TL;DR: In today’s challenging fundraising environment, defensibility isn’t just important—it’s everything. With AI making it easier to build but harder to defend, founders must master the art of moat-building to survive. The winners will be those who can clearly articulate not just how they grow, but how they protect what they’ve built. 

Southeast Asia’s venture landscape has transformed dramatically. International funds have retreated, capital deployment has plummeted 80% from 2024 levels, and founders face a brutal reality: the days of easy money are over.  

But within this challenging environment lies a powerful truth that separates the startups that will merely survive from those that will thrive: In the age of AI, moats matter more than ever. 

The New Fundraising Playbook: Defense Wins Championships 

The bull market’s end triggered a mass exodus of international and regional funds from Southeast Asia, fundamentally altering the investment landscape. The new operating assumption among VCs is stark: there is no guaranteed follow-on capital. 

This shift has driven investors toward businesses with clearer paths to profitability. Many VCs now favor consumer brands and offline retail businesses—a dramatic departure from the software-first mindset that dominated the bull run. 

The Moat Mandate: For companies that secured funding before this shift, financial discipline has become non-negotiable. The growth-at-all-costs mindset that defined the bull market has given way to a focus on fundamentals. Smart investors are now asking one question above all others: “How defensible is your business?”

The AI Paradox: Easier to Build, Harder to Defend 

Generative AI has created a fascinating paradox in the startup ecosystem. The barrier to building has never been lower—software businesses can reach $1 million ARR faster than ever before. But this accessibility creates a dangerous vulnerability: while building is easier, defending what you’ve built has become exponentially more challenging. 

The AI Image Editing Warning: Consider the cautionary tale playing out in the AI image editing space. Numerous startups have quickly scaled to $5-10 million in ARR, only to watch their value proposition erode overnight when established players like Meitu integrated similar AI features into their existing platforms. The lesson? Without robust defensibility, you’re just building features for tech giants to copy. 

This dynamic creates a new imperative for founders: articulate not just your growth trajectory, but specifically how you’re building and defending your moat. Your defensibility might be embedded in proprietary data, unique customer relationships, network effects, or other strategic advantages—but whatever form it takes, it must be clear, compelling, and credible. 

To illustrate how defensible moats manifest in practice, let’s examine five Southeast Asian startups that have built distinctive competitive advantages—each representing a different moat archetype that founders can learn from.

(1) The Data Flywheel Moat: Carro 

Moat Type: Data network effects combined with vertical integration 

Singapore-based Carro has revolutionized the automotive marketplace in Southeast Asia by building a powerful data network moat that becomes stronger with each transaction. 

How Their Moat Works: Carro’s defensibility stems from their AI-powered end-to-end automotive ecosystem that creates compounding advantages through data. As Insignia Business Review noted in their analysis of Carro’s journey, “Carro has geared its platform to be hyper-vertical, where the focus is on maximizing the LTV of every car owner and partner dealer using the platform.”

Unlike traditional classifieds that simply connect buyers and sellers, Carro has vertically integrated the entire automotive lifecycle—from purchase and financing to insurance, maintenance, and eventual resale. Each service reinforces the others: 

• Their AI inspection technology captures 160+ data points per vehicle, creating proprietary datasets for accurate pricing
• Transaction data improves their financing algorithms, allowing them to offer competitive rates while maintaining healthy margins
• Service history data enables predictive maintenance recommendations, increasing customer retention
• The complete ownership history makes cars more valuable at resale time

This virtuous cycle creates “accumulation of competitive advantages“— the more cars and customers in their ecosystem, the more valuable their data becomes, and the harder it is for competitors to replicate their insights. 

The results speak for themselves: during the pandemic when many businesses struggled, Carro’s AI-driven approach maintained rapid growth while achieving profitability—a rare combination in the startup world. 

Key Lesson: True data network moats don’t come from simply collecting data, but from creating closed-loop systems where data from one part of your business strengthens another, creating compounding advantages over time.

