Motley Fool Inc., the

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MOTLEY FOOL INC., THE

In 1993, The Motley Fool Inc. was established by brothers David and Tom Gardner and their friend, Erik Rydholm, as a 16-page newsletter offering investment information with a humorous twist. By the end of the decade, the newsletter operation had evolved into a multimedia personal finance company with a World Wide Web site, online store, a nationally syndicated newspaper column and radio show, a monthly magazine, and a series of published books. By 2001, The Motley Fool reached 30 million people per month through its multimedia channels.

EARLY HISTORY

After graduating from college with English degrees, David and Tom Gardner, along with Rydholm, teamed up to write a newsletter that mixed humor with investment information. The Gardner brothers had been exposed to their father's laid back and humorous philosophy toward business and investing throughout their childhood, and that set the tone for the newsletter. The Motley Fool name stemmed from Shakespearean literature and was based on the concept that only the Fool could speak the truth and go against what was the norm, without being beheaded for his ideas.

Using wedding invitation lists from friends and family, the trio mailed out their first issues in hopes of securing subscriptions to their fledgling publication. After receiving only a few dozen orders, the partners began to realize that marketing and selling a publication was not an easy task. The Gardners, who had been answering investment questions online via their Prodigy account, decided that utilizing the Internet would give them access to customers across the country. The pair began using America Online (AOL) to advertise their newsletter and solicit investment questions from fellow AOL members.

The Gardners' big break came in 1994 when AOL invited The Motley Fool to become a featured part of its home page. Using funds secured from the contract with AOL, the company moved into an office in Alexandria, Virginia, and established the "Fool Portfolio." AOL members were then encouraged to use the stock portfolio as a learning device and were able to track The Motley Fool's investment successes and failures. The Gardners' laid-back approach to personal investing gained in popularity rather quickly. Their habit of making public appearances wearing suits and jester hats garnered industry attention as well. The Motley Fool's unconventional mission—to educate, enrich, and amuse individual investors around the world—soon earned it a leading position among online investment forums.

The company's focus on the individual investor was also a key factor in its success on the Internet. By 1996, the company's investment forum on AOL was securing 275,000 visitors per month. According to a 1996 Computerworld article, "The Motley Fool founders have become cult figures because of their investment philosophy, which pumps up the abilities of individual investors instead of the powerful investment establishment of brokers and firms." In April 1997, when its contract with AOL expired, the company developed its own Web site. By then, it was offering its investment advice to over 500,000 surfers each month.

EXPANSION

As the firm's success on the Internet continued, the Gardners found themselves expanding offline as well. With the help of Gary Hill—the company's chief financial officer hired in 1996—the firm partnered with Simon and Schuster and published its first book, The Motley Fool Investment Guide, which became a New York Times bestseller. It also teamed up with Andrews McMeel Universal (AMU) to develop a nationally syndicated weekly newspaper column. In 1998, The Motley Fool began a nationally syndicated radio show. That year, the company expanded internationally by establishing Fool U.K.

The Gardners continued expanding by tapping into any media channel that was available. In 1999, the Motley Fool Monthly magazine was launched. The company also formed a strategic alliance with Reuters Ltd. As part of the deal, Reuters supplied financial news to The Motley Fool Web site and advertised the firm on its News Network. The company also developed FoolMart, an online store that operated as a subsidiary by selling e-mail subscriptions, detailed investment information, and company reports. That year, the firm secured $26.5 million in venture capital from Maveron and the Mayfield Fund, funds it used to beef up marketing efforts and upgrade The Motley Fool Web site.

Growth efforts continued into the new millennium. After nearly a year of searching for the perfect CEO candidate, the Gardners hired seasoned marketing executive C. Patrick Garner in May of 2000. Garner began to oversee the firm's growth efforts, which were focused on Europe and Asia, while the Gardner brothers remained co-chairmen and chief strategists. That month, the firm launched a new monthly subscription-based publication entitled The Motley Fool Select . The new publication replaced company research reports and detailed the Fool's top investment ideas. The stocks covered were divided into three categories: the highly profitable companies, or Rule Makers; the emerging firms, or Rule Breakers; and the smaller startups, or Small-Cap Foolish 8.

To fund expansion, the firm secured a second round of financing—$30 million from Softbank Finance Group, AOL Time Warner Ventures, Maveron, and the Mayfield Fund—in early 2001. At the same time, The Motley Fool signed a content distribution agreement with MSNBC.com, an Internet-based news site. The agreement allowed MSNBC.com to feature Fool information on its network. The successes of the company were overshadowed, however, by the downturn of the dot.com industry. As a result, The Motley Fool was forced to lay off 115 employees. The Gardners blamed a drop in advertising revenues, along with a weakening U.S. economy, for the cutbacks. In June of 2001, the firm continued with its downsizing and cut 45 additional jobs. The layoffs weighed heavily on the founders, who took pride in operating a close-knit organization. Co-founder Rydholm, the chief operating officer of the firm, stated in Institutional Investor that, "it was one of the most difficult things I've ever had to do. But you owe it to your investors to perform." As part of the restructuring, The Motley Fool also divided its business into six different units including Publishing, Electronic Media, Consumer Internet, Corporate Solutions, Fool U.K., and Fool Japan.