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You Won’t Believe How These Now-Huge Companies Stayed Afloat in their Early Days

by Alex Lipton

You Won’t Believe How These Now-Huge Companies Stayed Afloat in their Early Days

Many founders struggle to raise money in the first few months (or years) of their company. But the scrappiest founders find ways to make ends meet no matter what. Before you let a lack of funding get you down, check out how these five hugely successful companies kept the money flowing in their early days.

FedEx

Imagine that you have $5,000 left in your business’s bank account, which – based on your operating costs – won’t get you through the weekend. If you’re Fred Smith, founder of FedEx, you also know there’s only one thing left to do: go to Vegas and bet it all on a few hands of Blackjack.

Fully aware that the company wouldn’t be able to pay an upcoming $24,000 fuel bill, Smith took the company’s remaining $5,000 in cash to Vegas and ended up winning around $27,000 – enough to pay the fuel bill and keep his company afloat for the next few weeks.

Fully aware that the company wouldn’t be able to pay an upcoming $24,000 fuel bill, Smith took the company’s remaining $5,000 in cash to Vegas and ended up winning around $27,000 – enough to pay the fuel bill and keep his company afloat for the next few weeks. When asked by founding executive Robert Frock how he could take that kind of risk, Smith “shrugged his shoulders and said, ‘What difference does it make? Without the funds for the fuel companies, we couldn’t have flown anyway.’” While this might have worked for FedEx, I wouldn’t recommend trying out this logic the next time rent money comes up short.

Airbnb

During the 2008 Democratic Convention in Denver, the cash-strapped founders of Airbnb seized on an unusual opportunity to raise more than $30,000: they sold cereal boxes. But these weren’t your run-of-the-mill cereal boxes. They were Obama O’s and Cap’n McCains – which were really just re-packaged Cheerios with a $40 price tag. obamaos The first boxes sold out in a flash, so the founders produced and sold a few hundred more boxes – 800 in total –  raising thousands of dollars and keeping the company afloat before being accepted into the startup incubator Y Combinator. Venture capitalist Fred Wilson appreciated the hustle, noting that “whenever someone tells me that they can’t figure out how to raise the first $25,000 they need to get their company started I stand up, walk over to the cereal box, and tell this story.”

Apple

Apple founders Steve Jobs and Steve Wozniak also squeaked by in their early days, though instead of selling cereal boxes, they relied on credit from their parts suppliers. They made their first “big” sale when a local retail computer store placed an order for fifty computers. The problem was, Apple didn’t have the money for the parts. Jobs convinced his suppliers to extend him 30-days’ credit on $15,000 worth of parts. Jobs and Wozniak then scrambled to build the computers within a month, in just enough time to deliver them to the shop, get paid, and pay off their suppliers. They succeeded. Then they took their profits from the deal – $8,000 –  and reinvested it in the company. Today, Apple is the world’s most valuable company, worth more than half a trillion dollars.

Subway

Selling re-packaged cereal or betting it all on Blackjack may sound sexy, but that’s not how most founders make ends meet. Consider Fred DeLuca of Subway, who started his now-famous sandwich shop by asking a friend, Peter Buck, for $1,000 in 1965 (around $7,000 today). Believe it or not, the friend actually lent him the money, even though DeLuca was only 17-years-old at the time. Today, Subway has more than 40,000 stores across the globe, making it the largest quick service restaurant in the world. Subway’s success may mark one of the only times where handing a 17-year-old $1,000 did not amount to a huge mistake.

Samuel Adams

It would be misleading to suggest that Jim Koch, founder and public face of the Boston Beer Company (which brews Samuel Adams), came from nothing. Before founding what would become a nearly $3 billion business, Koch earned his JD and MBA from Harvard and worked at the Boston Consulting Group. While earning those degrees and working as a consultant, he must have made some pretty good friends; when asking for about $140,000 to help start his company, he told his friends that the investment would include “free beer for the rest of your life.” According to Koch, it took about a weekend to raise the money. Somehow, that’s not surprising.

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Obviously hitting the casino or trying some other crazy strategy isn’t the first thing you should do when your company’s funds run low. But it’s inspiring to learn from the stories of founders who managed to keep their company running even when it seemed impossible. If you ever find yourself struggling to pay the bills, remember that times were once tough even for the most successful companies.

Alex Lipton is a Legal Researcher at Shake and a Mitchell Jacobson J.D. Scholar at NYU School of Law. He also serves as Vice President of Operations for the InSITE Fellowship. He writes about legal issues affecting early-stage companies. Find him on LinkedIn or on Google+.