Community Building As A Moat
Why you should build a community and how you can do it
Iman Olya
23rd January 2022
Part 1: Mohammed’s Moat
Part 2: Religion-Lite
Part 3: Symbiosis
Part 4: Messiahs
Part 5: Atomically Niche
Part 6: Wedge Yourself
Part 7: Perfect Storm
Part 1: Mohammed’s Moat
I stepped through the intricately designed recessed half-moon towering over me. The whole entrance, a sea of blue and green and an inscription above my head noting the 400-year-old construction date of this architectural gem.
As I continued through, the haft-rangi (seven-coloured) marble tiles glistened with such vibrancy, I was left baffled at the feat of this achievement. Then it hit me. An elated sense of ancestral pride, mixed with confusion.
Being the ever-inquisitive, annoying kid, I ran up to the tour guide, pulled on his shirt and asked him: “Why the hell would anyone spend 20 years building this?” His response was simple: “For God, his King and the Persian people”.
You see, in 1603 the genius architect Mohammed Reza Isfahani had begun construction of the Sheikh Lotfollah Mosque in Isfahan on the orders of Shah Abbas I of Persia. 17 years later, one of the greatest architectural jewels of the world had been completed. It included private tunnels and an ingenious L-shaped connecting vestibule between the entrance and the enclosure. This was done to maintain the Qibla: the direction of the Kaaba (the sacred building at Mecca), to which Muslims turn at prayer. But interestingly, the mosque was intended as a private royal court, meaning it would be centuries before it was opened to the public, or the West.
It makes sense that someone so talented would devote their life’s crowning achievement to something as technically complex and time-consuming as this mosque. But Isfahani knew that his mosque was guaranteed to be kept in the shadows: most people would not experience its beauty or elegance, at least within his lifetime.
I’m not one for sentimental or philosophical questions. Like most people in tech I want to test stuff from first principles and that always begins in grounded, objective truth. But religion and the nation-state’s sweeping and deep penetration of the human psyche has always perplexed me.
Girard’s mimetic desire and scapegoating theories helped me compartmentalise some of this. You can read more about this in my last essay on contrarian entrepreneurs. But it was not until recently that the role of community in business helped me put together some puzzle pieces.
Mohammed, Jesus, Moses and all religious prophets have one thing in common – they all created a community based on belonging and group support. Mohammed had two major aims as a prophet: (1) educate and train individuals in Islamic doctrine and (2) build a community. The second aim was important to cement the Islamic doctrine as part of his legacy. When the Prophet went to the city of Yathrib, later known as Madinat al-Nabi, he quickly established an Islamic community. In fact, in a mere decade his Islamic community had spread across the Arabian Peninsula. And his first task in Medina? A community centre in the form of a mosque: Masjid of Quba.
The Sheikh Lotfollah Mosque in Isfahan, albeit a private royal court, was ultimately built in honour of Mohammed’s community expansion. A millennium after Mohammed. What had Mohammed created that had Kings building architectural monuments in admiration of his teachings 1000 years later? A community: built on the core ideals of belonging and group cohesion through value creation. Aside from military and economic allyship for Muslim nations, the true value attributed to all within the community was entry into heaven. Similarly, Isfahani had built the mosque, first in honour of his god and prophet, but second in respect of his Shah (King). He was serving both groups - his religion and his ruling class.
The third part of the tour guide’s answer stuck with me though: the Persian people. Your community of people, the group to belong to. The sprawling nation-state may not be as wide-reaching as you may think. The Persian empire was a behemoth, but today there are many “small” nations by Achaemenid standards: c. 60% of countries have less than 10m population and 88% have less than 50m people. Facebook is, in effect, the largest country on earth by size with 2.91bn MAUs. But a big group is obviously not the only determinant of a community.
Throughout the Achaemenid era, Persians expanded control of their huge empire by deploying regional emissaries, leaving local rulers in charge and allowing religious freedoms to conquered subjects. This was obviously done to maintain order, but it was more a function of enabling local communities to remain intact. It was a widely successful tactic, especially since Mesopotamians and Greeks had relocated huge populations once captured. Cyrus the Great even reversed some of these decisions, freeing Jews back to Israel.
So why the history lesson? Well, it is my belief that we are entering a period of community aggregation and polarisation. With the decreasing role of religion in Western life, the community values fostering social cohesion for smaller groups are changing. People have departed niche communities and are becoming washed over with macro-level identities.
