Technical Risk or Market Risk: Which one do you have?
Answering this question correctly could save you months, if not years of your life, and make you money faster. Getting it wrong could lead you down a road of gloom and misery. It’s easy to figure out the answer, but many don’t until its too late.
So, what’s the difference?
Technical risk is when you don’t know if you’ll be able to overcome technical challenges, but if you do, your solution will probably sell well. Your main question is: Can it be built?
Tesla is a good example. They didn’t know when they started if they would be able to build an electric car with hundreds of miles of range before their funding ran out. But, Elon knew that if he could solve the technical challenges, the car would sell. It took a decade, but once they had a working product, it sold well.
Market risk is when you don’t know if you’ll find customers even if you build it. Your main question is: Can it be sold?
AirBnB is a good example. They knew that the main problem they had to solve, or question they had to answer was: would people rent out rooms in other people’s houses. It would not have mattered whether they had built a full-featured, fancy marketplace or listed a few rooms on a blog. Their first site didn’t even have a way for guests to pay their hosts.
If the thing you’re building falls into the market risk category, just about the last thing you should do is start coding. You want to start with customers. Interview them about their problems. Find out if they would buy what you’re making without explicitly asking them.
But its still such a common mistake to build first and sell later. Oftentimes this mistake is made by developers, and it makes sense that developers want to…develop. They care about things like code quality and scalability. They mistake market risk for technical risk.
Say you want to build a marketplace. Whatever you do, don’t code! Marketplaces are already a well solved problem, technically. You’re not doing the world any favors (initially) by building your own custom version from scratch. Today you can start a marketplace in a matter of hours with sites like Sharetribe that already have all the features you need for a low cost. It would take you months to get to a product of the same quality. Customers don’t care who wrote the code. All they care about is if they want to buy or not.
If you don’t care whether the project ever gets launched, then by all means, start coding it from the start. It will probably take you months to get it to the point where it’s on par with plug-and-play solutions. If you don’t ever make it to an MVP and you’re okay with that, you probably got what you came for: coding.
However, if you want to actually launch and sell, it’s never been easier to “cheat” your way to an MVP. Use no-code tools like Bubble, Zapier, Airtable, or Webflow to speed things up. Use prebuilt SaaS templates like Laravel Spark or Bullet Train to skip the repeatable stuff in SaaS. Use Shopify instead of building your own online shop.
It’s never been easier to get started on a startup in the market risk category. Just make sure you’re not misidentifying it as technical risk to work on things you enjoy (coding) to avoid talking to potential customers.
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