Guest Post
By Mark M.J. Scott
President of Northern Pixels Inc.
November brings more than falling leaves and year-end planning. For AI startup founders, it marks a pivotal inflection point: board meetings loom, investors demand evidence of traction, and the gap between ambitious projections and hard results becomes impossible to ignore.
The pressure is immense, and the stakes couldn’t be higher. While AI startups captured a staggering $192.7 billion in funding during 2025, accounting for over half of all venture capital deployed globally, the brutal reality remains unchanged: 90%+ of startups fail and only 0.05% ever reach the $10 million revenue threshold.
This paradox defines the current AI landscape. Capital floods into the sector at unprecedented levels, yet the path to sustainable success has never been more treacherous. The real question facing founders as they prepare year-end strategy isn’t whether they’ve worked hard enough. It’s whether they’ve built a defensible position in an increasingly commoditized market.
The AI Defensibility Crisis
AI startups face a unique challenge that traditional software companies never encountered: the very technology enabling rapid product development simultaneously erodes competitive moats. Large language models have democratized AI capabilities to an extent that building functional products has become almost trivial. The result? A brutal compression of competitive advantage.
Consider the numbers. In the first half of 2025 alone, there were 427 acquisitions where AI startups bought other AI startups – an 18% increase from the prior year. This consolidation wave signals a harsh truth: the market is already crowding out companies that failed to establish defensible positions early. When 60% of global venture capital concentrates in megarounds of $100 million or more, capital increasingly flows toward established players with proven market positions, not hopeful contenders.
The challenge intensifies for AI vertical applications and “AI wrapper startups.” A small percentage of these companies manage to build proprietary workflows or deep integration moats that provide genuine technical defensibility. But in the real world of commercialization…. even those with strong technical differentiation struggle to capture clear category leadership. Why? Because category leadership is not ordained solely by technical superiority. The market is crowded, the messaging is fragmented, and without deliberate narrative control and ecosystem alignment, even technically superior solutions remain undifferentiated commodities. Compounding the AI startup crisis, the majority of vertical AI startups lack even basic technical moats – making their path to defensibility exponentially harder. The only way through is to build market-derived defensibility through positioning, not product features alone.
Market Shaping: A Commercial Go-to-Market Playbook for AI Defensibility
Most AI startups believe the path to success is straightforward: achieve product-market fit, then scale sales. But this approach confuses early customer validation with market positioning. A handful of paying customers doesn’t prove you’ve defined a category – it proves you’ve made a sale.
Market shaping is the deliberate process by which a startup influences how an industry evolves, rather than simply adapting to existing market conditions. It’s a commercial go-to-market playbook purpose-built to address the core AI defensibility challenges that technical moats alone cannot solve.
Market shaping is not simple thought leadership. It’s not publishing more blogs or opinions to feed vanity metrics. True market shaping is the coordinated orchestration of how an entire category gets understood, validated, and adopted across an ecosystem.
Where traditional marketing reacts to buyer needs, market shaping proactively defines them. It’s a strategy that catalyzes a groundswell of market validation and ecosystem support, building defensible differentiation, accelerating sales cycles, and establishing an unassailable position as category leader. This approach delivers the kind of AI defensibility that satisfies investors and pulls prospect target clients, creating barriers that outlast any product feature advantage.
Three Layers of Commercial Defensibility Through Market Shaping
Building AI defensibility through market shaping requires a systematic commercial approach. Each layer compounds the others, creating market momentum that no feature set alone can match.
Layer 1: Control the Industry Narrative
Investors, analysts, and prospect clients don’t weight founder opinions heavily when evaluating innovation. They listen to respected authority voices – industry leaders, technical experts, and analysts who define categories. These voices shape perception in your target sectors.
The market shaping methodology focuses on systematically identifying and engaging these influential voices: analysts who define emerging categories, industry veterans who validate technologies, and executives whose endorsement carries weight with buyers. When these authorities validate your unique leadership position in a category, their endorsement creates credibility that founder-led promotion cannot match.
Once you’ve cultivated these relationships, media and PR strategies become powerful amplification tools. Earned media featuring respected third-party validators carries exponential weight. These stories shape how markets perceive problems and evaluate solutions.
