Uncle Joe, the Village Voice and Jeff Bezos: Michael Gleissner Builds an Empire

From a sleepy hamlet in Bavaria to a multimillion-dollar serial entrepreneur, how a teenage German technologist became a worldwide success.  In our second episode, Jeffrey W. Berkman, Chair of the Corporate & Securities Practice Group at Falcon Rappaport & Berkman LLP, sits down with Michael Gleissner who tells his story; starting from his time as a boy growing up in Regensburg, Germany to building a multimillion-dollar, international empire. 

The episode explores how Michael was able to capitalize on the nascent technology of the late 1980s to build and sell a company to Amazon, had the vision in the 1990s to understand the business opportunities offered by the Internet, and then went on to build several successful businesses as well as become a prolific real estate and stock market investor. If you only take one lesson from Michael’s many pearls of wisdom, never tell them how much you want…    

You'll hear how Michael's clear-headed strategies on valuation metrics, risk perception, and the power of good legal counsel can make or break your investments. And don't miss the tale of our guest's admirable leap from an early online struggle with an overflowing inbox to a genius outsourcing solution halfway across the world.

Sit back, relax, and get ready to absorb the wisdom that can help you make that strategic leap. 

Falcon Rappaport & Berkman LLP (FRB) believes great results begin with great relationships. Helping You Soar, hosted by FRB Partner Jeffrey W. Berkman, Esq., LL.M., gives listeners insight into the minds of the myriad of successful businesspeople that FRB has been privileged to represent.

This podcast may be considered attorney advertising. This podcast is not presented for purposes of legal advice or for providing a legal opinion. Before any of the presenting attorneys can provide legal advice to any person or entity, and before an attorney-client relationship is formed, that attorney must have a signed fee agreement with a client setting forth the firm’s scope of representation and the fees that will be charged.

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Transcript

Jeff Berkman [00:00:08]:
Hello, my name is Jeff Berkman, and welcome to helping you soar a sort of legal podcast. Let me start with a quick story. In 2000, a 36 year old lawyer who had been working at big law and at several big lawlike firms walked into a spectacular brownstone in New York City for an interview. Interestingly, the lawyer had posted his resume at a website. Today, that's commonplace. But in 2000, that concept was in its infancy. The lawyer received a call from a woman stating she was the VP of a newly formed venture firm owned by a newly minted multimillionaire. The owner was looking for a general counsel.

Jeff Berkman [00:00:45]:
As I stated, the interview was at this magnificent double y brownstone on the Upper East Side of New York City. Remember, this was the venture world of 2000s. Fabulous digs, informal offices, overinflated dot com valuations, and the lawyer overdressed in a suit while the entrepreneur was wearing jeans, gray t shirt and white sneakers. And for anyone who knew him, this was the equivalent of the Zuckerberg hoodie before anybody knew who Zuckerberg was. By the time the interview was over, the lawyer was hired, which started an almost 25 year relationship. That lawyer was me. And the entrepreneur today is my guest, Michael Gleisner. We'll get to Michael's story shortly, but a bit about the podcast.

Jeff Berkman [00:01:29]:
Again, my name is Jeff Berkman and welcome to the second episode of Helping You Soar, a sort of legal podcast. If you haven't listened to our first episode, I encourage you do so after this one. It went very well, got a lot of great feedback. And Mike Aguilero, again, he was amazing guest. So, this podcast is styled as a series of interviews focusing on successful entrepreneurs. Our firm has had the privilege to represent as well as centers of influence who regularly work with them. The podcast is intended for entrepreneurs of all stages and there's trusted advisors from the newly minted to the serial entrepreneur. We discuss entrepreneurship with people who are making a difference by launching innovative products and services and disruptive companies.

Jeff Berkman [00:02:11]:
We want our listeners to gain valuable insight from these people and from our guests on how to build, grow and hopefully successfully exit a business. Please note this podcast is meant for informational and entertainment purposes only. It's not legal advice. If you need assistance on legal matters, please hire a lawyer. Okay, before I introduce my amazing guests, a little bit about me I'm a founding partner of Falcon, Rappaport and Berkman and the chair of the Corporate Securities Department. I continue to be impressed by entrepreneurs I have met over the years doing M A transactions, succession planning and acting as general outside counsel to a bunch of businesses. And in working with these successful businesses, it dawned on me it would be a worthwhile endeavor to interview business owners to see what their commonalities and their unique qualities are and thus the genesis of this podcast. However, I didn't want to focus on legal issues because I thought if I did so by now anybody listening would be bored and probably turn it off.

Jeff Berkman [00:03:10]:
So instead I like to interview these entrepreneurs and have them tell their story. And that's why I call this a sort of legal podcast. Okay, back to the story. I lied. I got to tell you a little bit of more before I jump in with Michael. The first question Michael asked me in 2000 during my interview was, what's your legal view on Napster versus copyright law? I nailed the answer. Obviously, I got hired. But what's interesting about the story is that the day before, a friend of mine had handed me a magazine.

Jeff Berkman [00:03:41]:
That was the dot com magazine of the day. And it had a whole story about Napster and copyright law and all the issues. And so I was able to talk about it. Unfortunately, had I thought about it back then and the whole file sharing, I'd probably be a gazillionaire now because that to me is like the infancy of blockchain. But leaving that aside, I think I've spoken enough. I want to introduce Michael Gleiser, my guest today.

Michael Gleissner [00:04:05]:
Hello, Jeff.

Jeff Berkman [00:04:07]:
Michael, your story is super interesting. I want to delve a little bit into your history growing up, where you grew up, and becoming a technologist. In essence, how learning about the internet. Remember everyone, the first company. When did you form television? What was that, 98, 97, or before that?

Michael Gleissner [00:04:24]:
Actually, we started before the Internet actually commercially surfaced in Germany. We had actually online services much, much earlier. And it was in form of a telephone with a little CRT screen that became known as the minitel.

Michael Gleissner [00:04:45]:
It had a very slow modem connected to a server with a telephone connection, and you could actually do basic research.

Michael Gleissner [00:04:58]:
Let me give the listeners a little bit of a background. I was born into the family of government employees in a small city in Bavaria, Germany, right? And my father, my mother, any of my uncles and aunts worked for the government. And there was one exception. I had this one grand uncle, his name was Joseph, and he went by Uncle Joe, and he is the guy that went to America. He lived in New York City and he impressed me because of his so we got one day we got a compact cassette. We didn't have a cassette player, so we had to go out to buy the cassette player to listen to the tape that Uncle Joe recorded. And he did a kind of an early day podcast. He would actually go and talk, and that was back in the 80s even the 70s, right? He would talk on this compact cassette and talked about Radio City Music Hall, a central park in New York.

Michael Gleissner [00:06:06]:
He would fade in the music. He would fade out the music and talk again. I'm like, oh my God, this guy is so cool.

Michael Gleissner [00:06:14]:
He left Germany and started his business and started his career in New York. And he was definitely very eccentric. So he would ship his big Cadillac in the summer to Germany to drive with this big American car on. And, you know, although it cost him quite some money, he says, I don't want to have a parking ticket and I want any speeding tickets. So he would actually go and bring the American lifestyle. He was my hero, right. And a lot of that was show business also.

Michael Gleissner [00:06:51]:
So I always wanted to be like Uncle Joe. And I said, Uncle Joe, one day I'm going to visit you in New York City, right. And there's certain things that shape your life, right. And it might not have anything to do with business and mold you into a business career, but this is just the fact that you're inspired to do something else and go out and leave the area, leave your current comfort zone. That was appealing to me. Of course, my parents say, you're going nuts. You're going to the US. What are you going to do there? You don't know anybody.

Michael Gleissner [00:07:33]:
You're not anything, Uncle Joey is not, you know, help you, and you should have your safe job. You should be working for the government. You should complete your studies. Actually, as you know, I did a very short time in law school, right. And that was kind of my backup career.

Michael Gleissner [00:07:56]:
The European system was such that law school is free, right. So when you'd start your own company, when you start something, you can actually have a free backup, right. If it doesn't work out yeah, just keep going to law school and finish that one.

Michael Gleissner [00:08:12]:
And we were very fascinated by computers, right. So when the first computers came out, the Commodore 64, there's all these enthusiasts that ended up playing on the computer, right. And we started I met my partner, who became my software partner in many businesses at a department store, we didn't can afford a computer. So suddenly all these kids ended up using these computers in the department store where they were on display. And these guys didn't mind these kids starting to play. And two groups separated, the ones that went just video gaming, they were the video game geeks, right? And the others that tried to figure out programming languages like Basic and Assembler. And I was like part of this other group. Right.

Michael Gleissner [00:09:04]:
Was always fascinated by technology, was always fascinated by innovation, and was always fascinated by being a little bit on the adventurous side. Right. So that's basically how I started. The good thing about law school is I had no money. And because there was no Internet at the time, you got to buy a lot of books. If you study books, is basically your major expense because university is free, right. So I was always annoyed that you go to a bookseller. Booksellers were basically the only places where you could buy these books and you would just tell him the title, and he would put the title in the computer and read you what he sees on the screen.

Michael Gleissner [00:09:49]:
I'm like, I can do it myself. I know the need this guy, right? And the German online, the nascent online industry came up. There was these telephones. They connected to databases. I'm like, I'm wondering if we can just get this database, put it online so people could not only search the books, they could actually place the order online.

Michael Gleissner [00:10:12]:
And that was in 91, when we had a complete ecommerce application. No, this was in 85. There we had a complete ecommerce application, 86, 85, that was actually online. You could search for books and you could order, although not many people did it because they were really skeptical that you could actually place the order online and actually get the book. But this is how we started.

