The Rizz Moat

How counter-positioning works in your favor when applying generative AI.

The more time I spend thinking about what the great AI investments are in consumer and B2B products, the clearer it becomes.

First, let's look at what has been proven.

ChatGPT is well-proven. Many people use it to get better search results than what Google provides. Heck, SearchGPT seems to be just around the corner. But the bigger unlock, the thing that isn't just a better Google, is the generative AI part of what LLM-based products offer.

What is generative AI? It's about creating different kinds of output based on user input and iterative feedback. You've got pictures, video, audio, and text being generated.

All of these have countless applications, but I think the best AI startup can produce counter-positioning over incumbents in their space.

In 7 Powers: The Foundations of Business Strategy, the author Hamilton Helmer outlines seven strategic powers that can provide sustainable competitive advantages. Counter-positioning is one of them, where a company introduces a new business model that incumbents can’t easily adapt.

From several startups we've observed at F4, the best AI startups are building a counter-positioning by doing what we at F4 call "the Rizz moat."

Let me explain the concept.

You have a startup working with generative AI content in a space where the incumbents cannot follow to the extent that it becomes contrary to their model, positioning, and branding.

At F4 Fund, we've seen several startups using this strategy. For example, we invested in Valley, which offers generative AI sales development tools (AI SDR). Valley enables companies to create sales reps that draft and send emails to prospects while you sleep. Their approach counters LinkedIn Sales Navigator, which relies on real people sending messages drafted by the sender. LinkedIn can't easily switch to bots without disrupting its core business.

Another counter-positioning we've seen is in AI dating coaches, and this is where "the Rizz moat" naming comes from. "Rizz" is slang for someone’s ability to charm or attract others, especially in a flirty way. It’s short for "charisma."

These new consumer apps are counter-positioning Hinge, Bumble, and Tinder by drafting AI-generated replies to messages when you’ve met someone online. The idea is to share with the AI what your Tinder match sent you, and the app will draft a flirty response. The counter-positioning is clear: It would go against the nature of Tinder's interaction if, all of a sudden, Tinder promoted messaging that a human didn't write.

When thinking about the possibilities of generative AI for your startup, can you apply counter-positioning? Here are all the seven powers listed by Hamilton Helmer:

1. Scale Economies: Cost advantages due to increased output.

2. Network Economies: Value grows as more users join the network.

3. Counter-Positioning: Introducing a new business model that incumbents can’t easily adopt.

4. Switching Costs: Costs that make customers reluctant to switch to competitors.

5. Branding: Strong brand loyalty and recognition.

6. Cornered Resource: Exclusive control of valuable resources.

7. Process Power: Superior processes that are difficult for competitors to replicate.

Have you seen similar or other interesting counter-positionings done with generative AI? Please share in the comments.

A message from our portfolio company

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