Most founders make a critical mistake here – they jump directly to PR agencies, believing awareness alone drives results. Flash-in-the-pan vanity coverage fails to move decision-makers and wastes money on campaigns disconnected from the voices that actually influence buyers. By orchestrating market conversation and mobilizing key validators, you create ecosystem advocacy that accelerates deal cycles and replaces slow technical evaluations with powerful third-party trust. This ecosystem validation is what accelerates sales cycles and secures investment interest – from the boardroom to the buyer’s shortlist.
Layer 2: Forge Strategic Partnerships
Most founders focus on technical partnerships, missing the impact of strategic alliances with organizations that influence buying decisions. These include professional services firms like Accenture and BCG (with C-suite access), technology integrators, platform partners, and marquee brands.
Strategic partnerships accelerate deal velocity and create defensibility beyond direct sales effort. When I forged a co-marketing partnership with Apple by aligning our startup innovation with their strategic initiative, we became the innovation wedge for new use cases. The resulting brand association became inextricably linked with theirs in our target markets – defensibility that cannot be bought, only earned.
Early relationship building with organizations whose success depends on innovations like yours is essential. Strategic partnerships work because they validate your innovation at the highest organizational levels. Market momentum generated through narrative control and category leadership can help you win partnership positions by displacing incumbents – strategic partners shift their allegiances when they see clear evidence that your company is becoming the market standard. This positioning as the inevitable choice unlocks enterprise buying committees, compresses sales cycles, and attracts venture capital willing to pay premium valuations regardless of specific technical IP.
Layer 3: Build Market Momentum That Compounds
Market shaping creates a different defensibility: the compounding advantage of category leadership. When you guide market perception and control how buyers evaluate competitors, you become the default choice – anchoring an unassailable leadership position far harder to challenge than any technical moat.
Consider Harvey, the generative AI platform built for legal professionals. Harvey helps law firms draft contracts, review documents, conduct legal research, and manage compliance – tasks that countless AI startups could theoretically replicate using the same foundation models. Yet Harvey has emerged as a category standard, not because its core technology is irreplicable, but because its market position – built on a powerful mix: deep law firm integrations, relentless ecosystem advocacy, and strategic narrative control that sets it apart. Major firms like Allen & Overy, Paul Weiss, and PwC adopted Harvey early, creating reference momentum that made the platform feel inevitable. The result? Harvey’s adoption is rooted in perceived category leadership and trust, not proprietary code.
This strategy converts early traction into self-reinforcing momentum. Reference customers become advocates. Analyst relationships yield category-defining reports. Media coverage that elevates trusted target sector voices creates inevitability. Each win makes the next easier, creating switching costs in buyers’ minds unrelated to technical integrations. Category leadership built through market momentum delivers what code alone cannot: trust, inevitability, and durable commercial advantage in a fast-moving world.
Why Investors and Prospects Value Market Positioning Higher than Technical Moats
Technical defensibility – proprietary algorithms, unique data, advanced features – remains important, but investors and customers both know these advantages can erode fast in the age of ubiquitous AI tools and aggressive competition. What truly satisfies buyers and VCs is category leadership validated by an enthusiastic market ecosystem and repeatable commercial proof.
Market shaping delivers exactly that: a durable perception of inevitability, trust, and innovation that outlasts technical features. Instead of getting caught in the “AI wrapper” stigma or a race to product parity, category leaders orchestrate market support that provides defensibility, accelerates sales cycles, and builds an unassailable position – all of which deliver outcomes investors count on in a world of relentless change.
AI Products Can Be Easy to Copy. Market Positions Are Not
The founders who break through in 2026 won’t be the ones with the best product or the most aggressive sales team. They’ll be the ones who treat market positioning with the same rigor as product development – the 0.05% who know defensibility is designed, not assumed.
About the Author Mark M.J. Scott is President of Northern Pixels Inc., an AI and deep tech marketing agency led by startup veterans with proven exits via acquisition. As a three-time marketing exec at startups acquired by AppDirect, Toyota, and Battery Ventures, Mark combines hands-on commercialization experience with strategic market positioning expertise. He recently served as Chief Marketing Officer for DistriQ, Canada’s $435M-funded Quantum Innovation Zone
