FedEx's first night took 14 jets and 25 cities to move 186 packages. See how Fred Smith and five other founders paid for the years before the volume came.
6 Founders Whose Companies Appear on SBA's List of SBIC-Financed Firms
Case 1
Intel, FedEx, Apple, Costco, Staples and Build-A-Bear all appear on a list the Small Business Administration has published of firms that received SBIC financing (money from Small Business Investment Companies). Here's what the early years of six very different businesses say about raising growth capital.
The SBA is best known for guaranteeing loans. Its investment arm is less familiar. The Small Business Investment Company program was created by the Small Business Investment Act of 1958 to stimulate "the flow of private equity capital and long-term loan funds" to small businesses. According to the Congressional Research Service, the SBA "does not make direct investments in small businesses." It licenses privately owned and managed funds, which invest their own private capital alongside money they borrow at favorable rates because the SBA guarantees the debt. In fiscal 2021 the program provided nearly $7.1 billion of financing to 1,080 small businesses through 298 licensed funds.
The SBA has occasionally named firms that received SBIC financing, and the list includes AOL, Apple, Build-A-Bear, Compaq, Costco, FedEx, Intel, Outback Steakhouse, Staples and Sun Microsystems. A senator speaking for a later bill put it more bluntly, saying the program helped companies like Apple and FedEx "become household names." The list does not say when each company received the money, how much it was, or what share of its early funding it represented. The six cases below therefore treat SBIC capital as one source among several and describe only what each founder's documented record shows. They are ordered by founding date.
Case Study #1: Robert Noyce and Gordon Moore, Who Used Convertible Debt Financing to Start Intel
Two scientists who left the company they had helped found
Robert Noyce, a physicist and co-inventor of the integrated circuit, and Gordon Moore, a chemist, had both been among the eight founders of Fairchild Semiconductor. On July 18, 1968 they incorporated a new company in Mountain View, California, together with the investor Arthur Rock.
Snapshot
Founder | Robert Noyce and Gordon Moore, with Arthur Rock |
Company | Intel (incorporated July 1968, Mountain View, California) |
Model | Semiconductor memory, later microprocessors |
Scale | 2025 revenue of $52.85 billion |
Philosophy | Bet the company on the next generation of chip |
Semiconductors were expensive to develop and to manufacture, and the founders' target market, semiconductor memory, was widely predicted to replace magnetic-core memory but did not yet exist at scale. A new entrant needed money before it had a product, and enough to survive the gap.
The founding structure was unusually lean. There were 500,000 shares at $1 each: Noyce and Moore bought 245,000 apiece and Rock 10,000. Rock then offered $2.5 million of convertible debentures to a limited group of private investors, convertible at $5 a share.
The first product, the 3101 static memory chip, reached the market in 1969, roughly a year after incorporation.
Two years after founding, Intel went public, raising $6.8 million at $23.50 a share.
In 1971 it created the first commercially available microprocessor, the Intel 4004.
The founders raised debt that could turn into equity, which let investors share the upside without the company giving away control at the start.
Results: The Bitter Truth, The Market That Made Intel Did Not Last
Memory, the business Intel was founded to build, did not stay profitable. By 1983 competition from Japanese manufacturers had sharply reduced the profitability of memory chips, and Moore, chief executive since 1975, moved the company's focus to microprocessors. The pivot built the company's dominant decades. It did not make Intel permanent. In 2025 the company reported revenue of $52.85 billion, an operating loss of $2.21 billion and a net loss of $267 million. In July 2025 it confirmed it would cut nearly 24,000 jobs, about 15% of its workforce, and in September 2025 Nvidia invested $5 billion in the company. A company built by betting on the next chip has to keep winning that bet.
Lessons & Playbook
Intel's case is the founding-capital-structure playbook.
Key takeaways:
Convertible debt lets early investors share the upside without immediate dilution.
A first product within a year proves the team before the money runs out.
The market a company is founded to serve may not be the one that sustains it.
Leadership in one technology cycle carries no guarantee into the next.
Case 2
Case Study #2: Fred Smith and the Overnight Delivery Business Model Behind FedEx
A college idea, delayed by a war
Fred Smith worked as a charter pilot while studying at Yale, where he graduated in 1966. There he conceived the idea of an integrated air-to-ground system that would ensure overnight delivery. He then served four years in the United States Marine Corps, including two tours in Vietnam, and left in 1970 as a captain. He later joked that he received his "business degree" from the Marines.
Snapshot
Founder | Frederick W. Smith |
Company | Federal Express (launched 1973) |
Model | Overnight delivery through an owned air and ground network |
Scale | More than 500,000 team members and 17 million shipments a day |
Philosophy | Build the whole network before the first customer arrives |
Most businesses can open with one shop. An overnight delivery network needs aircraft, a sorting point and drivers in every city it serves before it can promise a next-morning delivery. The capital comes first and the revenue follows.
Smith launched Federal Express in 1973 with a fleet of 14 Dassault Falcon jets. That first night, according to the company, it delivered 186 packages to 25 cities in the United States. As President and CEO he grew it from a small start-up into a multinational corporation.
FedEx now employs more than 500,000 team members worldwide.
It connects more than 220 countries and territories.
It moves nearly $2 trillion of goods a year and more than 17 million shipments a day.
The promise of next-day delivery only had value if the whole network existed, so Smith built all of it before the market had proved it wanted the service.
Results: 14 Jets for 186 Packages
The arithmetic of the first night is the hardest part of the story. Fourteen jets and 25 cities served 186 packages, about 13 packages per aircraft. Every jet, pilot and sorting shift cost the same whether the planes flew full or nearly empty. The model works only at a volume far above anything a new company has on its first night, so the early years were a race between the cost of the network and the growth of its traffic. A founder who chooses a business that must be built whole is betting that customers will arrive before the money is gone. Smith died on June 21, 2025, aged 80, still the company's executive chairman.
Lessons & Playbook
Smith's case is the network-first playbook.
Key takeaways:
Some businesses only work once the whole system exists.
Fixed costs from the first day mean volume is the only path to profit.
A founder needs funding sized for the gap before traffic arrives.
An idea conceived as a student can wait years for the right moment to build.
Case 3
Case Study #3: Steve Jobs and Steve Wozniak, Who Turned a Startup With No Money Into Apple
A partnership in a parents' house
Apple Computer Company was founded as a partnership on April 1, 1976 by Steve Jobs, Steve Wozniak and Ronald Wayne, in the home of Jobs' parents in Los Altos, California. Its first product, the Apple I, was designed by Wozniak and built by hand.
Snapshot
Founder | Steve Jobs and Steve Wozniak, with Ronald Wayne |
Company | Apple Computer Company (founded April 1976) |
Model | Assembled personal computers, later consumer electronics and services |
Scale | Fiscal 2025 revenue of $416 billion |
Philosophy | Sell a finished product where others sell a kit |
The founders had no capital to speak of. To finance production, Jobs sold his Volkswagen bus and Wozniak sold his HP-65 calculator. Neither received the full asking price, and together they raised $1,300. Most hobbyist computers of the time were sold as kits that buyers had to assemble themselves.
Wozniak demonstrated the Apple I prototype at the Homebrew Computer Club in July 1976, and a local retailer, Byte Shop, ordered 50 fully assembled computers. The Apple I came as a pre-assembled board that could connect directly to a household television, priced at $666.66.
Apple Computer, Inc. was incorporated on January 3, 1977, and Mike Markkula invested $250,000.
Annual sales grew from $775,000 in September 1977 to $118 million in September 1980.
In December 1980 Apple sold 4.6 million shares at $22 each, the largest IPO since Ford in 1956.
A purchase order from one shop gave two founders without savings a reason for others to fund them.
Results: The Founder Who Sold for $800
Ronald Wayne left twelve days after the founding and sold his share back to Jobs and Wozniak for $800. The early product was also more limited than its legend suggests: users still had to supply their own case, power supply and keyboard. The company grew because the Apple II, introduced in April 1977, became its first major commercial success after the spreadsheet program VisiCalc made it useful to businesses. Fiscal 2025 revenue of $416 billion was not visible from a board sold without a case, and one founder did not wait to find out.
Lessons & Playbook
Apple's case is the pre-sold-product playbook.
Key takeaways:
A firm order from a retailer can substitute for founding capital.
Selling an assembled product widens the market beyond hobbyists.
