Compliance into Your Core Offer
Turn certifications, governance controls, and auditability into product strengths.
Sequence Market Entry
Win credibility in a subsegment with manageable regulation, then expand into higher-barrier territories.
Partner for Trust and Reach
Work with incumbents whose distribution and regulatory standing amplify your own.
The Next Three to Five Years
Hard-built markets will stay scarce, but AI commoditisation will nibble at their edges. In parallel, easy-build markets will keep fragmenting, driving CACs higher and margins lower unless founders master niche positioning and cost discipline.
Investors will reward AI-native companies with stronger multiples — but will scrutinise their revenue quality and moat durability as much as their growth rate.
The winners in both camps will be those who treat advantage as something to engineer deliberately — not something granted by speed or complexity alone.
References
- Sam Altman, “Fast-fashion era of SaaS” comment, X, 2025.
- Andre Retterath, “Deconstructing the AI Landscape,” Medium, 2020.
- Market examples from AI infrastructure and middleware, CB Insights, 2024.
- Case studies of rapid MVP launches using Lovable, Bolt, Cursor, 2024–2025.
- Analysis of feature commoditisation in AI markets, TechCrunch, 2024.
- Replit gross margin disclosures, The Information, 2024.
- Community-driven distribution case studies, SaaStr Annual, 2024.
- Andre Retterath, “Five Phases of Winning the AI App Market,” Data Driven VC, 2025.
- Harvard Business Review, “Regulation as Competitive Advantage,” 2022.
- Gartner Research, “Governance in AI Product Design,” 2024.
- Margin benchmarking for AI infrastructure providers, CB Insights, 2024.
- McKinsey & Company, “Micro-market Dominance Strategies,” 2023.
