
Frederick W. Smith: No Overnight Success - niggler
http://www.businessweek.com/stories/2004-09-19/frederick-w-dot-smith-no-overnight-success
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kevinconroy
Headline is misleading. Only reference related to this in the article is:

    
    
       By 1973, Smith was so desperate for cash that he flew
       to Las Vegas to play the blackjack tables. He wired 
       the $27,000 he won back to FedEx.
    

Where did you find it was the "last $5000"?

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graycat
Guys, Fred Smith didn't go to Vegas to try winning the $27,000 gambling.
Instead he went to Vegas hoping to see Howard Hughes and get an investment in
FedEx (then Federal Express), and he won the $27,000 while waiting to see
Hughes. Hughes didn't invest, but General Dynamics did, as I recall, $5
million. Check the story with Fred, Roger Frock, Art Bass, Charlie Brandon,
Norm Waite, Leon Tyree, Mike Basch, and others.

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raheemm
The timing of this link almost seems karmic. After only 6 months of trying,
failing to learn coding, a competitor beating me to launch, less than $1k left
in the bank and living a broke ass life for what seems like an eternity, I was
thinking of throwing in the towel today. This gives such great perspective.
I'll try harder.

------
jayzalowitz
This is actually a famous story... dont ever give up on your startup.

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nashequilibrium
You just don't see that type of founder in SV anymore. Everyone watches the
latest conference talks from VC's and entrepreneurs that exited, which teaches
them a few common things.....fail fast, make sure you grow by x% week on week,
you need a co-founder, ask yourself who could you see trying to acquire you?

Staying power and testing monetization from day 1 never get mentioned. Oink
had a 150 000 users within a quarter i believe but still shutdown, Pinterest
were stuck on around 11000 users for a long time before they reached a tipping
point. Life happens in spits and spurts, even looking at a stock chart, a
companies stock price moves in a contraction expansion pattern. Bottom line we
all get taught that the startup lifecycle follows a normal distribution but it
is actually fat-tailed so is VC returns coincidentally. I think the last
chapter of Emmanuel Dermans's book, 'My life as a quant' can apply to the
startup industry as well.

~~~
graycat
It's simpler than that: Fred knew in fairly good detail just what he was
doing. All the early money in FedEx (Federal Express then) was from Fred's
family's money, basically Fred's personal checkbook.

Also should count Fred's time at his Little Rock Airmotive where he did the
engineering on the special cargo door and got the FAA approval. So, FedEx
really grew from a going business, Little Rock Airmotive, and was not started
with just an idea.

By late 1972, White-Weld was supposed to have done a good private placement,
but they didn't get it done. Although later one of the guys from White-Weld,
Phil Greer, did invest as part of Weis, Peck, and Greer, now Opus. The service
went live in early 1973 and was chronically short of money from then for at
least some months.

The fuel crisis hurt: FedEx was buying jet fuel for 16 cents a gallon in
Memphis but 55 cents a gallon in Nashville with the other cities scattered
between and with limits on how much must/could buy. Right: Buy fuel where it's
cheap and fly it to where it's expensive. Hmm ...

The more important questions were: How fast can bring the 33 planned planes
online to serve the planned 90 US cities? E.g., had to find and buy the
planes, get the special cargo door installed, get the pilots, be sure there is
enough maintenance staff and facilities. During this growth period, how fast
will the package volume and revenue grow? How much does FedEx need to charge,
for over-night and for next-day, and how much will the customers pay? Where
should the early marketing efforts be aimed -- law firms sending "time-
critical documents", lab animals, manufacturers' representatives sending
samples, e.g., decorative bricks, spare parts suppliers, suppliers of
inventory for just in time inventory manufacturing that just ran out of a
crucial part, clinics sending samples for medical testing, fashion, e.g.,
loads of dresses for a big sale, movie film, both unexposed and ready for
showing, etc.

How fast the service would grow was, if you will, an exercise in 'the network
effect' because the more cities served, the more opportunities to get
shipments from a given city. Further, of course, there was a big 'virality'
effect: Each shipment was, in effect, and ad to a good candidate customer. All
up, 90 cities, great publicity and reputation, sure, but just 15 cities, no
publicity or reputation and the billing sucks? So it was a bit unclear just
how fast the service would grow from 15 cities to 90.

In broad terms, the need for the service was quite clear. But some of the
planning was not good: E.g., the early planning arithmetic said that could fly
the planes half full and print money. Then soon the planes were flying packed
full, the rates were doubled, and they were still losing money. We're talking
some bad arithmetic.