An experienced investor brings management knowledge as well as money.
A founder who exits in the first weeks gives up all of the later value.
Case 4
Case Study #4: Jim Sinegal and Jeff Brotman, Costco's Founders Who Improved the Warehouse Club Business Model
A warehouse club built by a student of the model
Jim Sinegal began in wholesale distribution working for Sol Price at FedMart. Price went on to found Price Club, which opened its first store on July 12, 1976 in San Diego and was one of the first retail warehouse clubs. Sinegal and Jeff Brotman, an attorney from an old Seattle retailing family, opened the first Costco warehouse in Seattle on September 15, 1983.
Snapshot
Founder | Jim Sinegal and Jeff Brotman |
Company | Costco Wholesale (first warehouse September 1983, Seattle) |
Model | Membership warehouse club with low markups |
Scale | 2025 revenue of $275.2 billion and 145.2 million members |
Philosophy | Charge for membership and keep the prices low |
Costco was not the first warehouse club. Price Club had a seven-year head start, so a new entrant had to win on execution, location and cost.
Costco grew fast enough to go public on Nasdaq just over two years after its first warehouse opened.
When it went public in December 1985 at $10 a share, it had 17 warehouses and 1,950 employees.
In 1993 it merged with Price Club, after Price declined an offer from Walmart, creating PriceCostco with 206 locations and $16 billion in annual sales.
By 2026 it operated 924 locations, and in 2025 it employed 341,000 people.
The founders just needed a better-run version of an idea they had studied up close.
Results: A Margin That Leaves No Room for Error
The warehouse model depends on very thin margins on very large volumes. In 2025 Costco's net income was $8.1 billion on revenue of $275.2 billion, about 2.9 cents of profit for every dollar of sales. At that margin a small rise in costs, a fall in membership renewals or a few badly chosen locations would wipe out a large share of the profit. The merger that created its scale also did not hold its founding families together: in 1994 the Prices left to form a separate chain, PriceSmart. A low-margin model rewards discipline and punishes any lapse in it.
Lessons & Playbook
Costco's case is the improved-copy playbook.
Key takeaways:
Working inside a successful model is a practical education in running one.
A second entrant can win on execution where the idea is already proven.
Membership fees create recurring revenue that low product margins cannot.
Thin margins require scale, and scale requires capital before profit.
Case 5
Case Study #5: Tom Stemberg, Staples, and a Venture-Backed Retail Startup Born From a Missing Printer Ribbon
A missing printer ribbon on a holiday weekend
Tom Stemberg, a Harvard Business School graduate, had been vice president of sales and merchandising at the Jewel Company's Star Markets. In 1985 he needed a ribbon for his printer and could not buy one because his local dealer was closed for the Independence Day holiday.
Snapshot
Founder | Tom Stemberg, with Leo Kahn and Myra Hart |
Company | Staples (first store May 1986, Brighton, Boston) |
Model | Office supply superstore serving small businesses |
Scale | More than $7 billion in sales and over 1,000 superstores by 1999 |
Philosophy | Bring supermarket economics to office supplies |
Small businesses bought office supplies from small dealers at high prices and on the dealers' opening hours. Stemberg's frustration with relying on small stores for critical supplies, combined with his grocery background, suggested a format that did not yet exist: a superstore for the office.
Stemberg co-founded Staples with Leo Kahn, a former rival in the New England supermarket industry, and Myra Hart. The first store opened in the Brighton neighborhood of Boston on May 1, 1986. Its backers included Hambro International Ventures, Harvard Management, Bessemer Ventures, Adler & Company and Bain Capital, whose co-founder Mitt Romney sat on the board for 15 years.
Staples reached the Fortune 500 by 1996, ten years after the first store.
By 1999 it had worldwide sales of more than $7 billion and over 1,000 superstores.
It expanded into Canada in 1991 and into the United Kingdom the following year.
The idea came from a single bad customer experience, and the method came from a career in a different kind of retail.
Results: The Format the Internet Overtook
The superstore that disrupted small dealers was itself disrupted. In 1996 Staples and Office Depot announced plans to merge, and the Federal Trade Commission refused it. In 2014, facing competition from online retailers, Staples began closing stores. A second attempt to acquire Office Depot, announced in 2015, was blocked on antitrust grounds. In 2017 the company was sold to Sycamore Partners and became private, and by 2026 it had 827 stores in the United States. Stemberg died in October 2015, aged 66. A format built on being bigger than the local shop had no answer to a competitor with no shop at all.
