How a $500,000 bet created an $8.5 billion dollar company

Mattel, the world's biggest toy maker, got started in a Los Angeles garage
Mattel, the world's biggest toy maker, got started in a Los Angeles garage

On Wednesday's episode of CNBC's "Jay Leno's Garage," Leno shares the story of Elliot and Ruth Handler, a couple that risked the net worth of their company to become one of the most successful toy manufacturers of all time: Mattel.

Mattel Inc. was originally a picture-frame business founded in 1945 out of the Handlers' garage in Los Angeles. When they began producing toys, their first big hits were a child-size ukulele and cap pistol called the Burp Gun.

In 1955, as G. Wayne Miller explains in his book "Toy Wars," ABC asked Mattel to sponsor Disney's "The Mickey Mouse Club," offering them 15 minutes of commercial time a week for $500,000. That was just about the value of their company at the time.

After some consideration, Elliot and Ruth accepted. Fortunately, the show was a hit, and Mattel increased its sales by 25 percent, shipping over a million Burp Guns within the year.

They used that accumulated revenue to change the world.

In 1959, Ruth invented the Barbie doll, naming it after their daughter Barbara. Ken, Barbie's partner, came out in 1961, and they named him after their son.

Despite Elliot's insistence that "no mother is ever going to buy her daughter a doll with breasts," sales topped $100 million by 1965.

Greg Tracy drives in the Hot Wheels Double Loop Dare at X Games 18
Jeff Gross | Getty Images

Then, in 1968, Mattel began selling Hot Wheels, and the cars quickly became the world's top-selling toy. Today, Hot Wheels generates the most revenue of any toy in the world.

As Chris Downs, the senior vice president and global brand general manager of Hot Wheels, explains, what makes the cars so attractive to kids is their distinctness. Designers individually sketch out and digitize each one's specific 3-D shape before it is manufactured. Since 1968, over 10,000 unique models have been produced.

The most expensive, the VW Beach Bomb, sold for a record of $72,000.

The company has also made 19 life-size replicas of some of the more popular designs. "What's a large Hot Wheel without a life-size orange track?" asks Leno.

Indeed, at the 2012 X-Games, Hot Wheels showed off a six-story double loop, infusing the audience with the same wonderment they felt as kids playing with Hot Wheels in their basements.

What drives Hot Wheels, says Downs, has always been "challenging the unattainable." The Handler's bold willingness to risk their livelihood for Mattel reflects that same motto.

As of May, Forbes valued the company at $8.5 billion.

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CNBC's "Jay Leno's Garage" airs Wednesdays at 10 p.m. EDT.