Subscribe to Inc. magazine
STARTUP

5 Successful Companies That Didn't Make a Dollar for 5 Years

A couple of months ago, Square made headlines because there were rumors that Jack Dorsey was interested in taking the payments startup public.
Advertisement

There were also rumors that Square was seeking an interested party to acquire the innovative company. But why? Isn't Square making a profit?

In April, Square received another $100 million from investors that included Goldman Sachs, Morgan Stanley, J.P. Morgan, Barclays, and Silicon Valley Bank. Unfortunately, according to its earnings before interest, taxes, depreciation, and amortization, or EBITDA, loss, Square lost around $100 million in 2013. Fortune reported that the problem with Square is that it's a "money losing enterprise" that includes a "high burn rate, shrinking balance sheet, and narrowing set of options."

It's being predicted that the company will continue to lose money until 2015. If that happens, then it would have taken Square around six years before it finally can turn a profit, given that it was founded in 2009.

Startup expert John Rampton said, "While that may seem like a lost cause--not to mention the stress of sticking with a company that is losing money--it's not uncommon for a company to wait years before making money. For example, even Tupperware wasn't exactly an overnight success."

After working at the manufacturing division for DuPont, Earl Tupper introduced his Tupperware "wonderbowl" in 1946. Despite advertising and a showroom on Fifth Avenue, Tupper wasn't faring very well financially. That all changed when Brownie Wise began hosting the Tupperware Home Party in 1948. By 1951, Tupper realized that the Tupperware Home Demonstration system was more effective financially than continuing to sell his product in stores. Tupper sold his company for a cool $16 million to the Rexall Drug Company in 1957. And the rest is history.

More recently, Blogger was started by Pyra Labs in August 1999 and experienced some success before the bubble burst. Evan Williams and Co. ran out of money and struggled to keep the service. In 2003, Google purchased Blogger and arguably saved it before things got any worse.

The moral of the story? It could take years before a company experiences revenue or gets acquired, if you're as fortunate as Blogger was. Here are five successful companies that also didn't make a dollar for almost five or more years.

FedEx

Frederick W. Smith first came up with an overnight-delivery company back in 1962 that he outlined in a paper while attending Yale University. Smith went on to become a successful businessman who took his personal wealth of $4 million, along with another $90 million from investors, to found his delivery company in 1971.

However, Federal Express failed to take off initially and was on the verge of bankruptcy. Smith took the company's last $5,000, flew to Vegas, and played blackjack. The gamble literally paid off. Smith made $24,000, which was enough to cover the cost of fuel and keep the company afloat for another week.

With a little more time, Smith raised another $11 million to keep Federal Express running. The company made its first profit in July 1975. Today, the Memphis-based company enjoys total revenue of more than $3 billion.

Amazon

You've probably heard the origins of Amazon by now. Jeff Bezos left his cushy gig on Wall Street and moved to Seattle to sell books online from his garage in 1994. By 1996, Amazon had sales that reached $15.7 million and $147.8 million in 1997. Needless to say, people were intrigued.

Then, by the end of the decade, Amazon wasn't as promising as it once seemed. Despite having revenues of $1.6 billion in 1999, Amazon still managed to lose $719 million. Things didn't get better in 2000, when it was found that Amazon had just around "$350 million of cash on hand," despite raising billions of dollars.

Jeff Bezos finally turned a profit in 2003, which was nine years after being founded and seven years after going public. Bezos was able to turn things around for Amazon by laying off one-seventh of Amazon's work force and closing some distribution centers.

In the decade following Amazon's first profit, there's still debate as to whether it actually makes money. For example, there was an article from NASDAQ in October 2013 that asked "Will Amazon Ever Make Money?" However, former Amazon employee and shareholder Eugene Wei argues that Amazon does make a profit on most items sold on the site and has a profitable model as well.

Turner Broadcasting System

Ted Turner definitely came a long way after purchasing his first TV station, UHF channel 17, in 1970. Within a decade, Turner purchased the Atlanta Hawks, the Atlanta Braves, and Superstation 17.

In 1979, Turner changed the name of his company from Turner Communications Group to Turner Broadcasting System Inc. and launched the world's first all-news network--Cable News Network, or CNN. CNN premiered on June 1, 1980, with 1.7 million subscribers, which was enough to keep the channel afloat. In 1982, Turner launched CNN2 and merged with MGM Entertainment after a $1.5 billion deal in 1985, which gave Turner access to MGM's film vaults which created even more channels.

Unfortunately, the merger put Turner Broadcasting in financial strain, and the company wouldn't record an annual net profit until 1991. Thanks to the coverage that CNN provided throughout Operation Desert Storm the channel gained a worldwide audience of one billion viewers. In 1996, Turner Broadcasting merged with Time Warner, and the company enjoyed $7.4 billion in revenue by 2010.

ESPN

A father-and-son team, Bill and Scott Rasmussen, teamed up with Aetna insurance agent Ed Eagan to create an all-sports network in 1978. On September 7, 1979, at 7 p.m. Eastern Time, the first-ever Sportscenter aired.

There was some drama behind the scenes. In 1980, Bill Rasmussen was no longer in a decision-making role in the company and completely left the board of directors in 1981. Whether that was of his own accord or he was forced out is debatable. What isn't debatable is the network was losing money.

To help keep ESPN going, Michael Roarty (vice president and director of marketing for Anheuser-Busch) persuaded the brewing company to financially support the struggling network. In 1994, Roarty told the St. Louis Post-Dispatch, "We gave them $1 million that first year. And if we hadn't, they'd have gone under." The following year, Anheuser-Busch gave ESPN an additional $5 million. By the mid-1980s, ESPN was able to turn a profit thanks to the support of Anheuser-Busch. ESPN has become the most dominating sports network; it earned $11 billion in revenue in 2013.

Tesla Motors

What a strange road Tesla Motors has been on. The idea was simple: to create the world's first electric sports car. Tesla was incorporated in June 2003 by Martin Eberhard and Marc Tarpenning. One year later, Elon Musk invested in Silicon Valley's first automobile company and became chairman. In 2009, Tesla received a "$465 million USD loan from the United States Department of Energy" and went public the following year.

However, it wasn't until 2013 (a decade after its launch) that Tesla experienced its first profitable quarter. Wired reported that "Tesla recorded sales of $562 million, a gain of over 80 percent from the last quarter, with 4,900 Model S sedans delivered." Though some of that revenue was from cutting production costs, Tesla also made money by selling development services for the Mercedes-Benz B-Class Electric and Toyota RAV4 EV.

Though profits did decline, the future is looking bright for Tesla. Forbes reported that revenue has risen from $620.5 million, up from $615.2 million in the fourth quarter, and that the company will make its quota. Furthermore, research analyst Adam Jonas recently stated: "Not even two years after the delivery of the first Model S, Tesla Motors has transformed from fledgling start-up to arguably the most important car company in the world. We are not joking. Tesla is also emerging as an emblematic force in America's effort to foster high tech manufacturing job growth."

Tesla may not be as established as FedEx, Amazon, Turner Broadcasting, or ESPN, but it appears that things are finally turning around for the innovative automaker.

Last updated: Jul 7, 2014

DREW HENDRICKS | Columnist

Drew Hendricks is a tech, social-media, and environmental addict. He's written for many major publications, such as Forbes and Entrepreneur.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



Register on Inc.com today to get full access to:
All articles  |  Magazine archives | Livestream events | Comments
EMAIL
PASSWORD
EMAIL
FIRST NAME
LAST NAME
EMAIL
PASSWORD

Or sign up using: