Why ‘Wrapper’ Companies Are SECRETLY Building the Strongest Moats in Tech

During the last four years of growing Hexomatic to hundreds of thousands of users, one question kept nagging me: Should we build our own technology (expensive) or leverage existing technology (cheaper but “risky” as it reduces our moat)?

Well, last week’s DeepSeek R1 launch revealed something interesting…

While everyone obsesses over technical moats, the launch of DeepSeek R1 today, Perplexity V2 tomorrow, Claude improving their model next week, GPT-5 dropping next quarter…

Something more valuable is happening.

You see, whilst the Titans are battling it out, fighting about who has the more competent AI model, the “wrappers” (apps which are powered in part by 3rd party models or tech) get better at each iteration.

Not only that, but tech unicorns with seemingly unattainable moats are not untouchable either. In fact, within a week of DeepSeek R1 launching, chatGPT was knocked out of the top of the iOS app store rankings by a largely unknown rival.

And those “lower-status” GPT wrapper startups everyone mocked? They’re not just surviving – they’re thriving.

While tech giants battle over benchmark scores, smart startups focus on becoming muscle memory. They ask:

• Can users get value in 30 seconds?
• Does it feel familiar?
• Will they come back tomorrow?
• Does it reduce friction?

Here’s the truth: Your technical advantage will evaporate—but user habits compound.

Of course, there is always the nagging thought that the AI providers will provide the innovations the apps leveraging those models create (and we see this today with things like web browsing or the operator being built into chatGPT), but that is the challenge and opportunity of SaaS.

As a SaaS founder, it’s easy to feel imposter syndrome when you rely on third parties, especially when you have openAI, Google, AWS and Anthropic, to name a few, blazing the way with innovations,

But this is nothing really new, and many of the biggest apps we use today are wrappers too:

-Stripe is a wrapper for payment gateways.
-Twilio is a wrapper for VOIP and SMS.
-Even Apple and Samsung use 3rd party chips and components to build their devices.

In 5 years, no one will care about that or your breakthrough technology. But they will care about the 100,000 teams who can’t imagine working without your product.

So, my biggest takeaway is not to be afraid to be a “wrapper.”

Instead, embrace the opportunity and ask, “How can we become irreplaceable?”