Jeff Berkman [00:10:40]:
Yeah. So what I want to drive out a little bit is you haven't mentioned it, so I'll interrupt a little bit. But Michael came to the United States and said, I need to learn about this thing called the Internet, right?

Michael Gleissner [00:10:51]:
That was years later, because the Internet, when we started, we had an up and running bookshop online, and there was no Internet yet the Internet was not open to commercial use. It was only academic research.

Jeff Berkman [00:11:07]:
Okay, so let's get the chronology is important because it leads into a lot of things that happen in life, right?

Michael Gleissner [00:11:13]:
So from 85 to 91, we were actually building this system, an ecommerce system on this miniteel, and there was no Internet. Nobody could actually use the Internet for commercial things. In 91, we heard more and more things going on on the Internet. And we're like, well, if we miss this Internet train, we might be like, losing out long term. But there was no Internet to research the Internet, obviously, right? So we're like, okay, we gotta go to New York, right? So me and my partner Christian, we were in New York. We're in Times Square. We got to find out about the Internet, right? And true story, we picked up the Village Voice, and between Penile enlargement and all these classified ads, we saw an ad that says, do you need help on the Internet? 212-262-1118. I remember the phone number, right? And we called the guy on the other end is a guy named Jim Hoffman.

Michael Gleissner [00:12:15]:
And I said, Jim, I would like to learn about the Internet. We came from Germany. We don't know anything. And he invited us to his office on 1841 Broadway, and he took like 2 hours of his time, told us about TCP IP, about the basics of a web browser. We looked at a Mosaic Web browser, and then he didn't even charge us. Like, this must be a nice guy who's got to stay in touch, right? And ended up programming our first Internet application. That actually connected to the same database, showed you German books for a certain keyword. And then we ended up hosting his servers at his server location in Baltimore, Maryland.

Michael Gleissner [00:13:01]:
And we had this machine there in Baltimore, Maryland, and our code was not very good, so we would call him many times a week and say, hey, can somebody please reboot the server? The server crashed.

Michael Gleissner [00:13:16]:
And he had actually some guy in Baltimore that rebooted these servers. It was just ridiculous to talk about this like today, right. And I remember we had, like, our messaging system had a little bell, right? So when somebody would place an order, the bell would ring. And we had days where actually the bell rang, and we're like, oh, my God, somebody ordered a book. And then the days became the bell was more regular, and the bell would ring multiple times a day, and then the bell would just ring constantly.

Michael Gleissner [00:13:52]:
So we had to turn the bell off.

Michael Gleissner [00:13:54]:
Because orders were just constantly coming.

Michael Gleissner [00:13:57]:
But at the time, somebody ordering a book was actually we just did the high five.

Jeff Berkman [00:14:04]:
I think if anyone's listening on understanding where this is leading, what they were able to do. Right, Michael, is like, you took this concept of let's see how people can order, search and order books eventually online through the Internet. And if anybody is connecting dots, eventually someone came along and bought your company. Right. Who was it about?

Michael Gleissner [00:14:26]:
That's what's, like, long?

Jeff Berkman [00:14:29]:
But the point is, you had this original Nascent technology. You developed it. You were doing this in Europe, and Amazon came along and said, we need your market. Right? I mean, we want to buy this company. So that was your first amazing success. But I also want to go back to something you mentioned before, because this is also interesting in that that day, or when you came to New York City and you met Jim Hoffman and you met this other guy, Lenny Barshack, who yesterday thank you. I had lunch with and I hadn't seen in ten years. Right.

Jeff Berkman [00:15:03]:
Or more. I think you said something in effect that, thank you, this was great. You're not taking any money. One day I'll return the favor. Right. What was the favor that you returned eventually, many years ago?

Michael Gleissner [00:15:16]:
Well, there's so many stories. Look, at the end of the day, a lot of people that became successful, kind of their view of their stories change, and it becomes a little bit like no strategy. In my case, honestly, 98 became the crazy boom. M and A Internet companies were bought left, right, and center. And the truth is, we just tried a lot of stuff and kept what works.

Michael Gleissner [00:15:49]:
I mean, we tried an online travel agency. I wish we would have stuck with it and tried to figure it out, but we got so much headwind from these saber, the booking systems. It was too steep of a hill to climb. We tried all kind of stuff, right? But at the time we were just fascinated by technology and especially fascinated by people say that can't be done, right? So the first time I tried to get a relationship to buy these books at a discount is I approached a bookseller, right? And I said, hey, there's this new thing called the miniteel, not the internet, right? And we were trying to sell books. We know the technology part, we don't know the book selling part. So let's team up. The guy looked at us and said, nobody's buying books of a computer screen. Everybody wants to go to a store, wants to see the book, want to talk to a bookseller.

