How Stock Investor Came to Be — Part 2
“Do we rescue Telescan or build a new investing
website with another financial data provider?”
— D. Scott Elder to Ross Jardine in 2000
Online Investors Advantage went from doing one workshop a month, to two a month, to one a week, and eventually to as many as six workshops a week throughout the world. The U.S. stock market is the global stock market and the World Wide Web really is world wide. We were filling workshops in the United States, Canada, Australia, New Zealand, England, Scotland, Singapore, South Africa and even Dubai.
By the way, I enjoyed going to Dubai. The country is clean and beautiful and the people are very friendly. I haven’t been back since 9/11 but if I had a reason and the opportunity I would not hesitate. I fell in love with Australia. If I’d gone there when I was single or when I had a young family I would have been tempted to move there. The people are very friendly (they love Americans) and the weather is perfect. In the same day you can scuba dive in the beautiful ocean reefs and then go for an ATV ride in the rain forest mountains teaming with Kangaroos. I’ve taken my family there to enjoy Christmas in the summer on the beach. The New Year’s Eve fireworks at Sydney Harbor are spectacular.
But I digress. Our rapid growth was noticed by a small publicly held Internet holding company. This was right before the infamous “.com crash.” when Internet holding companies had experienced huge growth and tremendous run up of their stock. This looked like an opportunity to be part of something big so we became a wholly owned subsidiary of this company. Shortly after the acquisition of OIA, Internet stocks fell out of favor and the value of our parent company collapsed. The other subsidiaries were struggling to pay their leases, make payments on their lines of credit and meet payroll.
OIA was still doing well so it ended up supporting the parent company and most of the other subsidiaries as well. Ross and I went to work to divest of the subsidiaries that were draining OIA’s resources and we eventually got the company to where OIA was the only subsidiary left in the holding company. But even with no debt and no long-term liabilities the market cap (value) of the parent company was less than the cash that OIA had in the bank. That’s how crazy things got. I also ended up becoming CEO and Chairman of the parent company. This is not a fun position for someone who likes to be the “behind the scenes” creative guy and needs to be a little less structured than a typical CEO of a public company.
Just as we were cleaning up things inside the parent company, the .com crash created another challenge for us. The company that owned Wall Street City, Telescan, Inc., was also suffering the effects of the .com crash. By this time we had grown to the point where we were able to have Telescan build us a customized version of Wall Street City called Investors Toolbox. We stripped out all of the banner ads, formatted the web site so that the 5-Step Investing Formula flowed in a natural progression and automated many of the functions in each of the five steps.
Telescan had been built on a banner ad revenue-generating model (as most Internet companies were at the time). With this model, in order to attract “eyeballs” to attract advertisers, they had a free version of Wall Street City and a minimal subscription fee for the premium services. When the banner ad revenues started evaporating, Telescan started losing money at an accelerating rate. At the same time, Wall Street City’s subscriptions were also declining. The irony was that a subscription to Investor Toolbox was more than a subscription to Wall Street City and the Investor Toolbox subscriptions were increasing.
This dynamic proved to be a valuable insight. We learned that the things we did to customize our version of Wall Street City and educating subscribers on how to use the tools made it much easier to use; and consequently easier for them to get a return on their investment in the subscription fees. In other words people were willing to pay more to use our version because it was easier to make money trading stocks with it.
Telescan was on the verge of bankruptcy and we had to make a decision: either merge with Telescan and assume its liabilities or find another provider of financial data and rebuild Investor Toolbox from the ground up. Rebuilding the website would have been the least expensive alternative but the disruption to our business and our subscribers could have been disastrous for the company. The decision was made to merge with Telescan and assume its liabilities.
I was anxious to get back to focusing on the creative aspects of the company and was glad to let the CEO of Telescan become the CEO of the newly merged companies. He had a Wall Street banking background and much more experience running public companies than I did. Shortly after the merger the company changed its name.
Soon after the merger the vision that Ross and I had for the company and the vision the new CEO had began to diverge. Within a few months Ross and I left the company and pursued other interests. But the fact that we didn’t achieve some of the objectives we had when we started OIA kept rolling around in the back of our minds. So about two years after we left we decided to start another company to teach people how to use proprietary stock trading tools to invest in the stock market.
We didn’t want to do things the same way we had with our previous company. Starting fresh we had the advantage of being able to ask ourselves, “If we were to start this company again today, what would we do different?”
Continued on next post…
Your Friend in Investing,
D. Scott Elder