2025: The year product stopped being enough

Read Time: 3 min


Today, I want to zoom out and share a year-end review of what we are seeing across early-stage startups, AI and SaaS, and the 79 companies in our own client base.

We have worked with 79 clients this year. Collectively, we estimate they have raised roughly $270M. When you combine that with Y Combinator’s year-end reflections and batch trends, a clear pattern emerges:

Product is no longer a sustainable moat by itself. The real land grab is distribution.

This issue addresses where the market is heading, why great products are being commoditized faster than ever, and what actually creates advantage going into 2026.

Many entrepreneurs who build great products don’t have a good distribution strategy… even worse is when they insist that they don’t need one.

~Marc Andreessen

The old game was simple. Build something impressive, get early traction, and then raise on vision and product quality.

That window is closing. In AI and SaaS, especially, the market has shifted:

Product velocity has been democratized. With modern tooling and AI, it’s never been easier or faster to ship something that looks good.

Differentiation doesn’t last. Whatever clever feature you build gets cloned in weeks, not years.

Investors are scrutinizing distribution. The questions now are:

• How do you repeatedly acquire customers?

• What’s your wedge?

• What’s your channel?

YC’s own patterns and commentary mirror this. More AI companies, more similar-sounding pitches, and more emphasis on real use cases, revenue, and GTM discipline. The bar is no longer “Can you build?” It’s “Can you repeatedly win?”

If you don’t adapt to this shift, you risk becoming the startup with a beautiful product and a shallow moat, easy to copy, hard to scale, and even harder to fund beyond the first round.

A theme I’ve seen a lot this year (and, honestly, I’ve fallen into it myself) is the gap between knowing that distribution matters and how time is actually spent week to week. A few patterns pop up again and again:

• Hiding in product work. Shipping is fun. It feels productive. It’s also much less vulnerable than going in front of customers and risking a “no.” It’s easy to spend more time in Figma and on GitHub than in real conversations with the market.
  

• Bouncing between channels. One month it’s outbound, then it’s content, then maybe some paid experiments. Because focus keeps shifting, no single motion gets enough time to turn into a true acquisition engine.
  

• Making AI the headline instead of the helper. Decks and narratives lean heavily on models, prompts, and AI-powered everything, but sometimes the basics, who we serve, what painful problem we solve, and how we reach them, aren’t quite as sharp.
  

• Handing off GTM a bit early. It’s tempting to hire a salesperson or a marketer to figure things out. But in the early days, much of the messy learning often needs to be founder-led before it can be handed off cleanly.

When those patterns stack up, what you see is a lot of shipping, a lot of activity, but not much compounding advantage.

And in this environment, a good product is not enough. Without a clear plan to repeatedly reach a specific customer segment through a reliable channel, it can feel like you’re running hard on a track where anyone can jump in beside you at any moment.

3 Fundamentals To Building in 2026

If I were building a new AI/SaaS company from zero in 2026, here’s where I’d put almost all my energy:

1. Ruthless ICP clarity and a painful problem. I’d spend as much time as necessary to answer, in one sentence:

   • We help (very specific persona) solve (painful, expensive problem) in (clear context).

   
   I’d validate that statement with actual conversations and closed deals, not speculation. Everything from product to pricing to narrative would be anchored in that clarity.
   
   

2. One primary distribution engine. Before obsessing over every feature, I’d choose one main acquisition channel and commit to it for at least a full quarter:

• Founder-led outbound

• Product-led growth with strong virality or collaboration

• Ecosystem, integrations, and marketplace distribution

• A narrow but powerful content or community wedge

The goal is to build a machine that can predictably turn time and money into pipeline, not chase every shiny growth hack.

3. A GTM operating system as serious as the product one. I would treat GTM like engineering, with weekly metrics and reviews, clear hypotheses and experiments, and fast iteration on messaging, pricing, and positioning.

Instead of saying we are trying a bunch of stuff, it would sound more like this:

Here is what we shipped this week for distribution, what we learned, and what we are doing next.

That is how you build a company where distribution is the product.

2025 In Summary

2025 made one thing crystal clear: (1) Building is easier than ever, and (2) standing out is harder than ever.

We saw it firsthand across our 79 clients and in the broader early-stage, AI, and SaaS ecosystem: capital still flows, but it’s gravitating toward teams with distribution discipline, not just clever technology.

As you head into 2026, ask yourself:

• Do I have a real moat, or just a good product?

• Do I know exactly who I’m for?

• Am I building distribution with the same intensity I bring to product?

This will be the last issue of the year. I’ll be spending the next two weeks with family and friends, recharging, and coming back sharper.

I’ll see you back in your inbox on Saturday, January 10th.

Happy holidays and happy new year to you all!!

That’s it for today.

See you all next year! 🍻


Darren

P.S. If finding PMF and scaling to $1M in ARR through founder-led sales is on your radar, book a call with me here.

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