(2) The Expertise Moat (Risk Management): AwanTunai 

Moat Type: Embedded finance with proprietary risk assessment 

Indonesian fintech AwanTunai has built a formidable moat by embedding financial services directly into the daily operations of MSMEs in the FMCG supply chain. 

How Their Moat Works: AwanTunai’s defensibility comes from their unique approach to solving the financing gap for Indonesia’s 66 million micro, small, and medium enterprises. Rather than offering generic loans, they’ve created a tightly integrated system combining: 

• Inventory purchase financing specifically for FMCG products
• A proprietary ERP system that digitizes wholesaler operations
• AI-powered risk assessment models trained on transaction data

As detailed in Insignia Business Review’s case study, “By pairing their financing product with their proprietary ERP solution, AwanTunai has been able to capture valuable transaction data that allows them to accurately assess creditworthiness even when traditional financial indicators are unreliable.” 

This integration creates a powerful moat: the more merchants use their ERP system, the more transaction data AwanTunai collects, which improves their risk models, enabling them to offer better financing terms than competitors who lack this visibility. 

The strength of this moat was demonstrated during COVID-19, when Indonesia’s fintech industry saw non-performing loans (NPLs) soar to 20-30%. AwanTunai maintained a remarkable 3% NPL rate—a testament to their superior risk assessment capabilities built on proprietary data. 

Key Lesson: Embedding financial services into operational workflows creates stickiness, while the resulting transaction data enables risk assessment capabilities that traditional lenders cannot match.

(3) The Localization Moat: WIZ.AI 

Moat Type: Localized AI with cultural context 

Singapore-based WIZ.AI has built a powerful moat through deep localization of conversational AI for Southeast Asian markets. 

How Their Moat Works: While global tech giants offer generalized AI solutions, WIZ.AI has created a defensible position by developing conversational AI that understands not just the languages but the cultural nuances and speech patterns specific to Southeast Asian countries. 

Their “Talkbots” are trained on massive datasets of local conversations, enabling them to recognize regional accents, dialects, and colloquialisms that global models struggle with. This localization creates a significant barrier to entry for international competitors. 

As reported in industry analyses, “WIZ.AI trained Link Net’s Talkbots with our localized Bahasa language model, proving that enterprise LLMs can greatly benefit large-scale telecommunications companies.” Their bots are so human-like that 98% of users cannot tell they’re speaking with AI, resulting in customer engagement response rates over 30% —far exceeding industry averages. 

This localization moat extends beyond just language processing. WIZ.AI has built deep domain expertise in sectors like telecommunications, banking, and insurance across multiple Southeast Asian markets, creating AI assistants that understand industry specific terminology and compliance requirements. 

The result is a solution that global players cannot easily replicate without significant investment in local data collection and cultural adaptation—a barrier that grows stronger as WIZ.AI continues to gather conversational data across the region.

Key Lesson: In markets with unique linguistic and cultural characteristics, deep localization creates a defensible advantage against global competitors with more generalized solutions.

(4) The Adaptability Moat: fileAI 

Moat Type: Workflow integration with proprietary AI components 

Singapore-based fileAI (formerly bluesheets) has built a defensible moat by deeply integrating into enterprise document workflows with specialized AI components. 

How Their Moat Works: fileAI has positioned itself as “the world’s only horizontal file processing agent and AI workflow automation company,” creating a moat through specialized AI components for complex document processing that integrate seamlessly into enterprise workflows. 

According to Insignia Business Review’s coverage of their recent $14M Series A funding, fileAI’s defensibility comes from their ability to “process any file end-to-end” regardless of format or structure. While many companies offer document processing, fileAI has developed proprietary AI components specifically designed for the complexities of enterprise documents. 

Their moat strengthens through three reinforcing mechanisms: 

• Workflow integration: By embedding directly into existing enterprise systems and workflows, fileAI creates high switching costs
• Specialized AI: Their models are trained on specific document types and formats common in enterprise settings 
• Agentic automation: Their system can autonomously handle complex document workflows without human intervention 

This combination creates what the company calls “AI-native unstructured data processing”—a capability that becomes more valuable as enterprises accumulate more document types and processing requirements. 