Balaji S. Srinivasan has helped me understand the changing poles of world order from this lens. Balaji is the ex-CTO of Coinbase and a former GP at Andreessen Horowitz. This guy is deeply thoughtful and is naturally heavily bullish on decentralisation. He has this ingenious framework of simplifying shifting world megatrends into what he terms “extant poles”.
CCP, NYT and BTC are meant to show the polarisation of community structures across the world today. You either submit (CCP), be woke and apologise for the things you cannot control (NYT) or be completely sovereign (BTC). These are the extremes but they speak to the changing world order, particularly in the world’s two largest economies - or empires - US and China. Unlike the Persian Empire of old, these extant poles may not be as conducive to maintaining order at the micro-community level.
Balaji goes into a lot more detail on this framework in his second Tim Ferris podcast. The overarching point being that we will all fit into the CCP, NYT, BTC triangle across some spectral combination of the three poles. You don’t want to be fully sovereign, nor fully apologetic. And you certainly don’t want to be fully controlled. But some parts of all three poles are useful in maintaining order.
With these greater trends and the erosion of traditional communities, BTC (not the cryptocurrency per se, but the ideal of decentralised power) offers a solution. And we’re starting to see early examples of niche communities utilising this extant pole.
Part 2: Religion-Lite
Cyrus and I recently attended Odin’s launch party in London. (We’ve also released a podcast with the founders Paddy and Mary, so be sure to check out for deep dives on all things community). Now, I know what you’re thinking: another startup launch party with a bunch of overly excited, web3.0-espousing, “contrarian” nerds chewing your ear off about what price they got into Solana and how it’s gonna smoke Ethereum. And you’re not wrong, for the most part.
This launch event was for a community-focused startup, however. They had exclusively invited community members, investors and early customers. And not only did every person there genuinely want to help the founders and early team, but they also wanted to help each other. There was a sense of belonging and communal value generation. It was religion-lite.
The online community Odin has built is testament to this: with hundreds of members sharing deal flow, discussing trends, hiring, referring, sharing memes etc.
Silicon Valley has historically been heralded as a geographically restricted, invite-only cult. But community-focused businesses are changing this in the wake of the pandemic. Investment outside of San Fran has ballooned, with cities like Miami, Austin, Riga, Lahore, Delhi, Mexico City etc. gathering funding momentum. Community hubs across various geographies, focused on various niches are blossoming and changing the very nature of moat creation.
In this essay I’m going to show why I think community is the most powerful business moat there is. I’ll also break down how community works and provide a framework for thinking about and actioning it.
Part 3: Symbiosis
David Spinks, the author of “The Business of Belonging”, is a community king. He recently wrote a newsletter with Lenny Rachitsky on community building in which he gives an apt definition of the term:
“Community is more than just a feeling of belonging. In the context of business, it’s a structure for creating value. A simple way to understand it is to compare “community” to an “audience.”
To build an audience, you help people.
To build a community, you help people help each other.
It’s a subtle but massive difference in mindset. Traditionally, businesses create all the value for the consumer. Community-driven businesses create spaces for consumers to create value for each other.”
- David Spinks
Moreover, Spinks’ tweet shows just how connected the genesis of company and community are:
Companies are traditionally communities in that they generate value for consumers by working together under the banner of trade. Community-focused companies are generating compounded value for their consumers (members) over and over again but critically, this is user-led: everyone helps everyone. Members are not consumers, but prosumers.
It is precisely this symbiotic nature of support that (in my head) I think of as network effects supercharged within a group. In religion, this is the solidification of the word of sacred text passed down across generations by members of the community who want their children to follow the same righteous path.
So why is this a moat or a competitive advantage?
First Round research showed 80% of founders reported building a community of users as important to their business, with 28% describing it as their moat and critical to their success.
The investing and rational GOAT, Charlie Munger, defines a moat as an intrinsic characteristic that gives the business a durable competitive advantage. An intrinsic characteristic is one that is at the very core of the business. It cannot be removed without destroying the company.
Businesses built as communities first are designing for product-market fit from the start. They are positively discriminating for members, or prosumers, who will grow viral loops and create products themselves to help other like-minded folks. It is a semi-decentralised model of value creation, that can scale rapidly as every customer is also basically an unpaid employee.