Michael Gleissner [00:16:48]:
And we couldn't convince this guy, right? So it's like all these roadblocks and suddenly these orders came in. So as I think we bought the book at retail, sold it for the same price, just because we was fascinated by that technology, right? The other thing, I mean, I sold two companies in 98. One was Telebook, Amazon was the acquirer. And then there was another company called Viv Service v, the German letter W is so and that was a very early GoDaddy type of web hosting service where Germans telecom monopoly charged businesses extreme high costs to have an Internet presence. But the Internet is global. I found this company in Caboco Raton, Florida. The company name was Highway Technologies. That's actually the story that brought me to the US, right? So they actually would sell web hosting for 49, 95 a month.

Michael Gleissner [00:17:46]:
You could have your website, right? Germany German telecom would try to sell you $3,000 a month type of services, right? So we tried the service and then I called them up and said, you know, I think you should target Germany a lot more because there's a local monopoly and they charge crazy prices, right? I said, what if we, if we get ten accounts, would you give us a discount? They said, well, ten accounts, give it to 30% discount, right? Okay, if we get 100 accounts, you're not going to get 100 accounts, but let's say you get 100 accounts to give you 40% discounts. What if we get you 500 accounts? 500 accounts, we get a 45% discount, right? And then what if you get more than 1000 accounts, right? I don't know exactly what the scaler, but you get the idea, right? And we ended up marketing a service in Germany and within a year we get 8000 paying accounts, right? And I've been doing substantial business was $50, 50% of it times 8000, which she sent to Florida, and I've never been to Florida and we're like, well, we're doing substantial business with these know, I think I should just go and meet them, right? And it was a cold November day in Germany, it was a great day. It was not snowing, was this rain, it was super cold, right? And I went to this place. I said, what is this, Boca Raton? Boca Raton, right. In Florida, they took off, and the wet Munich day, the plane flew into Miami. I saw palm trees. I saw blue skies, and, like, oh, my God, that's where I want to be. So subsequently, we came up with all kinds of bullshit reasons why your company has to be in the US.

Michael Gleissner [00:19:42]:
And the truth of the matter was, I just liked it there. I liked the entrepreneurial spirit. I liked America as a place where you can just try a lot of stuff and nobody asks you for your resume, your academic qualifications. At that time, needless to say, I dropped out of law school, right, because this stuff was more important to me, and we ended up selling this company as well for a substantial amount of money, although we had no part in the technology. We were just a reseller. But we rolled up the German market. And what I recognized at the time, that a lot of American companies, they're like, oh, we deal in English. Everybody speaks English.

Michael Gleissner [00:20:27]:
We have credit cards. Everybody uses credit cards. But in Germany, it was not like that at that time, right? So we actually had, from a side business, it grew into a company that was also quite substantial and was then subsequently acquired.

Michael Gleissner [00:20:42]:
But it's like, had I not called this company? Had I not tried this? And we tried a lot of stuff that didn't work, right? But we were young. We were working day and night, and we were working because we love to work. And my conflict with my parents was my father said, this is not life. Why are you sitting in the office until late night? Why are you going to the office on the weekend? I mean, there's something wrong with you, right? You should finish your studies, should work for the government, get your degree. It could have gone the other way. I've got to be very honest. At least you don't try. You're not lucky.

Michael Gleissner [00:21:25]:
But a lot of stuff in life is luck. I mean, if you look at your own relationships, the way you meet certain people, and you could say, if I wouldn't have gone to this and that conference or to this and this place, wouldn't have gone to this party, wouldn't have gotten introduced, wouldn't have picked up The Village Voice, I wouldn't have met Jim Hoffman. I would have probably looked at some Broadway shows and went home to Germany and said, well, we went to New York to find out the Internet, but we were just not successful.

Michael Gleissner [00:22:01]:
Nothing like that would have, you know.

Jeff Berkman [00:22:05]:
I want to touch on something, because it really shows sort of, sometimes how you have to think outside the box as an entrepreneur, how you have to think differently, find loopholes. Everyone sort of does things one way, and then sometimes if you find that way, that's different. Right? Our firm. Obviously, we have a big tax department. We talk about taxes. We're concerned about taxes from an efficiency standpoint, from a standpoint of having your state in order or whatever. But sometimes you have to look at it a little differently. I want you to tell a story about how with Telebook, you figured out the relationship between Germany and Namibia.

Jeff Berkman [00:22:46]:
Right? I think it was Namibia, and how as a result of figuring out that loophole, it made a big difference. And it just shows that sometimes a lot of times with entrepreneurs, thinking out of the box is really what is a big basis for how they ultimately become successful.

Michael Gleissner [00:23:03]:
Well, it actually goes hand in hand with the fact that we had no money whatsoever.

Michael Gleissner [00:23:10]:
I mean, we were basically living not paycheck to paycheck, but in a corporate sense. So when we wanted to buy a new printer, we needed to project how many days and weeks of books we have to sell and make the profits from the books to afford the new printer.

Michael Gleissner [00:23:31]:
So there was not even a venture capital industry. There was nobody who would give us money. It was just two kids playing with this new technology.

Michael Gleissner [00:23:46]:
And at the end of the day, when we went on the Internet, one thing fundamentally changed. On this German local minitel system, it cost thirty cents to send a message, right? So, of course, people ecommerce was not a common thing. So before you actually come up with this crazy idea of ordering something online, which people filled out, like order forms and paper and mailed in the order forms to the big mail order companies, that was a way to order something online.

Michael Gleissner [00:24:30]:
So you suddenly get people that say, hey, how does it work? How do you ship? And they correspond a lot to make sure that stuff actually gets delivered.

Michael Gleissner [00:24:42]:
Now, when we went on the Internet, the floodgates opened because emails were free. So instead of getting three, four, five messages a day, we got like 300 messages a day. And we're like, there's no way that we can respond to so many messages asking really mundane questions like, when will we send out the books? Is it a new book? Is it going to be damaged? And stuff like that. People didn't trust the stuff yet.

Michael Gleissner [00:25:09]:
So I actually at a conference where I accidentally went to where who knows how I got on this invitation list, some official German, almost in the diplomatic business, chamber of Commerce type setting, right. So I was struggling how to find Germans that are able to answer emails in a way at a cost point we could afford. And I ran into some person that was connected with the German government that was in charge of the country Namibia. Now, a lot of your listeners might not know Namibia, but it's one of the few colonies in the world that germany colonized. And what is even more interesting is that it has a lot of native German speakers, right. So there's a minority of 40,000 people in Namibia that speak German at home. They speak a very old German. That was like kind of the challenge.

Michael Gleissner [00:26:17]:
They would speak the German my grandmother at the time would speak.

Michael Gleissner [00:26:22]:
And they're so still immersed in Germany, they have a German newspaper and there was Internet, and you didn't need a lot of bandwidth to answer. So I said, you know, why don't we set up in Namibia? And we started an early outsourcing. I mean, he tells somebody a stories like, yeah, everybody does that you call Expedia, you're in Manila and it's a, you know, American Express connects you to India. At the time, it was a pretty novel idea to outsource this.

Michael Gleissner [00:26:53]:
We also started with AT&T, the first Internet telephony application where our phones were actually answered in Namibia at that time, the bandwidth was so crappy that 70% of the calls were just disconnected. Right. But it was interesting to be pioneering that kind of technologies.

Michael Gleissner [00:27:14]:
And we had set up our little operation in Namibia, Africa, and it worked. A lot of stuff we did, we couldn't have done if we had to pay for it.

Michael Gleissner [00:27:30]:
Because we were just using revenues and the profits we made at the operation. I don't come from money. My parents were not wealthy. I was living in an apartment right above my office. I didn't have any commute. I was sleeping basically, more or less at the office. Not because I had to, but because I loved it. That's just my lifestyle.

Michael Gleissner [00:27:55]:
I didn't have a lot of girlfriends. I had a lot of computers. That was my teenage years. My late teenage years.

Jeff Berkman [00:28:03]:
Yeah. I think the point about it, I thought there was also an issue with some tax loophole between Germany and Namibia. But the point about it is that an entrepreneur starting up is living on a very limited runway. And like you said back then, the concept when you started teleba and those early companies, there was no VC money. That concept didn't exist.

Michael Gleissner [00:28:23]:
Exactly.

Jeff Berkman [00:28:24]:
Everything's on a shoestring, and you're barely making it through. So you had to figure out how we're going to rob Peter to pay Paul. We'll go to Namibia because we'll set up a call center.

Michael Gleissner [00:28:36]:
I can tell you about my various tax battles with the tax authorities. And actually my time at the law school really helped me because nobody would take my case. Only firms that would take my case would charge me as much money. I wouldn't be able to even afford to retain it. So I did this stuff myself. I argued that isn't I was actually successful in many of my tax cases. Right. But I tell you another story, which actually I think was the make or break moment for me to become wealthy or not so wealthy, right? When we were in Florida, me and my partner Christian, we both were like these young, naive entrepreneurs with no money, right? So one day I got this postcard from a company that says how to sell.

Michael Gleissner [00:29:27]:
We have a seminar how to sell the company. The company at the best price, right? And I attended the seminar. I went to my cap partner and said, hey, this is a seminar. $79 at this nice hotel. Includes breakfast and lunch for two days. I mean, let's go, right? So we drove to Fort Lauderdale at this seminar, and the guy that gave the seminar, his name was Tony Physicsella. And obviously it was an M, and A shop that wanted to approach companies in certain industries where they could pick up, like, an engagement to sell the company. We had no interest to sell the company.

