In The Early 1970s, FedEx Was Teetering On Bankruptcy. So Founder Fred Smith Took The Company's Last $5k… And Went To Vegas

The first few years of running a business are brutal. You're juggling cash flow, trying to win over skeptical investors, scrambling to hit impossible growth targets, and praying the phones keep ringing. There are supply chain issues. Burned-out employees. Missed deliveries. Broken equipment. Maybe even a lawsuit or two. And then one day, you wake up and realize… you don't have enough money to make payroll next week.

In that moment, a typical entrepreneur might head to a bank, hat in hand, and beg for a loan. Or maybe implore an investor to give a bridge loan. But FedEx founder Fred Smith was not a typical entrepreneur.

First off, he was a former U.S. Marine who served two combat tours in Vietnam, earning a Silver Star, Bronze Star, and two Purple Hearts. He was also a Yale graduate. He actually came up with the idea for FedEx in a senior-year economics class. According to legend, he pitched a revolutionary system for guaranteed overnight delivery in an end-of-year term paper. Here's the legendary part – The professor gave him a C because he thought the idea was dumb and unworkable.

That irked Fred. So much so that he decided to launch the company anyway, partially out of spite.

So that's the Fred Smith who was running FedEx in the mid-1970s when the company was experiencing a serious cash crunch. The situation was so bad that FedEx only had $5,000 left in the bank, which wasn't enough to make the next payroll. So what did Fred do? He didn't schedule a meeting with his banker. He didn't grovel to investors. Instead, he booked a ticket to Las Vegas… and went straight to the blackjack tables…

BTW, we're telling this story in honor of Fred, who died yesterday, June 21, at the age of 80. Rest in peace to a legend!

Fred Smith (left)  (Photo by PATRICK KOVARIK/AFP via Getty Images)

FedEx Takes Off

Fred Smith launched Federal Express in 1971 based on an idea he'd first sketched out in a Yale term paper. The concept — build a dedicated overnight delivery network using a central hub and a fleet of aircraft — was considered impractical at the time.

But Smith believed in it (and wanted to prove his professor… and every other doubter… wrong). After serving two combat tours in Vietnam as a Marine, he returned home with a high risk tolerance and a drive to build something transformative.

Fred had an advantage starting out. His father, James F. Smith, was the founder of a regional bus company called Dixie Greyhound Lines, which eventually became known simply as Greyhound. Perhaps you've heard of it? Unfortunately, James died when Fred was just four years old. Thanks to a trust fund that his father had set up, Fred came out of Yale with a $4 million inheritance.

That was Fred's startup capital. Not some of it. ALL OF IT. He literally plowed his entire inheritance into his startup idea. If it failed, he would have nothing left. Perhaps because of his determination and willingness to put it all on the line, other investors were swayed, and he eventually raised an additional $91 million in venture capital to get the company fully off the ground.

Turbulance

FedEx officially launched in 1973 with 14 small planes delivering 186 packages to 25 cities. The service worked, but the economics were brutal. Rising fuel costs crushed margins. Investor interest cooled. By its third year, FedEx was running on fumes.

After a crucial funding request to General Dynamics was denied, the company had just $5,000 left — not nearly enough to cover the next fuel bill.

One Weekend in Vegas

On his flight home from the failed meeting, Smith made a bold and fateful detour: Las Vegas. He took FedEx's last $5,000 to the blackjack tables, knowing that without fuel, the company would be grounded within days.

Whether by luck, nerve, or sheer desperation, Smith turned that $5,000 into $27,000. It was just enough to pay off the fuel supplier and keep the company running for one more week.

And that week turned into a lifeline. Within days, Smith raised another $11 million from investors — enough to stabilize operations and give FedEx the breathing room it needed to survive.

Clear Skies

By 1976, FedEx posted its first profit: $3.6 million on $75 million in revenue. In 1978, the company went public. By 1983, it had surpassed $1 billion in annual sales. The same overnight delivery model that once earned a C became the gold standard in global logistics.

Smith kept building. He acquired the cargo airline Flying Tigers, delivery firm RPS (which became FedEx Ground), and Kinko's (rebranded as FedEx Office). He built the world's largest all-cargo airline and turned FedEx into a fixture of the modern economy.

Smith remained chairman and FedEx's largest individual shareholder until his death yesterday at the age of 80. Today, the company generates nearly $90 billion in annual revenue.

Fred Smith's net worth was $6 billion.

He was survived by his wife, Dianne Avis, and ten children. His son, Arthur Smith, is the offensive coordinator for the Pittsburgh Steelers and was previously the head coach of the Atlanta Falcons from 2021 to 2023. His son, Cannon Smith, is married to Collins Tuohy, the daughter of Sean Tuohy and Leigh Anne Tuohy of "The Blind Side" fame. His daughter, Molly Smith, is a highly successful film producer. Among her credits are "The Blind Side," "Sicario," and "La La Land.

A Defining Moment

Fred Smith's $5,000 blackjack bet isn't just a legendary business story — it's a defining moment in entrepreneurial history. A moment that captures the raw nerve, deep conviction, and willingness to bet everything that it sometimes takes to build something lasting.

In a world full of calculated decisions and cautious strategies, Fred Smith's gamble is a reminder that survival sometimes requires one thing above all else:

Courage.