Dell used receivables to finance growth before it had capital

Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

1. 57:56

   forward slash CENRA. Lee Walker, tell me how important like that was finding a person because you were relatively persistent in recruiting him and you were like 21, I think at the time. 21, yeah. And he was 45 or something like that. Like what's the role that you feel he played at that point in Dale's history? Well, yeah, the company was, I mean, it's like our rocket had sort of taken off, but, you know, it was pretty fragile, right?

2. 58:28

   And, you know, we had some good ideas, but there was a lot of missing pieces. And Lee helped fill in those missing pieces and, you know, sort of organize the uncontrolled chaos and help this sort of really, you know, scale up the business. In like operations? Like, what do you think? Yeah, I mean, it was, well, first of all, we were growing so fast, we just didn't have the balance sheet or the capital to support our growth. And so, he helped us, you know, get some credit lines and, you know, that, you know, freed up capital and then, you know, sort of organized some, you know, some of the operations and stuff I didn't really know about or have a great interest in, you know, because it wasn't the technology or, or, uh, the customers. Yeah. And so he helped sort of get all that stuff on the right path. And then as we, as we needed even more capital, you know, with a private

3. 59:42

   placement and going public, you know, he helped help sort of get all that going and, you know, just basically how do you, how do you scale this thing up to get it ready for 10 X or a hundred X growth one thing i thought was very fascinating that lee walker said right is you guys point where you know you had that negative cash conversion cycle where but you were selling to like individuals so individuals like oh i want a computer michael okay give me your credit card you're like great i got this money which we'll talk about in a minute but now you've moved up and now you're doing enterprise and some of these companies are huge like texaco like these giant companies and i remember one point in the book it was something you're doing like 60 million a year in revenue and you had like 200 grand in your bank accounts it's like there's just no cash there

4. 1:00:25

   And what was smart is he went to the banks and I was curious. It sounds like he had relationships with the bankers. And I always have this maxim that relationships run. He did. Okay. So relationships run the world. You see that over and over again. And so Lee had relationships with these bankers that I assumed in the book and you just verified. But then what I thought he did was really smart. They're like, listen, we trust you, Lee, but we don't know this kid.

5. 1:00:51

   And his whole point is like, you don't have to even trust me or the kid. He's like, look at all the purchase orders. Like, do you think Texaco is going to pay us or not? And using the, like, the brand and the prestige and the, you know, essentially the value. Like, Texaco is not going out of business. They're going to pay them, pay this kid that you say you don't know, lend us against our receivables.

6. 1:01:13

   I was like, yeah, it's a really good idea. Yeah, it was receivable-based financing. The problem was that, you know, as a 21-year-old, you know, starting a business with really no capital, you know, infusion from the beginning, $1,000, right? You know, a banker looking at it with no one known inside the business to trust would sort of, their general reaction would be, I think I'll go do something else, right?

7. 1:01:48

   Yeah. But, you know, Lee had those relationships. He was trusted. And he was able to kind of explain it to them. And, you know, that helped sort of break open that log jam.