In other words, community-led businesses have an intrinsic membership and belonging structure that typically endures as everyone helps each other under the same brand. This is the core of the business model – not the product or an individual at the helm. Removing this key element kills the company. It’s exactly Munger’s definition of a moat, just reimagined.
In short, according to Patrick Woods having a community is a moat as it helps: “protect against competitor companies or products entering your territory. Whether that community is a group of power users, open source contributors, creators, or even just a brand (or franchise)’s super fans, it lends greater brand awareness, higher switching costs, and scale economies.”
But let’s be clearer here. Below I explain why this symbiosis is particularly helpful for founders, in building their personal brand and the business’ competitive moat.
Part 4: Messiahs
It is widely joked that three apples changed the course of history: the one in the Garden of Eden, the one that fell on Newton’s head and the one that Jobs built. As this New Statesman obituary says:
“There was undeniably something of the preacher about Steve Jobs. His product launches were quasi-religious events, at which sacred objects were revealed to an expectant crowd of initiates; some of whom had made a long pilgrimage to be there. Invariably wearing a shirt of clerical black, Jobs blurred the line between salesmanship and evangelism. Like a religious revivalist — or a demagogic politician — what he was selling was not just a consumer durable but a vision of life.”
- Nelson Jones, The New Statesman
Steve Jobs is the ultimate example of a messianic figure in tech. He inspired millions and is the epitome of entrepreneur embodying the American Dream. What Jobs did to become so revered is create such a strong community, it basically became a religion. It cemented a cult-like following of Apple’s products, which led to unprecedented growth and the creation of the world’s most valuable company.
In the short-term, Jobs mustered die-hard support for the brand, the business and himself. In the long-term he was able to create a platform leveraging this foundational support to create the pre-eminent piece of tech that we can’t live without: the iPhone.
For founders, the value in the short-term is unclear. Most don’t think or act in 20-year horizons. They’re so lost in keeping the business afloat or fighting the latest fire, their attention rightfully remains short-sighted. These entrepreneurs need to learn to let go of the reins while remaining close to the critical issues in their business. Communities are ideal for this, as I explained earlier.
Securing repeat paying customers is such a critical first step for achieving beneficial LTV:CAC ratios… I threw up in my mouth a little writing that. But it’s true. You want to spend as little as possible to acquire a high lifetime value customer. The self-serving nature of communities built around your business helps create that first group of die-hard fans. From then on it’s network effects for growth (the next chapter dives into this) and a higher likelihood your customers stay around longer; they want to be part of the in group. It’s far from likely you’ll achieve Jobs-level messiah vibes. However, there are some things that make it likliER.
Building community isn’t for every business, but niche products/services are where you can leverage community best. The point of a community is to fortify brand strength by bringing people together who are interested in niche areas. They can connect, network, share ideas and invest together.
But of course, like Jobs with his iPhones, Macs and iPads, the product or service a founder builds must be genuinely serving the niche and actually be a cut above the competition. You can’t expect the community to actually function without providing something valuable to them.
In the long-term, much like Apple, the outcome of a successful community is in pricing ability, outsized returns and crazy defensibility. As I said earlier, a business built around community is about value creation for each other. But that does not mean the value you create is free or cheap. Apple’s prices are too damn high - but we still buy the latest iPhones. Nike’s trainers (sneakers for you Americans), Harley Davidson’s bikes, Cohiba’s cigars are all great products but their brands are bigger and better. But because they appeal to certain niche demographics, they command huge prices. It’s also key to maintaining a competitive edge and a strong defensibility against losing customers to competition and monopolistic monsters.
Notion for example, has >20m users. It’s a brilliantly designed product (aside from its periodic lags) and has a core community of die-hard fans. While Microsoft has come knocking with a competitor to Notion, called Loom, I’d wager that even if Notion can’t maintain the trajectory of a better, faster, cheaper product, they will out-compete Microsoft, at least in the medium term. Why? Because of the community Notion has. It fortifies their moat.
But what about at the personal level?
Communities can also be built around messianic entrepreneurs. Andrew Gazdecki, who we recently spoke to on the pod, has executed this perfectly. MicroAcquire is a brilliant product serving a very particular niche (founders who want to “mini-exit”). But it’s the service PLUS Gazdecki’s nice-guy no-BS personality that people gravitate towards (his online beefs and Russ Hanneman Cameos also help…). Twitter’s resurgence has helped support many founders and solopreneurs achieve niche followings that they monetise and support. Packy McCormick is another great example. But the point is, if you’re creating a great product or service, building a community gives you a moat at both a personal and business level - as long as you’re niche enough…
Part 5: Atomically Niche
DAOs were undoubtedly one of the biggest developments in tech in 2021. Part of the reason is the decentralised ability to mobilise. But key to mobilisation is the ability to piggyback off existing community sentiment. This is where Balaji’s BTC extant pole is beginning to blossom.
