Back From The Dead

It’s Easter Sunday. A time to celebrate those that have risen from the dead.

My favorite success stories are the ones that were written off for dead and somehow pulled it out and built something lasting and sustainable.

It doesn’t happen that often to be honest. Sure there are the pivots like Odeo>Twitter and Glitch>Slack. But I am not talking about them.

I am talking about something like the Fedex story. Out of money with nobody willing to invest. And Fred Smith pulled it out and built one of the most important companies of the latter half of the 21st century. Or Apple when Steve Jobs went back and turned it around. These companies were near death. And their founders figured out how to keep them alive and then turn them into juggernauts. That’s rising from the dead.

The truth is that over the past twenty years and two venture capital firms, I could not find a great example of a portfolio company of ours that rose from the dead. There were a couple that were near dead and were turned around and got nice exits. But nothing on the scale of Fedex or Apple.

It’s really hard to go from dead to juggernaut. So when it happens, you just have to look at the experience with wonder. That’s why these are my favorite success stories.

Happy Easter Everyone.


Comments (Archived):

  1. JimHirshfield

    Sound track for your post…Listen to Zombie Live by The Cranberries #np on #SoundCloud…

    1. Kirsten Lambertsen

      Ha ha ha ha ha! Oh man, Jim. Ha ha ha!

      1. JimHirshfield

        Bringing back some memories?

        1. Kirsten Lambertsen

          Yes, and such a funny share 😛

    2. Anne Libby

      Love hearing her singing along with the audience! Kirsten’s right, this is a great share. Thanks, Jim.

      1. JimHirshfield


  2. William Mougayar

    Rising from the dead, and coming from behind, are two of the greatest acts humanly possible.”Out of suffering have emerged the strongest souls; the most massive characters are seared with scars.” — Kahlil Gibran

    1. Kirsten Lambertsen


  3. panterosa,

    Once you have nothing to lose you have everything to gain. It’s beyond having balls.

    1. Kirsten Lambertsen

      It so is, Panterosa. There’s been nothing so painful and yet so enlightening and liberating as the time I spent after having ‘lost it all.’

    2. JimHirshfield

      I’m struggling with your use of “having balls” in a comment about losing things. It’s a sensitive touch point.

      1. panterosa,

        It’s the mental leap ahead, so less touchy 🙂

    3. laurie kalmanson

      freedom’s just another word for nothing left to lose …

      1. Chimpwithcans

        Nice one, Janis 🙂

  4. Asim Aslam

    Hopefully Hailo falls into this category.

    1. fredwilson

      Is it or was it ever near death?

      1. Asim Aslam

        From the inside at times it did feel that way. Even more recently it’s been unclear whether it was 2-3 months away from shutting down or teetering on. Although I guess with significant revenue and being close to profitable in a few cities, when unable to raise money it instilled further discipline to cut burn and find a way to carry on.

    2. Kirsten Lambertsen

      +++ #AnybodyButUber

  5. LIAD

    I think this speaks more to tenacity and dedication than opportunityIn an age where failing fast is virtuous perhaps it’s not surprising that resurrections are elusive.

    1. LE

      The story of Fred Smith (as I recall it) was one of going to Vegas to make payroll or bust. That is also essentially gambling and luck. Most people at that point who would do the same had a casino’s chance of success (overwhelming house advantage) which we all know is super low. And that even assumes that the story is even correct as told. As opposed to a movie, book or article style way of portraying things. [1] Having read traditional business stories from most likely before you were born (back from high school and college days) I am typically skeptical as to anything that I read. Magazines (such as Fortune, Forbes or maybe Inc.) had a way of portraying businessmen in a particular way until of course they tripped up at which point the failure was celebrated with equal lack of veracity.[1] Meaning people typically enhance things for entertainment value whether it be the participant or the writer (Trump has mastered it but you’d be kidding yourself not to think that others don’t do similar things). I think the story is true by the way.

      1. sigmaalgebra

        > The story of Fred Smith (as I recall it) was one of going to Vegas to make payroll or bust.No. He went to Vegas to meet with Howard Hughes, to get and equity investment from someone with money who shared Smith’s “romance of aviation”. As he was waiting to see Hughes, which he never got to do, he played dice and won, IIRC, $27,000 which he did use to make payroll. The $27,000 was good to have but was not the difference in going bust or not. The employees were asked to delay cashing their paychecks for a while, if they could afford to do so.

  6. JJ Donovan

    I like the story of Ford Motor company coming back from the “dead”. Having to mortgage EVERYTHING they had, including the blue oval, they managed to stay afloat. One could argue the government kept them afloat with a loan, I still think, the leadership with Alan Mulally kept them afloat.

  7. John

    The 2004 Boston Red Sox…”Trailing 4-3 in the 9th inning of Game 4, they embarked upon an unprecedented (in Major League Baseball) comeback from a three-game deficit to defeat the New York Yankees in the series.”

  8. jerrycolonna

    You’re forgetting Mainspring, Fred. While they were never “quite” dead, that tale remains one of my favorite stories of redemption and resurrection. Less than a year after we invested (my first investment on behalf of Flatiron), John Connolly (the CEO) closed the door after a board meeting and told the investors that, essentially, we were fucked. We were weeks away from launching the service we’d invested in order to build and John said, “It’s not going to work guys.”We had $15 million or so still in the bank and he was pulling the plug. He offered the investors a choice: shut the doors, distribute the cash that remained and call it a day OR give him and Mark the CFO a few weeks to a) terminate everyone b) develop a new business plan and c) come back and pitch again.We chose the latter (well Paul Maeder from Highland and Bill Kaiser from Greylock chose. I was a scared-shit rabbit frozen in my tracks. They knew John and had confidence in him.).Long story short, we sold that business for, I think, more than $200mm to IBM in something like 20 months.So not quite a resurrection but not your average pivot. And redemption like that takes guts…on the part of the CEO as well as the investors.Happy Easter.

    1. MogulAzam

      @jerrycolonna I would want to have you to back me up in the future when needed

    2. fredwilson

      Happy Easter JerryI love that story too, but when you have $15mm in the bank you are very much alive

      1. jerrycolonna

        of course, of course. but still…

  9. Dana Hoffer

    Fred, Great topic. Why not do one of these stories once per week? I am not volunteering but I would volunteer a USV summer intern to tackle it. Chrysler in the 20’s and again in the 80’s are two stories here. Not only do these stories enlighten, they induce humility in our entrepreneur/investor community. This is fertile ground.

  10. Pete Griffiths

    “In the early days of FedEx, Smith had to go to great lengths to keep the company afloat. In one instance, he took the company’s last $5,000 to Las Vegas and won $27,000 gambling on blackjack to cover the company’s $24,000 fuel bill”Maybe that’s were your guys went wrong – they never went to Vegas.

  11. Kirsten Lambertsen

    Makes me see the role of Fedex in “Castaway” a little differently.

  12. PhilipSugar

    There’s nothing wrong about turning a zero into a nice exit. Sure not Fedex or Apple but certainly something to celebrate. It’s not easy it’s really hard and shows fortitude. It’s exactly the type of story that I would love to see told more often. Because while the super highfliers are interesting life’s reality is much more interesting to me. Yes winning the lottery is sexy (in no way am I comparing your examples to that) but so is grinding it out buying real estate or building businesses is really interesting as well.There is a guy that bought a struggling beach bar in Delaware. He was scraping together money and asked me to invest I didn’t a friend did. He now has a juggernaut of bar/restaurants in the beach Washington D.C. and Baltimore

    1. LE

      and asked me to investYou used the same brain that also saved you from a bunch of things that wouldn’t have worked. [1] Guy could have run into health problems or employee problems or anything in between (kid/wife issues) and you’d be saying that you dodged a bullet. (Trump lost his NJ Casino guy in a helicopter crash (Mark Etess)) [2]Stick with your gut does not always equate to luddite or stick in the mud. It is a pattern that often does make sense.My cousin passed on an opportunity (“don’t invest in family – his wife hocked him”) that would have paid off extremely well (those things that I bought in the 90’s). Ditto for a mentor esq older rich guy. Buy for close to zero, sell for lot’s of money nothing (relative to the risk) even comes close. Big win. Otoh cousin made money in other things. Rich guy lucked out people needed his mall locations. I passed on investing in real estate in Old City (and sold the one thing that I had prior to the market tripling (to my Dad no less) but spent my time on the thing that my cousin/”rich” guy passed on. Same brain. Follow what you know and what works for you.[1] We can call this an “airbnb” miss (small scale of course), after Fred’s passing of that idea (as I would have done, not that I am an investor like that, I’m not). You probably learned how to refine your pattern match most likely.[2]

  13. Richard

    George Foreman has to be on his list.Quickest way to becoming a millionaire is to be worth a 50 million.

  14. Nidhi Mevada

    We are also, before few months I have lost each single thing which I have build and started again it from scratch. No one can imagine how painful those days were, every morning my heart beats were high and sleepless nights. But I am glad to announce, today is Easter and closed deal just now with first techie of our company, with whom I was discussing since a long time.Back From The Dead, Happy Easter!

  15. george

    I’ve had an endless fascination with Steve Job’s, the leader and his complete revival of Apple, from grave to grand. This is truly one of the most amazing turnaround stories of our times – the unyielding will of a man, his private challenge to save his purpose and how an endless measure of faith can turn dreams into reality. The correlation here, it takes deep sacrifice, faith and most importantly “Love.”Happy Easter to all those that find special meaning in this Holiday!

    1. Donna Brewington White

      Love seems an interesting word choice. At first I wondered if you meant passion, but love has more connotation of endurance and commitment, doesn’t it?Happy Easter.

      1. george

        Beautifully stated, you contrast this point so well…I think Steve Jobs was right, “the only way to do great work is to love what you do…don’t settle.”

  16. pointsnfigures

    Happy Easter. I am part of bringing a company back from the dead. It’s horribly hard. Sometimes it’s better off to let them die. But in this case it wasn’t and so far it’s going okay. For me, it really reinforced a lot of the lessons of seed investing. You bet on teams with good ideas-not on ideas alone.I was part of a turnaround at CME. We were member run. Our memberships were worth $1M in 1994. By 1998, they were down to $280k. We demutualized, and went public. If you would have bought a membership for $280k, it was worth $1M on the opening tick of the IPO in November of 2002. If you sold at the top in 2007, it was worth $13.5M. Of course, 2008-09 wasn’t kind to financial services stocks but the business is operating strongly today.Apple and FedEx are amazing stories. What’s more amazing about them is they did it in the public eye-as public companies. I really wish the SEC would get its act together and change the rules and regs so companies could go public sooner. It’s good for their management. It’s good for their employees since they can get liquid on options. It’s good for investors that put money in early. But most importantly, it’s good for the average guy on the street because they can do their homework, invest in a rising company and increase their own personal wealth and do it with the supervision/discipline of the public market.

    1. Mark Essel

      Plenty of great reasons to go public sooner.Is there a history of being on a path to revenue neutral before going public? Or just putting off the work that going public requires while growing? Assume strong counter forces exist towards going public early in a company’s history.

  17. mikenolan99

    I’ve always loved Zappos and Tony Hsieh’s story of an investor stepping into an investment, pivoting and sticking with a vision. Saw him speak in ’08 – very cool guy.

