Why You’re Not Ready For Investment According To Axelrod
What Billions Can Teach Startups About Differentiation And Profitability
Josh Pigford, Founder of Baremetrics, recently stated, “The best way to future proof yourself is profitability plus 3–6 months worth of expenses as cash in the bank.” Too often, startups rely on raising outside investment while lacking a clear path to profitability. Differentiating yourself from your competitors is a good first step to become a sustainable business. Bobby Axelrod delivers a masterful assessment of the difficulties in scaling startups in the recent episode of Billions.
Billions, starring Damian Lewis as Bobby Axelrod, airs weekly on Showtime. The show is loosely based on the activities of a former U.S. Attorney for the Southern District of New York, and his legal battles with hedge fund manager Steve Cohen of SAC Capital.
Axelrod’s wife, Lara a former nurse, launched a mobile-enabled house call service targeting stressed out Wall Street investors. In this episode (Season 2, Episode 5) Lara becomes aware of a new competitor in the space and thinks the best way to take them out is to raise a round of funding and expand the business. When she shares her negative experiences with potential investors, the realities of expanding her business come between her and Axe. After ignoring her husbands advice, Axe explains why she’s not ready for investment:
“What is it that you do that you’re the best in the world at? You offer a service you didn’t invent, a formula you didn’t invent, a delivery method you didn’t invent. Nothing about what you do is patentable or a unique user experience. You haven’t identified an isolated market segment. Haven’t truly branded your concept. You want me to go on? So why would an investment bank put serious money into it? I all but told you ahead of time, but you wouldn’t listen. Now you’ve heard it, but it’s too late. YOU WEREN’T READY!” — Bobby Axelrod
This is a very intense and eye-opening scene as you can tell by the expression left on Lara’s face. But Axe is right and it’s a bitter pill to swallow for most founders. Differentiating yourself amongst competitors and putting revenue as your top source of capital is the difference between living and dying — between scaling and failing. Unless you have domain expertise, built new technology in an industry with a large market opportunity and traction then odds are you probably aren’t ready for investment. Until then, minimize the effects of shocks and stresses of future events with profitability.