Michael Gleissner [00:30:08]:
We were just looking at a nice golf course and a free quasi free lunch, right? We listened to this guy for two days, right? And he had a profound effect on our life because when he started the seminar, he said, you're going to hear a lot about due diligence and acquisition, how to negotiate the sale of the company. If you forget most of the seminar, you only remember one thing. This thing I want you to remember is that if you ever get approached by a big company, they're going to immediately want to find out where your sweet spot is, what's the price you would sell the company for. And let me tell you, the advice I need to give you is the seller never names a price. Let them come with the stuff. Give them the information you want them to know, because it's only going to go downhill from whatever price you seem to be agreeable to. And I swear to God, because when Jeff Bezos when I met Jeff Bezos for the first time and it was in New York City, we went to the Central Park Zoo, right? And he came there with his general counsel, Alan Kaplan, if I remember correctly, they kind of tried to feel me know what my sweet spot was. But had I not been to the seminar, I would have said, and I swear to God, I would have know, Jeff, I really have no interest selling this company.

Michael Gleissner [00:31:46]:
Of course, if somebody would come up with a crazy price, like a million dollars, of course I would say I would have said that no. And obviously, hearing Tony Physicsella in my back of my ear, whispering, never say never state the price, I kept quiet. And the first offer that came in was like a multitude of that, you know, truth to be told is probably if I would have said a million dollar, bezos would have walked. It's like, there's something wrong with this guy. We thought, he's a player. He would even for a million dollars, this is know, let's not talk to this. Guy, you know, and then little know, if I wouldn't have gone to the seminar, I wouldn't have had this information.

Michael Gleissner [00:32:38]:
And it's just a lot of things in life are a series of coincidences that fundamentally shape where things are going. I mean, you just look at you like, where you met your wife, what could have been wrong or gone wrong, you would never have met this person, and your life would have turned out totally differently, right?

Jeff Berkman [00:32:57]:
That's a great point. The thing is, I think a thing is, with a successful business, obviously the theme through this is a lot of work figuring out how to make things work when you don't have the funds to do it again. Those days, the PE firms and the visa firms didn't exist. No one was handing money. And then you figured out how to you went to this seminar, and someone taught you a lesson, and you were able to utilize that. I want to remind you of the story, because I think it's kind of interesting, and it kind of goes to that whole point about taking risk, right? So I'll never forget the first project you had me work on where you were putting some money into I think it was like a million dollars into this e learning company, right? When e learning was again at its infancy, it was an OSHA education company, you know like teaching workforces, how to follow OSHA regulations, and it was all done through modules on e learning. But it was very you were like, you said to me, go and read know Ppm, go and read this subscription agreement and come back and tell me what you think, right? So I read through it for some legal things or whatever. I come back, I'm sitting in your office, and I start telling you these legal points.

Jeff Berkman [00:34:08]:
You're like, no, you're missing my point. I want to know what you think. I'm like, what are you asking me? You're like, well, should we invest in this company? And I said to myself, I've been at big law firms. Nobody asks me anything about strategy or business terms. It's just like, do this and be done with it. And I said, okay, I think it was you put in a million dollars or something. And I said, okay, put in $500,000. And you're like, no, that's not what I want.

Jeff Berkman [00:34:34]:
If that's how the relationship it's going to be, it's not going to work out. You got to say yes or no. Put in the money. Take the risk. You're asking me to invest this money. So I ended up coming back. I'm like, let me go back. Look at this stuff.

Jeff Berkman [00:34:45]:
You ended up I said, go ahead and do this. After I left, after I opened my own shop and you were a client, a major, major company came and bought that business, and your million turned into, like, 20 something X of that. But the funny thing about that story too is, and this is a learning lesson for anybody who's doing operating agreements or shareholder agreements or any kind of those corporate documents. If you remember, there wasn't a drag along in there. Now, for those people who are listening and don't know what a drag along is, a drag along basically says the majority can rule over the minority if you get an offer to sell the company. There was no drag along in this document. So you had no obligation to sell what your million dollars of interest was only a few percentage points, right, in the total scheme of things. And you kept saying, no, I don't.

Jeff Berkman [00:35:35]:
I mean, if they want to buy me out, they have to offer me more money. And as a result of that, because the law firm and the business people overlook the absence of a drag along, it cost them extra money. So the whole story came full circle. And it just shows you how a combination of things, right? It's a combination of your ability to see the disruptive technology long before anybody was really monopolizing on it or monetizing on it. Two, the importance of having the guts to make a decision when you could kind of sit on the fence. And three, you have to have good counsel. Right? You have to have good counsel. Absolutely.

Jeff Berkman [00:36:15]:
For a lot of entrepreneurs where you're a serial entrepreneur, you sold a lot of companies, you've done a lot of other things we can talk about in a second. But a lot of entrepreneurs, they get money plopped in their lap by VP firms, especially in this day and age, and they don't have good counsel. They don't have good accountants, they don't have good M A advisors, and they end up leaving money on the table or missing a know, efficiency or whatever it so, you know, I think that's a perfect example of that because a.