  18. sigmaalgebra

    Okay, okay, okay, okay, okay, okay, FedEx, okay, if only in the sense of the J. K. Rowling Harvard commencement speech,…no doubt, even without any wizard jokes, it is my moral obligation as a fellow earth’s surface 24 hour a day rotator with Rowling to recall FedEx and its founder, COB, CEO, F. W. Smith.Yes, there was a guy, call him X, who helped Smith and Federal Express, which is what FedEx was known then. Actually X kept FedEx (let’s use the current name) from going out of business, twice.In his last months at FedEx, X had his office next to Smith’s. Supposedly X reported to Senior Vice President, Planning Mike Basch (who later wrote a book on FedEx). So, Basch had his office across the hall from Smith, and X had his office across the hall from Basch and, thus, next to Smith. But, really, X didn’t really report to anyone except maybe Smith who provided no management. Basch certainly provided no management of X.Instead, X discovered his own work and pursued it and, in particular, saved FedEx, right, twice.Apparently X was seen as a power within the company. The rest of the C-suite and HQ people may have admired or hated X, but one day, when X called a meeting to talk about his work, everyone showed up — the room was packed, with Smith, etc. One guy, say, B, said that he couldn’t come so that the meeting had to be delayed; B just didn’t want the meeting held at all. X said “then don’t come.”. B came. In the meeting B sat next to Smith and raised hell until Smith quieted him down. At the end of the meeting, B wrote a memo firing X and Smith wrote a memo having X report to Basch instead of B.In the meeting X proposed three problems. Each of the three problems was darned practical and, if at all successful, stood to save FedEx one heck of a bundle of money in opex.One problem was a fairly routine application of deterministic optimal control theory, say, the Pontryagin maximum principle for a two point boundary value problem with mixed end conditions, e.g., as inL. S. Pontryagin, V. G. Boltyanskii, R. V. Gamkrelidze, and E. F. Mischenko, The Mathematical Theory of Optimal Processes.Michael Athans and Peter L. Falb, Optimal Control: An Introduction to the Theory and Its Applications.for how to climb, cruise, and descend a cargo airplane to minimize direct operating costs due to fuel and flight time (on the engines leading to FAA mandated engine maintenance) but subject to constraints on flight time and engineering limitations of the airplane.Relatively simple: start with Newton’s second law, that is, a system of ordinary differential equations, the lift and drag equations for the airplane, the engine performance characteristics, the weight of the airplane, and weather data and satisfy the necessary conditions for optimality, basically a fancy version of Lagrange multipliers.Another two point boundary value problem is for, say, the vibrating string of a violin. Common, standard work in numerical analysis by then long had some polished means of numerical solution.X flew to MIT and chatted with Athans, drove to Providence, RI to meet with Falb and others at the Division of Applied Mathematics at Brown and did, e.g., with W. Fleming, H. Kushner, J. Hale, U. Grenander, E. Infante, etc., although that day Falb was traveling, flew to Cornell to meet with G. Nemhauser, and flew to Johns Hopkins to meet with J. Elzinga.And, yes, there was an even easier way: Just tabulate flying options directly from the airplane flight manual and based on load, distance, and weather.In that talk at FedEx, each of the other two problems, both even more practical, resulted in Ph.D. dissertations. E.g., the problems were doable with high quality results.BackgroundYes, FedEx has been a terrific success, basically as Smith originally envisioned.When well to do women went shopping at department stores, they asked that their purchases be delivered. So, the store boxed up the purchases, and early that evening UPS picked up the boxes, brought them to a central city sorting center, and delivered them to the homes of the women the next day. So, UPS was in over-night delivery of small packages.Smith’s father owned the bus company Southern Greyhound, and Smith went to Yale. Yes, there he had, as in Rowling’s talk, imagination, enough to scale up the UPS model to the US using, say, a 500 mph truck instead of the UPS brown trucks. Yes, there is the story that Smith wrote up his idea as a term paper in economics at Yale and received a grade of C.FedEx PlanningAfter being a USAF pilot in Viet Nam, Smith bought Little Rock Airmotive, basically a lube, tune, overhaul, and interior decorating shop for business jets. There Smith focused on the popular business jet, the Dassault Fanjet Falcon DA-20, with GE engines, US avionics, and a French airframe. The airframe was strong, e.g., had no fatigue life. And the airplane was certified for acrobatics. Nice airplane.The GE engines were fan jets. Basically, with a jet engine, burn fuel to put kinetic energy into hot air and push it out the back of the engine. For air mass m and relative velocity v, the kinetic energy get is (1/2)mv^2. But the force on the airplane is from just the change in momentum, mv. So, pick m and v, pay energy (1/2)mv^2 and get momentum mv.Hmm …. For a given mv, can make one of m and v larger and the other smaller. But notice, in energy, pay proportional to each of m and v^2. So, really, for a given momentum mv, to make the most of given energy, want m large and v small. But a jet engine has v a bit too large. So, fix that — have a fan.If already have the jet engine, then the simple, cheap, quick, and dirty way to get a fan is to get an aft fan, that is, have a fan at the back of the engine. The fan is essentially just one piece and connected to nothing else. Cute. So, let the fast, hot gasses of the engine blow against the fan blades and, thus, turn the fan. But have the fan blades longer, so long that they extend past the cylinder of the hot gasses and, then, pull cold air from around the engine and push it out the back. So, now, in the front, the engine takes in cold air, passes some of it into the engine for burning and lets the rest flow around the outside of the hot core of the engine and get pushed by the longest parts of the aft fan. It’s cute.And, that way get more momentum for a given energy.So, why didn’t the GE engines have fans right at first? Because fans don’t work at supersonic speeds, and that GE engine was originally designed for US military supersonic fighter jets. So, for use on subsonic business jets, GE later added the aft fan.In the shop of Little Rock Airmotive, Smith engineered modifications to the DA-20 Fanjet for carrying cargo and for a cargo door, built one, and got FAA approval for the modifications. The max gross takeoff weight was 28,660 pounds, and the max cargo weight, about 6000 pounds.The plan for FedEx was to have 33 of the Fanjet Falcons modified for cargo, have the overnight sort at some partially renovated WWII hanger space on the side of the Memphis airport, and serve 90 US cities, coast to coast.Sure, FedEx was not focused on well to do women getting their department store purchases delivered to their city townhouses. Instead, FedEx was focused on overnight delivery of high priority documents, e.g., from lawyers, engineering firms.The back of the envelope revenue planning said that FedEx could fly the planes about half full and have a license to print money.Looking ahead a little, that was one gigantic mistake: Instead, standing in the central FedEx sort center is an overwhelming experience: The variety of what the US economy wants to have shipped quickly is beyond comprehension; the variety is from medical testing samples, live animals, product samples of all kinds, spare parts, …, beyond simple description or comprehension. It wasn’t just or mostly legal briefs from lawyers.Smith’s initial funding was from his inheritance.To get the 33 Falcons, Smith needed to buy up about all there were. Here he met Art Bass, ad executive, pilot, used executive jet salesman, and, soon, Director of Flight Operations for FedEx (the FAA requires that person to be a pilot, etc.).Fleet SchedulingFedEx was started in rented offices in an office building in Little Rock. Smith had a corner office. When he had picked his first 15 cities, one afternoon he decided to work out a schedule for the fleet to serve the 15 cities. The afternoon went on, and about dinner time he walked out tired, without a schedule, saying “we need a computer”.He was not the first. He was encountering a problem of looking for a good, hopefully the least expensive, combination of discrete options, e.g., does plane z fly from city A to city B, that met various constraints, e.g., engineering limitations on the airplanes and agreed arrival time windows at the cities.Bell Labs had encountered similar problems in designing communications networks — does cable z go from city A to city B?At the end of WWII, at Rand Corporation, with USAF funding, G. Dantzig looked at the logistics problem of deployment via airlift. He observed that he could write down a system of simultaneous linear equations, just as in high school algebra, where any solution specified a way to move the materiel, and one could look for a solution with least cost or least time, etc. Thus, Dantzig invented linear programming.Well, as in high school, can solve such equations with a simple technique, very intuitive, easy to understand, called Gauss elimination. Quite broadly, that’s the first choice approach. Well, can slightly modify Gauss elimination to get the solution that is the, say, cheapest, and, thus, get Dantzig’s simplex algorithm for linear programming — once rated one of the best engineering achievements of the 20th century. There have been valuable applications in mixing animal feed, running oil refineries, and much more.Really, Dantzig also wanted solutions where the variable values were integers.That problem is now called integer linear programming. A first guess was that could get best integer solutions from just a small modification of the simplex algorithm — people are still looking for that modification, small or not.Well, there is a wide, deep, rapidly flowing ocean of problems in business and industry that can be formulated accurately enough as integer linear programming and where best possible solutions would save a bundle of money.Well, the Bell Labs people saw that their problems in network design could also be formulated as integer linear programming.Indeed, at one time MIT Institute Professor and Dean of Engineering T. Magnanti gave an Alan Goldman lecture at Johns Hopkins on the design of internet protocol networks via integer linear programming.So, somehow, we’ve discovered two things: (1) the world is awash in integer linear programming problems where best solutions will be quite valuable and (2) no one knows a good way to solve such problems.Those two facts led to the theory of NP-completeness and the question P = NP, sometimes called the most important unsolved problem in applied math. Clay Mathematics in Boston has a prize of $1 million for the first good solution — don’t rush; likely there’s plenty of time for finding the first good solution.So, at one point the Bell Labs guys wrote,Michael R. Garey and David S. Johnson, Computers