The defensibility of this approach is evident in fileAI’s rapid growth and ability to secure significant funding in a competitive market. By solving the specific pain points of document processing in enterprise workflows, they’ve created a moat that generic AI solutions struggle to cross. 

Key Lesson: Creating specialized AI components for specific enterprise workflows builds defensibility through integration and domain expertise that generalized solutions cannot easily replicate.

(5) The Regulatory Moat: Tonik 

Building Your Own Moat: Lessons for Southeast Asian Founders 

These five case studies illustrate different approaches to building defensible moats in Southeast Asia’s unique market environment. While each company has taken a different path, several common principles emerge: 

1. Localize deeply: Whether through language models, cultural understanding, or market-specific solutions, deep localization creates barriers that global players struggle to overcome
2. Embed in workflows: The more integrated your solution is in daily operations, the higher the switching costs and the stronger your defensibility
3. Leverage proprietary data: Building systems that generate and utilize proprietary data creates compounding advantages that improve over time
4. Combine multiple moat types: The strongest defensibility comes from layering multiple moat types—regulatory + distribution, data + vertical integration, etc. 
5. Focus on specific pain points: Highly targeted solutions for specific industry challenges create more defensibility than generalized approaches 

The Exit Reality Check: Begin with the End in Mind 

Perhaps the most sobering shift in investment thinking concerns exits. The fantasy of a US IPO has given way to a more pragmatic view of what’s actually achievable in Southeast Asia. 

The $5 Billion Reality: The mathematics of a successful US public listing are humbling. A liquid company on a US exchange requires a market capitalization of $2-5 billion. Working backward: a $5 billion outcome with a 10x EBITDA multiple means you need $500 million in EBITDA. With a 10% margin, that’s $5 billion in revenue—a scale vanishingly few Southeast Asian companies will ever achieve. 

This reality check has broadened exit horizons, with more consideration given to regional IPOs and strategic acquisitions. Japanese and Chinese strategic buyers are showing increased interest, particularly for companies with valuable licenses in regulated industries. 

The Venture Fit Test: This recalibration has led to more candid conversations with founders. Not every business—even excellent ones—is suited for venture funding. Venture capital comes with specific expectations that not every business model or founder is prepared to handle. Before seeking VC funding, ask yourself: “Is my business truly venture-scale, or am I better served by alternative growth paths?” 

The China-ASEAN Opportunity Window: Timing is Everything 

Despite the challenging climate, a significant opportunity is emerging in the China ASEAN corridor. With shifts in Chinese economic policies, the region is witnessing an unprecedented migration of tier-one talent. Entrepreneurs who historically would have stayed in China are now looking outward, creating a unique window for regional investors. 

The AI Transformation Play: Particularly promising are business models combining traditional services with AI capabilities, enabling massive digital transformation of established industries. The intersection of AI hardware and supply chain solutions presents another compelling opportunity, with potential to create defensible advantages through technological integration.

The Defensibility Playbook: Five Questions Every Founder Must Answer 

For founders navigating today’s challenging environment, clarity about competitive moats is paramount. As you build your business and prepare for fundraising, you must convincingly answer these five critical questions: 

1. What makes your moat unique? Articulate the specific advantages that competitors cannot easily replicate. 
2. How does your moat deepen over time? Explain how your defensibility strengthens as you scale.
3. What data or network effects protect you? Demonstrate how your business creates compounding advantages. 
4. How will you defend against both startups and tech giants? Show you’ve thought through multiple competitive threats.
5. Why is your moat relevant to your exit strategy? Connect your defensibility directly to your long-term value creation. 

Communicating Your Moat: A Fundraising Guide for Founders

In today’s challenging fundraising environment, effectively communicating your startup’s defensibility can make the difference between securing investment and being passed over. Here’s how to articulate your moat in ways that resonate with investors:

(1) Quantify Your Defensibility

Investors are skeptical of vague claims. Instead of simply stating “we have a data moat,” provide specific metrics:

1. Data advantage: “Our 5 million proprietary data points across 150,000 transactions give us a 35% accuracy advantage over competitors in predicting X”
2. Network effects: “Each new enterprise customer adds an average of 120 users to our platform, and our churn drops 15% for every 1,000 new users added”
3. Switching costs: “Customers who integrate our API spend an average of 200 developer hours, creating a $20,000 switching cost”

The more you can quantify your defensibility, the more credible your moat becomes.

