FedEx CEO Saves Company With A $5000 Gamble

FedEx CEO Saves Company With A $5000 Gamble

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Now a $27 billion corporate giant, Federal Express started as a concept in founder Frederick W. Smith’s Yale term paper. Smith envisioned a company that could supply overnight deliveries from start to finish, with its own depots, airplanes, posting stations and delivery vans. His professor awarded him a ‘C’ for the paper, noting although the concept was interesting and well-formed, it simply wasn’t feasible.

The term paper conception doesn’t end the fascinating story of Fed Ex’s beginnings, however. In the early days of the company, Smith literally gambled it all—and won. According to Smith, regardless of the professor’s disbelief in his concept, he founded the company in the early 1970s, and in 1973 it shipped its first delivery of 186 packages. Soon, though, it ran into serious financial difficulties. The 1970s were a time of rapidly inflating fuel costs, which were draining the young company’s accounts. Within three years of its founding, Fed Ex was losing more than $1 million each month and verging on bankruptcy. Smith could not secure any more loans and investors were turning their backs on his young company.

Smith reached a point when the company’s account had only $5,000 and he couldn’t afford to refuel the planes that delivered Fed Ex’s shipments. After an unsuccessful pitch to General Dynamics for additional funds, the company was at the point of closing if it could not refuel its planes the following Monday. Still, Smith refused to surrender. He took the last $5,000 and flew to Las Vegas, placed the company’s remaining money on Black Jack bets over the weekend and won an additional $27,000 by Monday. It wasn’t a huge windfall, but the total $32,000 was enough to refuel the planes and keep the business running for a few more days.

Those next few days were all Fed Ex needed to turn things around. Soon, Smith raised an additional $11 million, and by 1976 the company’s profits reached $3.6 million. By 1980 Fed Ex’s profits reached almost $40 million. Today, the shipping juggernaut transports as many as 17 million packages each day, is valued at an estimated $25-$35 billion, and Smith’s net worth is $2 billion.

Samantha Lile