and Intractability: A Guide to the Theory of NP-completeness.So, this book was, say, to tell the suits at AT&T that no one could solve, as well as the suits might wish, the problems of network design.Well, yup, Smith’s fleet scheduling problem is essentially necessarily a problem in integer linear programming. So, that afternoon in Little Rock, Smith ran solidly into the most important unsolved problem in applied math.Yes, one hope for a good solution to integer linear programming problems is quantum computers. So, really Smith’s statement “we need a computer” was a meager description of the challenge.Calling XA former college classmate, B, of X heard Smith’s lament “we need a computer” and called X. X flew to Memphis, got into a small plane B shared with Smith, and flew to Little Rock. X got hired to do the computing to schedule the fleet.The message to X from Art Bass went:There will be a stock plan for the senior employees. It will be based on salary, and with your salary you will be quite high up. The Board is working on the plan now.We expect a plan in three weeks. If the plan is not equitable, then the next plane out of Memphis will be filled with ex-FedEx executives.At the time X was a systems programmer at Georgetown University and teaching courses in computer science.In a rush, in six weeks, X designed and wrote some software for scheduling the fleet. When the course teaching was over, X left Georgetown, drove at about 90 mph on the Interstates to Memphis, rented a room, worked a few more days on the software, and pronounced it done.There was still no stock. Gads.Soon the FedEx BoD was concerned: A guy on the Board and with experience at American Airlines remembered a study that illustrated the challenge of having a schedule that would make connecting flights reliable. That is, the first flight might encounter delays and arrive after the second flight, staying on schedule, had already left.This person looked at the FedEx central sort as a gigantic case of 33 planes all making connecting flights and, thus, was highly concerned that FedEx just could not do the fleet scheduling. A big, important shot of equity funding and loans of $55 million on the airplanes was in the balance. FedEx was at risk — no schedule, no FedEx.SVP Roger Frock (who later wrote a book on FedEx) contacted X, and that evening X and Frock used the software X had written to develop a schedule for all planned 33 planes serving all planned 90 cities. The work didn’t take long and wasn’t very challenging.The schedule was printed and copies made and circulated.General Dynamics was considering an equity investment and had two representatives, an aeronautical engineer and a finance guy, in the FedEx HQ offices.These two General Dynamics guys went over the schedule in detail and announced “It’s a little tight in a few places, but it’s flyable.”.At the next senior staff meeting, Smith’s remark on the schedule was “Amazing document. Solves the most important problem facing the start of Federal Express.”.The Board was pleased, and the funding was enabled.Classic Organizational Behavior Goal SubordinationB then declared war on X. B asserted that he was going to go “ape shit”. X said, “Fine. Do so, right here outside of my office. I will sell tickets, and people can gather around and watch.”The BoD Wanted Revenue ProjectionsSoon the Board was concerned again, wanted revenue projections. The main responsible person was Mike Basch. X was working on better approaches to the fleet scheduling and didn’t want to get involved, but the situation was a disaster: All anyone had were hopes, intentions, etc. with no rational support or justification.So, X thought: We know the revenue per day now. From the capacities of the 33 airplanes and the schedule, we know about what is the maximum number of packages per day we can ship and, thus, the corresponding revenue, say, before some increase in prices due to demand exceeding limited supply.So, say, time in days is t, the revenue at day t is y(t), and the maximum revenue is b. Call t = 0 the present; so, we know y(0).Well, from, say, traditional word of mouth advertising or, if you will, from virality from the FedEx network effect, e.g., if you will, from “a large network of engaged users,”, FedEx would get revenue growth, at a rate, each day, directly proportional to (1) the number of happy users talking and (2) the number of potential new users listening. So, the rate of growth at time t is the freshman calculus first derivative d/dt y(t) = y'(t) and, for some constant of proportionality k,y'(t) = k y(t) (b – y(t))so, right, this is an initial value problem (we know y(0)) for a first order, linear, ordinary differential equation.Yes, just from freshman calculus there is a closed form solution, right, in some exponentials. A particular solution depends on the constant k.So, a Friday afternoon, Mike Basch and X tried several candidate values of k, picked one, and drew the graph of y(t) as a function of t.Some of the candidate solutions are shown in the attached graph. The vertical axis can be in packages per day, revenue per day, or percentages of such. In all cases, the growth curves, scenarios, are a lazy S curve that is convex and rises like an exponential, rises close to linear, and then goes concave and asymptotic to the upper bound from the maximum daily revenue b.It may be that the solution of the differential equation is the logistic curve, long known to be an approximate model of viral growth.The next day, a Saturday, X was working on fleet scheduling and got a call from Frock asking about the revenue projections and was asked to come to the Board meeting.The