Originally published at sameerbajaj.com.
There have been many new entrants in the AI wave over the last few years, but for me, Cursor takes the pick for the most useful product. I've been a daily active user over the last year, and during this period, I've used it for a variety of use cases that don't just involve working on code. I've also used it for knowledge management. You see, I primarily store my notes in markdown format, which makes it very easy for tools like Cursor to help me understand trends and connections I wouldn't have come across myself.
For example, you can add context to the Cursor AI chat by '@' multiple markdown documents (or folders) and 'talk' to your own notes. Now, there are alternatives such as NotebookLLM to do the same, but the friction involved in uploading your context is just too high. Cursor is just quick and very responsive.
Another major reason I onboarded quickly with Cursor was its pricing structure. Back when I first onboarded, Cursor offered 500 premium fast requests and unlimited slow requests from the top AI models for just $20 a month. To be able to use one subscription for my regular AI questions, knowledge base-specific questions, and coding side projects was peak AI 'zero percent interest' days. That pricing structure didn't last very long. Recently, Cursor announced a new pricing model that would be worth $20 of API usage from the top AI model providers for their $20/month subscription plans. This pricing makes sense for Cursor, but users are not happy. And with how Cursor is currently positioned, user churn could start to be a problem.
To strategically evaluate Cursor's positioning, I go back to Porter's Five Forces framework. This framework evaluates an industry from the perspective of its players—the buyers, suppliers, new entrants, rivals, and substitutes. According to Porter, the stronger the force, the lower the profits for the player. Today, Cursor is positioned as a single-player coding AI tool in an industry governed by very strong forces from all of these players.
1. Buyers (Cursor Users)
When it comes to buyers (Cursor's users), they have a strong upper hand. Essentially, what Cursor offers are AI models that users can access from any app. These users have no switching costs should they decide to move to something like Cline or GitHub Copilot. While Cursor's tab completion model has been touted as better than its competitors, the lack of lock-in remains a risk.
2. Suppliers (AI Model Providers)
Cursor's suppliers are the AI model companies such as OpenAI, Anthropic, and Google. These suppliers exert a medium force on Cursor. Cursor can swap out any model with no switching costs. However, suppliers gain power because there are few frontier model providers, and model providers can vertically integrate directly into editors (as OpenAI did with Codex extensions).
3. New Entrants & Substitutes
The threat of new entrants is strong because Cursor is built on VS Code and doesn't have an insurmountable proprietary moat. Similarly, substitutes are readily available: tools like Claude Code, Gemini CLI, and Codex all provide CLI-accessible workflows for developers.
4. Rivalry
Rivalry with established players such as Cline, GitHub Copilot, and Windsurf continues to intensify, forcing intense competition on speed and UX.
How Can Cursor Build Long-Term Moats?
A theme repeated across the analysis is the lack of switching costs. So how does Cursor make it harder for users to churn?
1. Reducing Friction for "Vibe Coders"
Cursor today is mostly used by users who have prior programming experience. But for beginners and vibe coders, a blank project folder and chat can feel overwhelming. Could starter kits, built-in scaffolding, and automated environment setup reduce the time from onboarding to launch? The growth of SaaS starter kits proves that users want to launch without setup friction.
2. Moving from Single-Player to Multi-Player Context
Today, Cursor is predominantly single-player. But the real asset is shared context. As more non-traditional developers build, codebases become harder to navigate. Cursor can be the companion that documents architecture, decisions, and system prompts, enabling teams to collaborate seamlessly with shared AI context.
3. Personalization & Developer Memory ("For You, By Cursor")
Cursor observes where developers struggle—languages, bugs, prompt patterns. By introducing proactive guidance ("You've been struggling with this pattern—want to deep dive?") and workflow capture ("You had success with this prompt—save as a workflow?"), Cursor can create compounding personal leverage that makes leaving impossible.
I'll be curiously watching how Cursor's strategy and positioning progress over the next year. As a daily user of their product, I hope they build enduring defensibility!
Originally published on Sameer Bajaj's Blog. Explore native Mac tools and developer workflows: EnhancedSkills and MacYT.
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