Maker Risks

to all the Indie Hackers moving back in with their parents because the Twitter API now has a price tag, i’m offering my services free of charge to help you recover from your mistakes.¹

of course it’s silly to tell someone what to “do” in startups, as every case study has a counter-example. should you raise money or bootstrap? prioritize top-line growth or fix your churn rate? it’s impossible to say, as all startup advice is true.

advising what “not” to do, however, is still useful. so in this post i’m sharing a few tech entrepreneur strategies to avoid, accompanied by mitigation tactics in case you’re already knee-deep in their execution.

General Risk

what’s obvious to Jane is a new secret to John, so i’m including this section just in case.

to build something great you need your health. you need a deep work environment. and most of all you need tenacity. great employees keep trying, but great entrepreneurs keep trying until it works.

many people try to build an application that pays their bills, but they can’t concentrate for more than an hour. they’re distracted by family or friends every 19 seconds. they talk themselves out of new ideas within days of breaking ground.

Platform Risk

“The Lord Giveth, and the Lord taketh away.”

Job 1:21

when you build on top of a platform like Twitter, Shopify, Facebook, or Amazon, you are literally 1 click away from being destroyed.

although Elon Musk is today’s punching bag, Elon is not the root problem. platforms recognize APIs as a marketing channel, and a marketing channel’s job is to increase revenue.

once the risk/reward is no longer attractive (and sometimes, even if it is!) platforms will shut down that marketing channel.

the challenge for makers is that nobody can agree whether their relationship with a platform is symbiotic or parasitic. perhaps a heuristic is if you have to ask, you already know.

Dependency Risk

when people say “it’s easier than ever to build a tech company,” what they’re actually referring to is the proliferation of dependencies.

you no longer need to build a server closet, roll your own authorization, or own 50 mobile devices to test compatibility. there are SaaS, open source libraries, and simulators available to solve nearly every definable job to be done.

taking a step back here, it’s sobering to realize that many web apps are simply a handful of existing technologies, glued together with a new point of view. or even an existing point of view, but for a specific use case.²

less devastating than Platform Risk, dependency risk is what happens when your product’s Promise (what people pay for) is delegated to an underlying technology that decides to break up with you.

firms of all sizes have dependency risk. look at Apple’s long-term reliance on Intel chips. a pattern among stable companies is to reduce these as you grow.

Venture Risk

among the most popular tropes in Indie Hacker literature is “pick a niche.” this is directionally accurate but neither necessary nor sufficient for increasing your odds of success.

to evaluate if your idea is the Right Kind of niche, figure out if the market is big enough for investors to make money in it. if it is, you can bet your booty another entrepreneur will raise a million bucks and try to destroy you.

India Risk

i understand my Indian and white liberal readers may be offended by this moniker, so i’ve prepared “British” and “Russian” substitutes, respectively. if these don’t suit, try “China.”

India Risk, or Developing Country Risk, is at bottom the currency hacking edge enjoyed by almost every person who is not American, British, Australian, or Canadian. as Tim Ferriss puts it, “Fun things happen when you earn dollars, live on pesos, and compensate in rupees.”

if your SaaS costs $19 /month and you need 100 customers to cover your small town USA living expenses, guess what? someone a thousand miles away (who is better at coding than you) only needs $500 /month. if their application has feature parity, but only costs $7, they might win.

while building Fomo.com we experienced dozens of such cases. and being undercut on price, while totally fair and legal, is not even the worst of it. you will also be libeled and harassed by people who have more to lose. after all, they’re trying to feed their families. you’re trying to surf in Thailand.

Mitigating risks

there is no reward without risk. but you can build an escape hatch for many of the biggest ones your company faces, so long as you swallow enough pride to identify them.

general

to compete with those of us who can focus for 14 hours straight, consider starting your tech entrepreneurial journey without a code base at all.

get your reps in at the gym, the library, and a startup with a smarter CEO than you. then come back to the kitchen table to decide between React Native and VueJS.

platform

when we acquired Notify in 2016 i both loved and hated our Shopify integration. it was the source of all our revenue, double digit conversion rates, and streamlined billing. my first directive was to rebuild the product to work on any platform.

around 6 years later when we sold the company, Shopify was 47% of our revenue. still a huge chunk, but not enough to be fatal if they cut us off.

dependency

when feasible, use dependencies in the wrong way.

instead of signing an expensive Salesforce CRM contract, build a good-enough version in Trello. instead of making live API calls to a GIS platform, download a static database of 1 billion IP address locations and perform lookups yourself. make a fork of every OSS project you implement.

India

again, this is not about India per se. i’ve worked with wonderful Indians my entire career. but you’ll want to keep your guard up as you grow.

there will always be less creative, less moral, and less abundant-mindset-having individuals ready to eat your lunch. this realization essentially killed the so-called Open Startup movement: naive founder shares their “exact strategy for growing X to $Y /month,” then a week later discovers a clone with Google search ads targeting their brand match keywords.

venture

identify a solution whose revenue is simultaneously life-changing for your family, but completely uninteresting to an investor. don’t be dissuaded by the daunting market caps of Education or Transportation or some other high level category.

the Private Equity market, for example, is $4 trillion annually. yet i created the first [and arguably best] Micro PE course. it took me 9 days in 2019 and changed my life forever. niches live inside the whales.

BE the risk

“I am the one who knocks.“

Walter White

the defensive tactics above are a good start, but you still need one more thing. if you’ve ever been asked “what’s your killer feature?” or “where’s the moat?“, you’re already painfully aware.

surprisingly, respondents often provide a statistical answer. from “we rank on page 1” to “our plugin is 3x faster” or “our pricing is 50% cheaper.”

but how does one achieve these benchmarks? if you can hire someone to change a number, remember that your competitor can hire them too.

a better answer to this question is domain-specific knowledge. what do you know that competitors don’t? unfortunately for most tech bros, they have no experience in the real world. they leapt from subsidized school lunch to subsidized Silicon Valley lunch. how could such a person ever come up with ideas like Endcrawl or Lobiloo?³

developing domain specific knowledge is the most important focus area for entrepreneurs in the pre-build phase. i personally look for it in books and while people watching.⁴

Edward Thorpe, the inventor of card counting, demonstrates in A Man For All Markets that even a 1-2% “edge” over the house, patiently executed over many hands of Blackjack, yields enormous profits at scale.

if you can find (and protect) just a tiny bit of domain specific knowledge, you’ll win. Twitter’s API pricing has nothing to do with it.

footnotes

1. i get it, Elon Musk sucks. but your project is your responsibility. if you want all the profit, you absorb all the losses too.
2. there was a case study once about a small, struggling bank. they changed all their advertising to “personal checking accounts for medical residents” and within a few years had a large cohort of high-depositing doctors. same product.
3. after finding Endcrawl i immediately wanted to buy it, then discovered i’m already an investor. after finding Lobiloo we bought it from a florist, improved it, and resold it to another florist.
4. every morning since 2015 i’ve read a book. i then watch people at the park, on YouTube, and in my Twitter timeline.