two General Dynamics guys were in the hall, unhappy, with their bags packed and plane reservations back to Texas. That would have stopped a pending equity investment by General Dynamics and killed FedEx.Frock asked X to reproduce come of the points on the graph, and everyone got happy. The General Dynamics guys stayed, likely General Dynamics made an equity investment in FedEx, and FedEx was saved.Later X learned that at the Board meeting early that Saturday, the revenue projections had been presented, and the General Dynamics guys asked how the projections were calculated. After several hours, none of the FedEx people there could reproduce the projections. The General Dynamics guys were giving up on FedEx, and, finally, as FedEx was about to die, Frock called X.Gee, apparently X was the only person at FedEx who remembered freshman calculus. Amazing.X had deliberately been kept from the Board meeting and was not asked until FedEx was about to die. Really big, bad bummer.X still saw no stock. Smith told him, “You know, if you stay, you are in line for $500,000 in FedEx stock.” No, X knew no such thing. The stock was already 18 months later than promised, and Smith was still not putting anything in writing. Bummer.With still no stock, X went for a Ph.D., a piece of paper no one could take away from him.The Good Foundation of FedExDefinitely the US needed good, overnight package delivery.The US already had air freight: So, if want to move ten tons of something across the country quickly by air, then there were companies with cargo airplanes ready to serve. But this was for some really big stuff.The US already had fast package delivery: The passenger airlines were eager enough to carry packages as extra cargo between their city ticket counters, and there were airfreight forwarders ready to move cargo between customers and ticket counters. But, with each package commonly passing serially through three or more companies, packages got delayed or lost, and reliability was poor. Indeed, Art Bass saw the need as for some of his advertising work he wanted to ship a special camera mount good for taking out vibration, say, for shooting smooth video from a helicopter. So, Bass would get the whole production in place on, say, some mountain in Montana, and, then, have the camera mount not be there with no one knowing, for some days, where it was or when it would arrive. Bummer.So, one of the early goals of FedEx was to have very good package tracking.Such tracking is now an industry standard. So, if Joe was expecting a package at 10 AM and by 10:30 AM he still doesn’t have it, then maybe FedEx or Joe using the Internet can discover that in fact the package was signed for at 9:12 AM by Sam in Shipping and Receiving and is already in the building, three floors down from Joe. Early on, such tracking was impressive.The CAB, Carter, and KhanWhen FedEx started, the Civil Aeronautics Board (CAB), bless their dedicated, regulatory compulsions, said you can fly airplanes and you can drive trucks, but you can’t do both.Except if you are a mom and pop unscheduled airtaxi in which case your airplane can’t have max gross takeoff weight higher than 25,000 pounds.So, Smith got a small exception on his 28,660 pounds.So, flying as an unscheduled air taxi is how FedEx got around the CAB rules.Just about the time FedEx needed larger planes, Carter got elected and appointed Alfred Khan head of the CAB, and Khan promptly abolished the CAB, that is, got rid of economic regulation of the airlines. The safety regulation by the FAA was left in place. Then FedEx could fly Boeing 747 freighters if they wanted, or Lockheed L-1011s.ErrorsYes, FedEx went through some risky days.Why?(1) Budgeting.The cost estimates from the initial idea that FedEx could fly the planes around half full and have a license to print money was off by a factor of about 8.Why? Getting users of the service was never a very big challenge. E.g., the service itself provided excellent advertising.Soon FedEx was flying the planes around not half full but packed solid, doubled the rates, and was still losing money.So, we’re talking some really bad arithmetic.(2) Staff QualityAt FedEx, by far the best people, the most competent and professional, were the pilots.Otherwise, too many people at FedEx were not very good and were getting away with it.E.g., at a senior staff meeting, Smith was at the head of the table with about 13 managers around the sides.Smith went person to person getting reports. Usually the result was that the person needed to get more information; so they were to have the information at the next meeting, in a week.At the next meeting, Smith again went person to person, and, of the 13 or so, not one of them had the promised information.Might have anticipated this: The week before, not one person took notes on the need for the information.We’re talking B- or C or C- students here.(3) Goal SubordinationFar too many people in middle management were willing to hurt the company if it might yield them comparative advantage. This is classic goal subordination in organization behavior; Smith put up with too much of it.In addition, people were timid, as if afraid of being seen to have failed on gnats while doing well killing lions.(4) Stock PlanningSmith was really slow to implement the needed plans for stock for the senior employees.Results too often included disloyalty, disrespect, contempt, and lower than desirable performance.The near death experiences were unfortunate and mostly should have been unnecessary.SummaryBut, the biggest point is, FedEx was a great success. Smith is the one who thought of it, got it going, and pushed it through.

