Teaching His Son Led To Leapfrog -- Ex-Lawyer's Company Makes Educational Toys

NEW YORK - Not long ago, Mike Wood was just a father looking for a way to make reading easier for his young son.

Now, he runs LeapFrog, an educational toymaker known for its math and reading games found in toy stores and classrooms. His business partners include former junk-bond king Michael Milken, Oracle chairman Larry Ellison and former Mattel executive Tom Kalinske.

"Toys need to be captivating, fascinating, stimulating and rewarding," Wood said during a visit to the company's showroom in New York. "But toys with all of those capabilities aren't always easy to find."

When Wood's son Mat was learning to read seven years ago, he had trouble sounding out letters. To Wood's dismay, there wasn't a toy on the market that really could help him.

Wood began teaching his son phonics - using sounds of letters to pronounce words. By the time Mat reached kindergarten, he was well on his way to reading and Wood was thinking of starting a toy company.

In 1995, Wood left his job as a partner at a big San Francisco law firm to start LeapFrog. His first investors were his father and two brothers, who each contributed $5,000. He later turned to some former clients for capital.

"When I told my partners I was leaving to start a toy company, many told me I was crazy, and plenty of times in the first year, I thought they might have been right," said Wood, who graduated from Stanford University, Hastings College of Law in San Francisco and

University of California at Berkeley business school.

"But I knew I wanted to do this," said Wood, who at 45 still has a child's passion when discussing his toys. "I knew what all parents knew - the secret to success was to make something fun and put the fun into something that helps kids learn."

LeapFrog's initial product was the Phonics Desk, a $50 toy that teaches shapes, sounds and pronunciation of letters and words. To ensure it met educational requirements, Wood solicited the help of Robert Calfee, a professor at Stanford's School of Education who is a proponent of teaching with phonics.

"I knew what I wanted to do. I knew I had an exceptional product," Wood said. "But then came one of the biggest challenges: getting it into the stores."

Luck came Wood's way when Toys R Us, the nation's largest toy retailer, placed an order in fall 1995. Strong sales that Christmas helped secure LeapFrog more shelf space and eventually landed its toys in FAO Schwarz, Target and many smaller chains.

As his company grew, Wood recognized that outside investors could fuel expansion. In October 1997, LeapFrog merged with Knowledge Kids Enterprises, a division of Knowledge Universe, which is an education company founded by Milken, Ellison and Kalinske.

"I had more ideas than I had money," said Wood, who declined to give sales figures for LeapFrog. "I realized I could use some good advice from these people, and that's what I've gotten."

LeapFrog produces 17 toys, all retailing from $20 to $50.

New for 1998 are a number of innovative math games, which teach counting, addition and multiplication. It also is promoting its first doll, named "Little Leap," a green plush frog that teaches phonics, shapes, colors and animals' names.

In addition to home toy chests, LeapFrog toys have found a place in day-care centers and after-school programs, where they are used as teaching tools for children struggling to read.

This year, LeapFrog will donate its toys to more than 600 Head Start centers nationwide that service children from low-income families. The company also has a relationship with The Riordan Foundation, a nonprofit group that provides children with programs and tools to read and write.

"In low-income communities, parents don't have the means to buy the best toy," said Shawna Pinckney, spokeswoman for the National Head Start Association in Alexandria, Va. "A product that helps children learn really will move them ahead."

LeapFrog also has won the attention of celebrities Whoopi Goldberg and Rosie O'Donnell, including a mention of its toys on O'Donnell's popular television show.

While Wood knows he can't compete with toy giants like Mattel and Hasbro, he still revels in the difference his toys have made.

"Being an underdog isn't so bad," Wood said. "We are not making 1,000 different toys a year, but we are very focused and proud of the toys we make."