Beyond the Hype: How XOVR Looks for Companies With Durable Moats

By Joel Shulman

In every major innovation cycle, investors eventually ask the same question: which companies, with durable moats, can actually last?

Hype can move markets in the short term. But durable value creation usually requires something deeper: a moat. (See Investopedia’s definition of an economic moat.)

For ERShares, the search for moat is central to the XOVR investment story. XOVR is not designed around short-term headlines or one-time IPO speculation. It is designed around a long-term framework for identifying companies that may become category-defining leaders across public and private markets.

As Eva Ados, Chief Investment Strategist at ERShares, often explains: “We are not looking for companies that are popular for a moment. We are looking for companies with the potential to build durable moats and define categories over time.”

What is a moat in investing?

A moat is a company’s durable competitive advantage. It is what may allow a company to protect its market position, maintain pricing power, scale efficiently, and resist competition over time.

Moats can come from many sources. A company may have a technology moat, a network-effect moat, a cost moat, a data moat, a distribution moat, an infrastructure moat, a brand moat, or a regulatory or operational advantage that is difficult for competitors to replicate.

For long-term investors, moat matters because innovation alone is not enough. A company can be exciting, but if competitors can easily copy its product or business model, the long-term investment case may be weaker.

The strongest companies often combine innovation with defensibility. They do not simply participate in a trend. They help shape the trend and create barriers around their leadership position.

Why ERShares connects moats to its VC lens

ERShares developed its proprietary Entrepreneur Factor methodology after years of research into how venture capital investors identify exceptional companies. The methodology includes 18 attributes that seek to identify businesses with long-term category leadership potential.

A VC-style investor does not only ask whether a company is growing. The deeper question is whether the company can keep growing while defending its position as the market evolves.

That is where moat analysis becomes important.

Eva Ados describes the ERShares approach this way: “Our VC lens is designed to look beyond today’s numbers and ask whether a company has the qualities to become a category leader. Moat is a major part of that question.”

This approach has historically helped ERShares identify major public-market winners early, including several companies that later became part of the Magnificent 7. These companies did not become dominant only because they were innovative. They became dominant because they built powerful ecosystems, platforms, distribution advantages, scale advantages, and other forms of competitive defensibility.

Why moats matter in the AI era

Artificial intelligence may create enormous opportunities, but it may also create major hype cycles. Many companies will claim exposure to AI. Far fewer may build durable competitive advantages from it.

In the AI era, moats may come from compute infrastructure, proprietary data, distribution, customer lock-in, model performance, hardware ecosystems, capital intensity, technical talent, or the ability to operate at massive scale.

That is why ERShares believes investors should look beyond labels. It is not enough for a company to be associated with AI, space, robotics, defense technology, or next-generation infrastructure. The more important question is whether the company has the ability to defend and expand its leadership over time.

As Eva Ados puts it: “In innovation investing, the word ‘moat’ matters because not every exciting company becomes a lasting company. We want to identify the companies that can build defensible leadership, not just capture attention.”

How XOVR applies moat thinking across public and private markets

XOVR was designed as the first ETF to provide exposure to select private companies alongside public equities in one ETF structure. The fund reflects the belief that the next generation of category-defining companies may be created across both public and private markets.

This matters because many companies with emerging moats may remain private longer. By the time they reach the public markets, a meaningful part of their value creation may already have occurred.

XOVR applies ERShares’ VC lens across public equities and select private-company exposure. The goal is to identify companies that may have the potential to develop or maintain durable competitive advantages over a long-term horizon.

This is why XOVR should not be viewed as a short-term trading vehicle built around one headline. It is a crossover ETF strategy designed for investors who want earlier access to category-defining companies while understanding that moat-building takes time.

Why SpaceX is a moat example, not just a headline

SpaceX gets significant attention because many investors are searching for ways to access SpaceX before a potential IPO. But for ERShares, SpaceX is not simply a headline.

SpaceX is an example of the type of company that may fit a moat-based, VC-style framework. Its potential competitive advantages may include launch infrastructure, cost structure, technical execution, satellite connectivity, scale, vertical integration, and the ability to operate across multiple areas of the space and communications ecosystem.

For XOVR, the SpaceX thesis is not about chasing a short-term IPO pop. It is about identifying a category-defining private company that may have durable competitive advantages over time.

Eva Ados summarizes the point this way: “SpaceX gets the attention, but the moat is what makes it strategically interesting. XOVR is about finding companies that may have the ability to build and defend leadership for years, not days.”

The takeaway

Moat is one of the most important concepts in long-term innovation investing.

The companies that define the future are usually not just the companies with exciting products. They are the companies that can build defensible leadership, scale advantages, ecosystem advantages, and long-term relevance.

XOVR was built around that idea. The fund applies ERShares’ VC lens to public equities and select private-company exposure in search of category-defining companies with the potential for durable moats.

The question is not only which companies are getting attention today.

The deeper question is which companies have the moat to matter tomorrow.

Key Questions

What is a moat in investing?

A moat is a durable competitive advantage that may help a company defend its market position and create long-term value. Moats can come from technology, scale, network effects, brand, data, infrastructure, cost advantages, or other hard-to-replicate strengths.

Why does XOVR focus on companies with moats?

XOVR is designed as a long-term crossover ETF strategy. ERShares uses its VC lens to identify companies that may have the potential to become category-defining leaders, and moat is an important part of that evaluation.

How does moat relate to AI investing?

AI may create major opportunities, but not every AI-related company will become a long-term winner. Moat analysis helps investors focus on companies that may have defensible advantages rather than short-term hype.

Is SpaceX an example of a moat company?

ERShares views SpaceX as an example of a category-defining private company that may have durable competitive advantages across launch infrastructure, satellite connectivity, scale, and technical execution. XOVR’s exposure to SpaceX is obtained indirectly through a special purpose vehicle.

Is XOVR only focused on SpaceX?

No, it’s not. SpaceX is an important holding, but XOVR is a broader crossover ETF strategy combining public equities with select private-company exposure.

Disclosures:

Important information: Investing involves risk, including possible loss of principal. Private-company exposure involves additional risks. Past performance does not guarantee future results. Holdings are subject to change. References to individual companies are for illustrative purposes and should not be considered investment advice. XOVR’s exposure to SpaceX is obtained indirectly through a special purpose vehicle.

Joel M. Shulman, PhD, CFA, is CEO and CIO of ERShares and the architect of the Entrepreneur Factor® and ERShares’ VC lens investment framework, which applies venture-style research principles to public-market investing.