You’re both correct. Absolutely you need to start small and build confidence over time. However, it’s important to know early if you plan to eventually make the product a profit center. You can establish legal and technical foundations that will make your life much easier down the road.

Another option is to consider building in the open. If the technology is not a differentiator in your industry, then maybe you build it open source under GPL. That way you can build a consortium of similar firms to build a genuine alternative to the status quo while preventing lockout.

You don’t have to decide about proprietary vs open source release now… but you should consider taking steps to preserve those options down the line.