The Clouds and Dirt of Risk

The job of an entrepreneur is to manipulate risk.

You’re in Tacklebox to mitigate your own risk. Our goal is to make the opportunity as likely as possible to be worth your time.

At the same time, we’re trying to minimize risk for your customer. To make sure they’re willing and excited to speak with you or test out your product or pay for it before they know who you are or are sure that you can help them succeed.

There’s tension here — how do you remove risks for both sides?

The answer is that you can't. Misplaced risk is a momentum stopper - you've got to figure out where it needs to sit at each interaction to make sure you keep moving forward.

I think of this as the Clouds and Dirt of Risk. The Clouds are the high level view — us running interviews and testing acquisition channels and validating pricing and business models and raising money if needed and hiring people and on and on. We’re constantly trying to de-risk our involvement in the broader opportunity. From a cloud perspective, we remove as much risk as we possibly can.

The Dirt of risk is very different. This is the risk associated with the granular interactions with customers. The cold emails that lead to interviews, the intent tests, the MVP. From a Dirt perspective, you have to shoulder all the risk.

Here’s an example:

When you cold email someone for an interview, you’re de-risking the opportunity for yourself from a Cloud perspective. But there’s still risk from the customer side. The call could be uncomfortable, you could be trying to sell them something (something humans viciously hate and will avoid by any possible means), or you might just generally waste their time. In Dirt scenarios, you have to be conscious of the risk so you can remove it or visibly take it one. An easy way to do this is to call out the risks and address them in the interaction. Usually, I try to do the opposite of the thing people are worried about.

• Uncomfortable Call - the most uncomfortable thing for humans is ambiguity. Create explicit boundaries so they know exactly what to expect.

• Don’t Sell - within those boundaries make it clear you have nothing to sell and actually have something incredibly valuable you can give.

• Waste of Time - make it clear you’ve chosen them for a reason - you know who they are and what they want. Specifics build trust, doing homework on someone is flattering.

Get those three points, in three bullet points, in a cold email and you’ll be in good shape.

As the risk of the transaction increases, your willingness to take it becomes more important.

We had a Tacklebox company a year or so ago trying to build a marketplace for farms and restaurants. The goal was to start with farms - get a bunch of produce listed with details on where it came from and how it was grown, then go to restaurants to see if they’d order it. The founder would put all the details for the farmer online and wouldn’t take a cut of transactions early on. The entrepreneur thought it was riskless. But no farms were interested.

After digging in a bit on why, the entrepreneur finally spoke with a farmer who was clear - “I’m taking all the risk here. You’re just putting my stuff on a site and making a profit if people buy it. If they don’t buy it, you don’t care. You’ve got zero risk. Since when am I your employee.” Yikes.

So, the entrepreneur took a different approach. They spoke with restaurants to learn what fresh produce they’d love to have at a certain price. Then, they went to farms and prepaid, in cash, for all of that produce - in the case of the first test, heirloom tomatoes.

The interaction looks completely different:

Can you tell me what you make so I can put it on a website

vs.

Here’s $5k, I’ll take a bunch of tomatoes

Shoulder the risk.

If you’re getting lukewarm reactions from customers, it might be worth looking into the risk balance. We’ve all got an empty tank these days when it comes to risk. You might be subconsciously passing risk on to your customer that you shouldn’t. Mitigate the Cloud risk, shoulder the Dirt risk.

What risk could you shoulder? What risk is holding your customer back? What’s your tomato option - how can you take it all?

Give it a think and give me a holler if something comes up.

Also, I made a cartoon about this because we had a long ferry ride this morning and I had no wifi.