    1. Donna Brewington White

      This comment has to win some sort of record.

      1. sigmaalgebra

        That’s it! Chicks like the graph? Right? It’s the graph? Chicks like the graph? Maybe that’s it?

        1. Donna Brewington White

          Well, the graph was pretty impressive, I must say.

          1. sigmaalgebra

            GREAT! The usual explanation to men is that chicks like the car. But, men know a bit less about what chicks like than about dark energy in astrophysics. And, in my experience, things did go better when I had a new, high end Camaro — now I’m still waiting for my Ferrari to arrive!But, progress! A graph! Until my Ferrari arrives, a graph! Chicks might like just a graph! Gee, I can do lots of graphs!!! Thx! I needed that! One more secret of the universe revealed!

          2. Donna Brewington White

            I think you are carrying this a bit too far, Siggy.

          3. sigmaalgebra

            I accept your judgment!But, there’s a reason: Already in the crib, human females are paying attention to people and, males, to things. I was and remain way out on the male end — I’m a nerd. I look forward in some years with a lot of help working my way all the way up to seriously socially awkward!It’s long been clear at AVC, even to me, that socially you are exquisitely talented, skilled, and polished.Ah, learn a little each day! Thanks.

  19. Thees Peereboom

    Blackberry is a candidate..

  20. bijan

    I was trying to think of one in our portfolio and had trouble as well. We have a few came extremely close to “death” but then able to get to reach CFBE. And then there was OMGPOP which was 90 days from being out of cash, then created a hit game which made them profitable a few days later and then a positive exit shortly after that.None of these examples are at FedEx/Apple scale but a few of them have rejected death and made something happen. And as you say, I do indeed look at the experience with wonder and gratitude.

  21. Jake Chapman

    Great post. Its hard to think of many examples of truly resurrected companies. My very first angel investment is exiting now 8 years post investment and I was looking back through my emails. Over that time the company has experienced at least 8 existential crises. It happened almost like clock work every year but the CEO never threw his hands in the air and gave up. Not quite a resurrected company but certainly one that died on the table a couple times. I wonder how many major success stories out there are similar? Its hard to tell from outside, I don’t think any of our partners ever got wind of how close things were to shutting down over the years, all they saw was the public face of “smoothly” operating company.

  22. LE

    I have always felt it somewhat interesting when people think that just because someone has skin the game that means the game is safer than if not. [1] Also nobody ever talks about the 100,000 Musk’s who didn’t end up where Musk did following the same strategy. Shit that I’ve been reading for longer than I want to remember. To stick with a vision like this it helps to be crazy and reckless.[1] Let’s take the guy who runs the carnival ride that says “it’s safe enough for my kid … he is riding up there now”. Or the pilot who flies in the plane as well as flies the plane. They could just be more risk taking than you are, or simply not care as much, or simply not recognize the potential harm.

  23. pointsnfigures

    I don’t like those examples because they survive off federal subsidies.

  24. LE

    You are not a scorched earth kinda guy which you need to be if you care about quality in all parts of what you do. I like that about you. I am the same way but much less green and kindly. Definitely more selfish though, no question about that (and don’t apologize for it either). The world needs both of us.

  25. LE

    I meant to say “you are not a scorched earth kind of guy and you can’t be a scorched earth kind of guy if you care about quality typically”. Might not have been clear out of context below (was a compliment in case that was not clear).

  26. LE

    I look at discipline to principles an example of stick with what you know and have an edge with actually. At least when you are older and know something and have an edge. In businesses where knowledge comes over time, and wisdom matters, it’s hard to compete if you stand something to lose. [1] Reason I won’t invest in startups even though I sorta have an edge (but I don’t have anywhere near the world class edge that others have already acquired).[1] If you are younger the rules are different.

  27. LE

    Well you have me fooled then. (Noting, to your point, that someone else who comments on this blog has sort of said that about you “he is tough actually”).

  28. PhilipSugar… Connan what is best in life: “Crush your enemies see them driven before you and hear the lamentations of their women”

  29. Kirsten Lambertsen

    Thanks for sharing this! It was SO good 🙂

  30. panterosa,


  31. Frank Traylor

    Thanks Willy. Wonderful words, truth and relevance. “Rock bottom became a solid foundation”

  32. LE

    Upvoted without watching. Now I am waiting for a 30 sec ad on youtube (the above link is blocked).Just watched it. Type of stuff I missed not being a frat member in college!

  33. pointsnfigures

    One of my favorite movies!

  34. Donna Brewington White

    Meaning you had the option of raising more and didn’t?It’s not enjoyable, and the feeling of relief isn’t worth the unbelievable anxiety and stress.The business romance stories often leave out this part. Unless maybe it’s a given.

  35. Chimpwithcans

    As does the rest of the country’s banking system 😉