(2) Demonstrate Compounding Advantages

The most powerful moats strengthen over time. Show investors how your defensibility improves with scale:

1. Virtuous cycles: Map out specifically how one part of your business reinforces another (e.g., “More users → More data → Better recommendations → Higher engagement → More users”)
2. Margin expansion: Illustrate how your unit economics improve as you scale, creating barriers for new entrants
3. Time advantage: Quantify your lead in months/years and explain why competitors can’t simply catch up by spending more

(3) Provide Competitive Evidence

Don’t just claim defensibility—prove it with competitive evidence:

1. Failed competitor attempts: “Three competitors have tried to enter our market in the past 18 months; all have failed because they couldn’t overcome X barrier”
2. Customer retention: “Our 95% retention rate despite competitors offering 20% discounts demonstrates our moat’s strength”
3. Competitive win rate: “We win 70% of competitive deals, up from 55% last year as our moat strengthens”

(4) Align Your Moat with Market Trends

Show investors how macro trends reinforce your defensibility:

1. Regulatory tailwinds: Explain how evolving regulations favor established players with compliance infrastructure
2. Technology shifts: Demonstrate how your technological approach is aligned with where the industry is heading
3. Market consolidation: Show evidence that your market is moving toward fewer, stronger players with established moats

(5) Address the AI Challenge Directly

Given the AI-specific challenges to defensibility, proactively address how you’re protected:

1. Proprietary data: Explain why your data can’t simply be replicated by large language models
2. Domain expertise: Quantify the specialized knowledge embedded in your solution that generic AI lacks
3. Integration advantage: Show how deeply you’re embedded in customer workflows beyond what an AI feature could replace

(6) Use Visual Storytelling

Complex moats become more compelling when visualized:

1. Moat diagrams: Create simple visuals showing how your defensibility works as a system
2. Competitive positioning maps: Plot your position versus competitors on axes that highlight your moat’s strength
3. Before/after scenarios: Illustrate customer workflows before and after implementing your solution to demonstrate lock-in

(7) Prepare Moat-Specific Responses for Due Diligence

Anticipate investor skepticism with prepared responses:

1. “What if Google/Meta/Amazon enters your market?” Have a specific, credible answer about why your moat protects you
2. “How sustainable is your advantage?” Provide evidence of how your moat has strengthened over time
3. “What’s your response to X competitive threat?” Show you’ve thought deeply about potential disruptions

The Moat Communication Framework

When pitching investors, structure your moat narrative around these four elements:

1. Current strength: “Today, our moat consists of X, Y, and Z, which gives us advantages A, B, and C”
2. Historical evidence: “Over the past 12 months, we’ve seen our moat strengthen as measured by metrics 1, 2, and
3. Future reinforcement: “As we scale, our moat will become even stronger because of factors D, E, and F”
4. Strategic protection: “We’re actively widening our moat through initiatives G, H, and I”

Remember: in a world where building is easier than ever, your ability to articulate how you’ll defend what you’ve built isn’t just part of your pitch—it’s often the deciding factor in whether you secure funding in today’s challenging environment.

The Resilience Imperative: Winter is for Building 

The venture capital industry recognizes there are no perfect answers in this environment. Leading firms approach each investment as a co-discovery process with founders, learning and adapting together as markets evolve. 

Remember this: Market cycles are inevitable. The founders who use this challenging period to strengthen fundamentals and clarify their defensible advantages will emerge strongest when the funding environment recovers. 

And it will recover. It always does. The question is: Will your moat be ready when it does? 

Insignia Business Review provides strategic insights from Insignia Ventures Partners, a Southeast Asia focused venture capital firm investing across Southeast Asia from pre-A to Series B stages.