Michael Gleissner [00:36:42]:
Lot of things is just personality, right? There's a certain entrepreneurial personality that in an interesting window. They'd start with an idea, all despite every naysayer telling them it's not going to work, right? And they execute in the beginning, but then they had to flip at some point. Once they reach a certain maturity, they start listening. They start listening to what the customer wants, what their environment is like, and they completely turn their tunnel vision. They switch it off and they say, now I'm on the trajectory, that this is a working concern, but now I need to adapt what the market really wants. But when I said to you, hey, Jeff, tell me what you think, it's mainly to say, tell me what you think about this guy.

Michael Gleissner [00:37:41]:
Because the personality is important, right. I mean, venture capital, let's not kid ourselves. If I put a million dollars in the company, of course there's a high likelihood that this money is going to be lost. You just don't want that to be lost for the wrong reason, right? If you're dealing with good people that are dedicated, that can execute, that can build companies, and they also treat their shareholders fair, that's okay. Out of ten investments, one or two is going to work out. It's going to compensate for all the losses, but you just don't want to have any regrets with investing in wrong people bad energy. And we can go through the experience we made every deal we made. We sat down, and the first deals, as you remember, I was just, oh, cool company.

Michael Gleissner [00:38:35]:
I like the guy. Let's give him the million dollars. And he's like, Whoa, whoa, whoa, whoa. What about this? And you just basically we sat down, say, let's see what could go wrong. And a lot of stuff went wrong, and even you just don't want the aggravation. There's not only these two scenarios. Number one, the company goes like hockey stick growth, and you sell at multiple, right? Everybody's happy. The other thing is the company doesn't go anywhere and just needs more money.

Michael Gleissner [00:39:05]:
And there always knocks like, we need more money, more funding and stuff. At some point, you have to say no, but then there's this middle zone where people kind of okay. And then you suddenly said, well, you invested of $2 million into your company. You cash flow positive. What about returning something to shareholders? And they don't and then you see their payroll, and suddenly all the family is on the payroll. Every cousin becomes their consultant, and they're basically sucking the money out of the company. You just feel stupid. You don't want to wake up in the morning say, what a stupid investment I made because I didn't think of what to put in the contract, right? And that's where good counsel comes in, not just to make sure that you don't waste your money on stuff that doesn't work, but also, if it doesn't work and it doesn't work for a reason, it's still good having made the investment, right? But if it doesn't work because the guys then trying to wiggle themselves into a different position and basically more or less legally embezles the money, that's just discouraging from you from keeping an open mind to the next opportunity.

Michael Gleissner [00:40:24]:
And that happened to us in a couple of occasions, right?

Jeff Berkman [00:40:27]:
Let me just switch gears to a little bit because you invested a lot in technology, you built companies, you had some amazing ideas. Unfortunately, we can't touch upon all of those today. But you also have been a prolific real estate investor, investor in the market. You always seem to have found these undervalued concepts, right? Whether it's in the stock market, in real estate, going back to where you started. You're this kid growing up in Germany, and you learn about technology. How did you kind of transform yourself to be able to like, hey, I can look at Wall Street Journal. I can look at whatever. I can look at Financials and say, this company's undervalued.

Jeff Berkman [00:41:02]:
Here's a good place, or I can look at that building down in Miami or wherever all around the world that you've purchased properties and say, that's going to be a successful enterprise. It's undervalued. I can make something of that. You never were formally educated on that. How do you think you learned to do?

Michael Gleissner [00:41:17]:
You know, trial and error is one thing, and actually you have certain industries where there's certain valuation metrics. I wouldn't say you go out and you find something undervalued because that would imply the market is not efficient.

Michael Gleissner [00:41:32]:
Now, you ask yourself, why is the market not efficient? Because an external factor like liquidity.

Michael Gleissner [00:41:39]:
As you know, I never borrow I have never borrowed a single cents on real estate.

Jeff Berkman [00:41:44]:
Right.

Michael Gleissner [00:41:44]:
And everybody's like, oh, you got to do leverage and this and that. 2008 was a big party for us because we were all cash and everybody who borrowed was just with a back to the wall. And that was actually you leveraged liquidity.

Jeff Berkman [00:41:58]:
Right.

Michael Gleissner [00:41:58]:
Because liquidity suddenly dried up.

Michael Gleissner [00:42:01]:
We also studied the stock market and had some effects.

Michael Gleissner [00:42:06]:
And if you remember, some of the public company investments we did was just studying the perception of bankruptcy risk of a company that was loaded with a lot of debt, right. If the debt can't be refinanced, companies go into bankruptcy and the equity was wiped out.

Michael Gleissner [00:42:25]:
And I had, at the time, a big risk appetite and took stakes in public companies of like ten plus percent. We say, okay, this company, as long as we can line up the comp, that potentially the money to pay down all their debt, they will never go under.