Lessons & Playbook
Stemberg's case is the cross-industry-format playbook.
Key takeaways:
A personal frustration as a customer can reveal a market others ignore.
A retail method proven in one category can transfer to another.
A syndicate of several investors spreads the risk of a new format.
The model that replaces small competitors can be replaced in turn.
Case 6
Case Study #6: Maxine Clark, Build-A-Bear Workshop, and the Experiential Retail Business Model Children Chose
A shoe executive who asked children what to build
In the mid-1990s Maxine Clark resigned as president of Payless ShoeSource and began developing concepts for interactive retail stores, inspired by experiences from her own childhood. She presented several ideas to a group of children, and the make-your-own stuffed animal was the one they responded to most.
Snapshot
Founder | Maxine Clark |
Company | Build-A-Bear Workshop (founded 1997, St. Louis) |
Model | Experiential retail where customers make their own stuffed animal |
Scale | Fiscal 2025 revenue of $529.8 million |
Philosophy | Sell the experience of making the product along with the product itself |
Stuffed animals were a crowded, low-priced category sold in toy shops and department stores. A dedicated store needed customers to travel for the experience and to pay more than they would for a bear off a shelf.
Clark founded the company in 1997, and its first store opened at the Saint Louis Galleria in Richmond Heights, Missouri. Children's enthusiasm was half of the case; the other half was that stuffed animals offered a strong profit margin. She planned a national chain of 100 stores within five years.
Sales in the first year reached about $377,600, ahead of projections.
Investment from Kansas City Equity Partners funded a second store in August 1998, and Windsor Capital later invested $4.5 million.
By the end of 1998 there were four locations with sales of $3.3 million, and a further $5 million from Walnut Capital Partners in 1999 took the chain to 14 stores.
Each round of outside capital paid for the next handful of stores, so the business only had to prove a few locations at a time.
Results: An Idea That Was Not New
The concept had a predecessor. Basic Brown Bears had operated in the do-it-yourself stuffed animal market since 1985, and in 1997 Clark explored acquiring it. In 1999, the year the chain reached 14 stores, Build-A-Bear was in legal disputes with Vermont Teddy Bear and Basic Brown Bears over trademark, copyright and business practice claims; the Basic Brown Bears dispute was settled confidentially. In fiscal 2025 revenue was a record $529.8 million, but pre-tax income was $67.2 million against $67.1 million the year before, held back by about $11 million in tariffs and related costs. A retailer that imports its product carries trade policy as a cost it cannot control.
Lessons & Playbook
Clark's case is the experience-retail playbook.
Key takeaways:
Testing ideas with the intended customer before building saves capital.
An experience lets a retailer charge more for a familiar product.
Raising money store by store limits how much each round must prove.
Being second into a niche invites legal disputes with whoever was first.
Conclusion
The six companies have little in common as businesses. One makes chips, one flies parcels, one sells phones and computers, one runs warehouses, one sold office supplies and one sells teddy bears. What they share is a stage in their history when the founders needed more capital than they had, and private investors who were willing to back a company that had not yet proved itself. The SBIC program exists to enlarge that pool of investors by letting licensed private funds borrow against an SBA guarantee. The licensed funds pick the companies themselves, on the same terms any investor would apply.
The cases also show what those investors were buying. Noyce and Moore offered a team with a track record and a product within a year. Smith offered a network that could only be built with outside money. Jobs and Wozniak arrived with a purchase order. Sinegal had studied the model he was improving, Stemberg had a retail method from another industry, and Clark had tested her concept with the customers it was meant for. Every one of them brought investors something more than an idea. Each showed a specific reason the business could work and a specific use for the money, which is the substance of any plan that an investment fund, SBIC or otherwise, will read before deciding. The bitter pills are equally specific: a market that faded, a network that ran nearly empty, a co-founder who left, a margin with no slack, a format the internet overtook and a concept that was not new. Investors price those risks too, and a plan that names them is easier to believe than one that leaves them out.