Posted on: Sunday, November 2, 2003
Stock wizards settle down — no foolin'
By Ellen McCarthy
Washington Post
Folks at Motley Fool Inc., known as much for their boisterous personas as their financial knowledge, have been awfully quiet lately.
"Are you still doing that Internet thing you were doing?" people ask David Gardner, one of the investing adviser's two founding fools.
Gardner, his brother Tom and their merry band are celebrating Motley Fool's 10th anniversary this year. The Alexandria, Va., firm is markedly smaller and more sedate. There is still a foosball table on the second floor and beanbag chairs throughout the loft-like conference room, but the employees are older and quieter.
"We all have kids. Now it's all about 'Hey, bring your kids to the office,' " said David Gardner, a 37-year-old father of three. "It's not, 'Hey, bring your crazy college friend to the office.' "
The privately held firm does not release financial information. But its executives say a painful maturing process has made the business sound, it is making more than it's spending, and hiring again.
In 2001, the personal-finance gurus laid off more than three-quarters of their staff, and rumors flew about the firm's viability.
The rise of the Motley Fool coincided with the do-it-yourself trading rage, when it seemed anyone, with a bit of homework, could become a Nasdaq millionaire. The Web site for Motley Fool, written in entertaining language, was billed as the commoner's guide to this complex world.
The brothers had started a financial newsletter in July 1993 with recommendations on which stocks to buy. With co-founder Erik Rydholm, they set up an online discussion folder. But their popularity skyrocketed when America Online brought the Motley Fool's content into its empire in 1994. The company landed two rounds of venture capital worth $56.5 million and began expanding rapidly in the mid-1990s.
Motley Fool launched a sister site in England, one in Germany and a subsidiary called SoapBox to let people sell their own research on stocks. It hired Coca-Cola Co. veteran Pat Garner as chief executive. At its peak, Motley Fool had 400 employees, and rumors flew of going public.
But in 2001 the limits of free online financial information became clear. SoapBox and the German unit were closed, and Garner left the company. The once-exuberant staff was hit with three rounds of layoffs in less than a year.
In April 2002, the company went back to its paper-and-ink roots. Motley Fool executives say there are 36,000 subscribers to a stock-picking newsletter that sells for $200 a year. The company produces two other newsletters and is planning more such publications.
The firm still holds to its core mission — helping people improve their financial situation through education — but is now less dependent on the Internet.
"We have more of a feeling of calmness and stability" than during the tech-stock boom, Gardner said. "We lack some of the craziness. But in those three years we couldn't provide stability. We've all aged a little bit."