ConstitutionDAO may have taken a colossal L this year from Captain Evil, Citadel's Ken Griffin, but the underlying utility behind the design is brilliant. It enables bottom-up mobilisation of groups to help each other create value by pooling capital and purpose. It was truly hilarious that Nic Cage memes helped fuel the flames of the first famous DAO. But it also speaks to the capability of communities to accelerate common causes using network effects.
Taking a step back from communities, in any business model customer growth and user retention are some keys for success. Tapping into network effects can expedite growth to mind-boggling levels.
Andrew Chen’s new book “The Cold Start Problem” is quickly becoming a bible on this topic of network growth. He writes about the “atomic network” that has supported companies like Slack, Uber, Reddit, Tinder, Coca Cola etc. flourish.
“The “atomic network” is the smallest network needed that can stand on its own. It needs to have enough density and stability to break through early anti-network effects, and ultimately grow on its own. I liken it to an atom because it is the unit upon which larger networks are ultimately built. If you can build one, and then another, you can build the rest of the network—this is the base unit to build everything else.”
- Andrew Chen, 'The Cold Start Problem'
And interestingly, this differs from traditional business models built on product development and refinement.
Put another way, make the thing you build around (in this case the product) super simple, so that the people it attracts are bought into the thing you’ve built.
Now that’s all well and good, but how do you build this type of network? Here’s what Andrew says:
“…there is a huge benefit to picking a smaller and more targeted starting point. Nail this initial niche network, establish an atomic network, and grow from there. In other words: The next big thing will start out looking like it’s for a niche network.”
- Andrew Chen, 'The Cold Start Problem'
Start with a niche. Much like Rational VC’s endeavours at building our 1000 true fans (s/o Kevin Kelly), the niche is the hardest but most important part. Figure out your little wedge in this world and then find others who are part of it too.
But that’s harder said than done. So, let’s dive into some practical exercises and steps on finding the niche and building a successful community-focused business.
Part 6: Wedge Yourself
Although Cyrus and I have built our little wedge on the internet with Rational VC and minority in.tech, I reached out to a bunch of community operators on Twitter to see what they could teach me. After all, some of Rational VC’s principles are “Always just be doing shit” and “ABL” (always be learning)…
Bonus points if you know the movie…
Patrick Woods and Rosie Sherry shared their brilliant pieces on a tactical guide to starting their community at Orbit and their Community Discovery Framework.
Rosie also shared her guide on Minimum Viable Communities, which is echoed by Alexis Ohanian on a recent podcast. See the video below for his 2 minute explanation of MVCs in action with Reddit:
I love this framework as it builds on Andrew Chen’s idea of picking, testing and iterating on a small niche. As Rosie puts it:
“An MVC is not about having all the pieces in place for your dream community. It's about experimenting with the foundations. Finding out what brings value. Building relationships and trust. In a manageable and not too overwhelming way to help you find your path with the community you need to build.”
- Rosie Sherry, 'A guide to Minimum Viable Community (MVC)'
With Reddit there was a dedicated die-hard community using the platform to converse with other anon accounts. Although anonymous, subreddits enabled relationships to be forged with inherent trust. With basically no product development and no investment, Reddit was able to grow year on year because of the community moat it had developed.
In addition to these great resources, I found Tom Ross’ Community Manual to be a brilliant deep dive into community building. His 4 stages of community development are:
(1) early direction and clarity;
(2) starting your community;
(3) growing your community;
(4) nurturing your community.
Let’s jump into these key areas, where I outline my key takeaways from Tom’s comprehensive guide:
(1) Early direction and clarity
Determine the demand for your community through a combination of:
Market size: How many people are interested in your community topic?
Competition: Are these people currently well served by existing communities in this space? Basically, are you doing something niche enough, or are you serving a space that is already communitied out?
Passion: How much do these people care about your community’s topic/focus? Are they crossfit / vegan / NFT levels of devout?
Outline what the worst type of community would look like and build up from there.
(2) Starting your community
(i) Decide on a platform:
Currently platforms are one of the largest sticking points of community-building. This survey from CMX shows 56% of respondents are somewhat or not satisfied with their community management platform, despite new platform options. Therefore it is paramount to think about some key questions on platform before you build:
What platforms do your intended community currently use? Are they Discord or Slack? Twitch or Facebook? Whatsapp or e-mail? This one goes back to knowing your audience…
What platforms do you personally resonate with the most? It’s quite likely that platforms you enjoy using are best aligned as you will be part of the community and will naturally have a similar profile to the target audience
(ii) Define your value proposition:
As explained earlier in this essay, the most important element of community is the value generation for members. Give and you shall receive. The CMX report also showed that the top frustration for the community industry was difficulty in quantifying the value of the community. Value generated can include:
Networking – opportunity to meet and engage with like-minded people
Information / learning – access to materials and information not available publicly
Belonging – encouraging a sense of purpose
Entertainment – creating a positive emotional space
All of the above values work individually, but communities that deploy all the above successfully will have built a stronger moat. Think about having channels for these areas and deploying them over time. Sometimes doing too much to start is overwhelming for new joiners. That reminds me, also ensure you have an Introductions channel too, where new members can give a little intro bio.
(3) Growing your community
One-to-ones: go out and make friends with people who are interested in the same niche. Whether through Twitter, other tangential communities or in actual real-life places (sorry Meta)
Word of mouth: spread the word by building conviction in your brand and in the quality of the community’s initial content. People will naturally know you as the [insert community niche here]-guy or gal if you make yourself that person. Cyrus loves to say “perception is reality” in our podcasts and this works both ways: sometimes you need to speak your goals into existence in order to publicly hold yourself accountable
Distribution: share your thoughts / community’s value proposition with active audiences that are relevant to your niche – Packy McCormick is a great example as he built his Not Boring brand by heavily promoting on Twitter
Inbound: the value of compounding will support growth in others wanting to join your community. But the key is not to dilute your brand/niche with increases in members – stay true to the ideals and goals you set out with
(4) Nurturing your community
Community mindset: be proactive as a community lead in engaging with your community by:
responding to everyone - you ain’t special, you’re as much part of the community as you are running it. I can’t stress this enough: talk to EVERYONE and be inviting of conversation
being authentic - no brainer, but see why this is important in a pod Cyrus and I did on authenticity
setting up the right rules and guidelines - moderate with simple rules and pin them somewhere accessible
always looking to give members more value than they give you. This is paramount to developing the right mindset
filter community management to core fans – scale as you grow
I would highly recommend reading all the materials in this essay as essential reading if you're setting up a community. But most of all, just build a community and see how it turns out. Remember: always just be doing shit.
Part 7: Perfect Storm
There are so many buzzwords in tech these days that hopping off Twitter for a week probably means you miss out on the new latest hot thing.
Community is definitely one of these buzzwords. But there is a convergence of historic, psychological, business and technological characteristics that makes building a community-focused business a valuable proposition.
Historic, in that religion has proved how communities can grow rapidly and endure for millennia.
Psychological with the mimetic elements of desire and wanting to be a part of a niche like-minded group. FOMO is a powerful hack once you scale.
Business, in that companies are inherently designed for community, whilst network effects work best when starting with a niche group.
Technological in that Web 2.0 infrastructure has provided the foundation for developing communities, and Web 3.0 technology is making decentralised communities creatively viable.
It’s a perfect storm.
While you may not have genius architects building you monuments a millennium after your death, communities can serve as a method of cementing a legacy. Building relationships through community may just be one of the most satisfying and joyous pursuits in life, if done right. Not only that, but communities will serve as an exceptionally powerful tool for business-building over the next decade. It’s why Cyrus and I look for network effects and community-led startups in our angel investments. So although you may not get a beautiful monument in the traditional sense, you can build your own little castle with a moat constructed of a niche friend-group ready to fly your flag.
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A big thanks to WhosAria and Cyrus for their reviews. A special thank you to Imran Mahmud and Danny Clink for helping me refine the essay by providing examples and inspiration.
A huge thank you to all the community experts mentioned in this essay too. Their fantastic blogs, books, videos and Tweets made writing this piece all the more enjoyable. Give them all a follow!
Also check out the video / podcast Odin and Rational VC recorded on community building:
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