All ventures are born with a long list of risks, some easier to quell than others, and some inherently tied to the venture you chose to pursue. Some businesses are born searching - looking for the buyer, the category, the language and the business model that makes the sale possible and repeatable. Others are born past this stage, with all these questions answered, and the success of the company riding largely on execution.
How you should allocate resources as you build the business can be completely opposite depending on the venture-type you’re in, and so it is worth knowing this from the start.
Founders generally feel like they’re doing something new, however, this perspective is useless as a diagnostic and it is more useful to look at the buyer’s perspective. The question is whether the purchase is new. If a buying habit, budget allocation, or procurement category/role already exists for the thing you are selling - then you’re carrying execution risk. If the buyer has to invent a way to buy your product - e.g. creating a new budget line, a new purchase justification, or a new mental category for what you’re selling - you carry search risk. With search risk, you've chosen, voluntarily, to abstract yourself further away from the outcome (the outcome I assume you want at least, which is building a successful company/business).
I have experienced this myself first-hand with an AI intelligence platform I built for mining, energy & resources (Honeycomb). The job itself we are providing is very well-established, the mechanism however, is not. If you create a new mechanism for an old/existing job, by virtue of now having a new product type, this is category creation whether you like it or not - because the buyer has never bought a thing like this before. You may simply see it as a new and better way to do the same thing they are already doing, the buyer sees it as a completely new thing they need to understand and assess, let alone procure. This gap between an existing job-to-be-done, and your new answer to it, is search risk.
Search risk decomposes into four types. (1) Technology risk: not only does the underlying technology work, but does it apply to the buyer’s use case and domain? And does the buyer understand/trust the technology enough to buy it? I started Honeycomb in 2024, roughly a year after the GPT 3.5 release, which was by no means long enough for the buyer to fully understand the technology, let alone trust it. (2) Demand risk: does anyone value the output enough to pay? This one is relatively easy to answer - with enough outbound volume you’ll reach buyers that are naturally early adopters, and see whether they will pay or not. Early adopters are a clean test-population, as their willingness to try new things largely insulates them from the other risks. Testing buy/no-buy with early adopters is the cleanest way to isolate the question of value itself. (3) Category risk: Even if the buyer values your product, can they recognise what it is and do they have enough internal justification in their organisation to buy it? (4) Timing risk: being early is indistinguishable from being wrong for a long time.
Search risk ventures carry all four of these from inception, and they resolve on different schedules.
Execution risk doesn’t decompose the same way. Search risk is unknown questions, whereas execution risk is known questions, answered under competition. For example: everyone in home services knows what the customer wants; and the entire game is operational quality and speed against other capable teams chasing the same known answers.
Search risk and execution risk fail differently too. Search risk: either no-one wanted it, or no-one understood it in time. Yes, you can educate customers, however it is not realistic for a startup to educate a completely unaware market on new technology/mechanisms if said startup is not extremely well-resourced, particularly if they need to create new buyer behaviour. Execution risk: you got outrun.
There is no safe or “right” choice. I think you decide what is right for you by your personality and what you want. Successful search risk ventures lead to entire category ownership, successful execution risk ventures lead to market share.
As I mentioned, correct behaviour differs by venture-type. For example: if you run customer discovery processes on an execution venture, you will likely waste months on learning things the market has already figured out. For a search risk venture however, this is not only not a waste, but a necessity in order to get the business right. Conversely, if you scale operations on a search risk venture before you’ve resolved the search, you are scaling a guess and likely wasting resources. Being quick to scale on an execution venture, however, is good business practice.
If you’re in search, I think that product-market fit arrives a lot sooner than you might think, and what you’re actually dealing with past a certain point is message-market fit. We had lots of demos where the customer seemed to love and was excited by the product, but few sales. In this case, it is more likely that the message points you’re selling on simply aren’t matching to what the buyer is looking for/experiencing as pain internally. As a founder, it is very easy to think that you need to “build your way out” of this, through product development, iterations, and more features. Avoid this completely. For high-ticket products, simply having an attractive product does not mean it sells itself. What you need to do past this point is iterate and test the pitch, not the product.
If you have enough conversations, and listen, you will see that the buyer will tell you the answer anyway, without being asked. (Asking the buyer explicitly “what would make you buy”, did not generally give me the answer. My hypothesised reasons for this are for another essay). Instead, pay attention to where their energy goes throughout the conversation. The things they interrupt you on, change the subject to, ask you more questions about, or raise unprompted, are generally the things they are dealing with internally - and would jump to procure if presented with a well-defined and packaged solution to the issue. This gives you direction for pitch iteration. After enough conversations you’ll have a well-defined concentration of interest, and this becomes your message to the market.
You choose your risk type the moment you choose your venture, and I don’t think most first-time founders fully appreciate the meaning of the choice. Knowing which one you’re in determines general strategy and specific resource allocation, and tells you what to do when things aren't working: do you keep searching, or do you execute better?