Michael Gleissner [00:42:45]:
So one of the companies we both looked at, they had how much was it? 200 million in debt something. So we said they are valued at 20% what? They should be valued because everybody's like, they can't pay their debt because they go into bankruptcy. And at that time, I thought, can I call a couple of my friends, friends and family money and say, look, if we pay down the entire debt, this company is debt free. It's valued at 20% because of the bankruptcy risk. If we exclude the risk, you basically have a five times upside.

Michael Gleissner [00:43:21]:
Very logic.

Michael Gleissner [00:43:23]:
And then it's like quite something where the valuation metrics didn't really support it, because debt is usually I mean, risk is usually priced as an absolute. It is not priced as like, hey, can I actually take the money, raise it, and then pay down the debt and completely eliminate the risk, right. But that has changed now. There was this period of free money. Liquidity was not an issue anymore. So a lot of these liquidity considerations were not relevant anymore. Right? Maybe sometimes you get bored and you think about where can you leverage actually, some effects that you learned about how valuations actually come together, right? Whereas on the entrepreneurial side, what everybody underestimates, and I can't emphasize this often enough, it's all about execution, right? It's not about the idea. Everybody pitches you an idea, like the idea is worthless.

Michael Gleissner [00:44:34]:
We can sit in a room, have a cigar, and in the course of an even come up with ten business ideas, the question is, can you execute?

Michael Gleissner [00:44:47]:
That's where the rubber meets the road, right? And most of the investments that fail didn't fail because it was a bad idea, because the guy couldn't execute, couldn't find the right people, could not really was distracted with something else, got bogged down into legal things because they didn't have good counsel.

Michael Gleissner [00:45:05]:
Especially in technology where intellectual property, branding, trademarks is involved. I think the good legal counsel and solid valuation of legal risks is probably a factor of 30% in the neighborhood of 30% of what can actually make an investment be intrinsically valuable because there's IP or not valuable, even if they don't execute right? They have patents, they have trademarks, they have copyright on technology. You can always go and monetize this as properties aside from the actual business.

Michael Gleissner [00:45:53]:
But as an investor, you have to be secured with that. That's what I learned from you too, right. You know, having equity company doesn't go anywhere. Equity gets wiped out. If you're a debt holder with secured with actual assets, then you actually get these assets to monetize them first before everybody else gets paid back.

Jeff Berkman [00:46:15]:
Yeah. I think we only have a couple of minutes, so I just want to thank you. I mean, there's so many stories we could tell and some of know, like I said, where you recognize investments that are potentially undervalued. I'll give an example quickly. Prior to the Olympics, what was the first Olympics in China? What year was that where you said, look, all this stuff is going to go on with the Olympics in China and this company Cena exists and it looks like nobody's really investing it. So you and I went up to Beijing, we sat there, we met the company, you made that investment and lo because of the Olympics, it did successfully. Well, so sometimes just recognizing the opportunity that might be right in front of your face, right?

Michael Gleissner [00:46:54]:
Yeah. These guys were like suddenly baffled that this German guy ended up buying 10% of their company on the stock market and we had to disclose. But this, when you remember, was another effect because there was another company called Chanda that came into liquidity problems. They had to have a huge debt. They had a huge debt that was due in like a year, and they sat on lots of Cena stock and they said, we got to sell the Cena stock to pay back the debt. And of course it depressed the stock price, which had nothing to do with Cena's performance. That was one of the major factors. And then obviously you being able to talk in Mandarin Chinese, which was really hugely valuable at that time, right when nobody whiteficed, talking Mandarin Chinese was very rare.

Michael Gleissner [00:47:41]:
That brought us a lot of credibility.

Jeff Berkman [00:47:44]:
All right, well, again, I'm sorry. We could just go on all day with this. This is amazing stuff, and I just want to say, truly fascinating. Michael, before we wrap up today's episode, I just like to give you my heartfelt thank you for appearing as a guest and being my friend for the last 25 years, or almost 25 years. I appreciate you take the time to share your insight and experience. It's really been a pleasure. And to our listeners, thank you for tuning in. We hope you found today's discussion as enlightening and as informative as I did.

Jeff Berkman [00:48:14]:
If you have any questions about the topics we covered, or if you want to learn more about the firm and how we can help clients, please don't hesitate to contact us. Falcon, Rapport and Berkman is a full service business law firm with multiple offices across New York, California and Florida. Our breadth of services offers a full range of legal practices, and our team works collaboratively to simplify complex and interdisciplinary matters. FRB differentiates itself by approaching matters with a level of depth and variety of skills that none matched by typical advisors following through on firmwide commitment to excellent service, offering access to thought leaders in numerous areas of professional practice, and engaging in a partnership with clients to develop and achieve legal, business and personal objectives. We really, truly hope you enjoyed the podcast today, and until the next time, take care.