Podcast

The Art of Building a Billion Dollar Network

3Q20

Success is built on the values of hard work, integrity & adroit instincts

Read The Transcript

In today’s episode of Real Wealth Real Health, our guest is Jeff Scheinrock, Assistant Dean at UCLA Anderson School of Management. Having started his career as a CPA at a major accounting firm, Jeff’s intelligence, instincts, and integrity coalesced to create an ‘x’ factor of well-timed opportunities that enabled him to find success in a plethora of professional pursuits. Jeff has a storied and accomplished career as an entrepreneur, investor, fundraiser, and negotiator, having founded his own Advisory Firm, ran an entrepreneurial services firm, invested over $950 million in venture capital & private equity funds, and served as Chairman, or on the boards, of major US companies. Among his impressive list of triumphs, Mr. Scheinrock has received special recognition for his contributions to the Space Program from NASA.

In addition to discussing his impressive career, we talk with Jeff about his personal values, especially surrounding the importance of work-life balance, some of the more important lessons he’s learned, and advice he’d give investors today. Jeff offers incredible insights, not only through the direct advice he gives, but by describing his approach to various situations in business, in a way anyone can understand & identify with. We know this eye-opening discussion will be one that sparks inspiration in many listeners.

Key Insights

  • The value of prudent risk taking; finding what provides you fulfillment is often what precedes success
  • The importance of keeping an open mind & networking, as luck and timing often presents people with extraordinary opportunity Predicting
  • Always keep money set aside for emergencies, and diversify your portfolio where possible
  • Try to get to a place where you can work with people who you want to work with, rather than people you have to work with
  • The importance of prioritizing the maintenance of work/life balance, even as your career brings new & exciting challenges

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Guest Bio

Jeff Scheinrock learned about entrepreneurship at an early age, primarily watching his parents manage their own electrical engineering business. Working for large companies post college graduation was not to his liking, so he started own accounting company. “I realized that if you wanted to make more, you worked harder. The outcome was in my hands, and I liked that. I guess I’m a risk-taker.”

Early in his career, Scheinrock was senior partner in charge of the entrepreneurial services group of Arthur Young and Company’s Los Angeles office, a company whose sales he increased from zero to $7 billion in six years. He has extensive experience in international financial markets, corporate finance and capital structure, acquisitions and strategic investment.

A registered CPA, Scheinrock served from 2010 to April 2020 as an officer and board member of Originate, which invests capital and elite engineering talent and startup expertise into high-potential opportunities. The company, the result of a 2010 merger between Scheinrock Advisory Group and Originate Labs, builds products that define the future, utilizing expertise that includes software innovation (mobile/web development, artificial intelligence, cryptocurrency) and strategic consulting (turnaround, product development, market research). Originate partners with the innovation teams of Fortune 500 companies to create transformational software products.

Scheinrock is a former member of GKM Newport Generation Funds, a fund of funds that manages over $950 million for investments into venture capital funds and private equity buyout funds. Prior to founding Scheinrock Advisory Group in 1997, he served as Vice Chairman of Finance and strategic planning for Packard Bell NEC Electronics Inc., where he negotiated equity investments from Groupe Bull and NEC, and set up operations throughout Europe and Asia, successfully negotiating tax incentives from the different countries. He has also negotiated in excess of $1 billion in bank debt and $3 billion in trade credit from companies such as Intel, Microsoft, Panasonic, Tatung, Lite-On, Seagate and others, and handled the negotiation and structuring of all acquisitions, including Zenith Data Systems and Ark Interface Software.

Resources:

Real Wealth Real Health

Alpha Investing

[email protected]

https://www.anderson.ucla.edu/faculty-and-research/faculty-directory/scheinrock

The Agile Startup: Quick & Dirty Lessons Every Entrepreneur Should Know

Podcast Transcript

Speaker 1:

Welcome to Real Wealth Real Health, the show that empowers you with insights, information, and inspiration to achieve your version of financial wellness. Learn how to balance living a full life today with planning for the future. This podcast is brought to you by Alpha Investing, a real estate centric private capital network that provides exclusive investment opportunities to its members. Now, here are your hosts, AdaPia d-Errico and Daniel Cocca.

AdaPia d’Errico:

Jeff, thanks so much for joining us on the podcast.

Jeff Scheinrock:

Thank you. I’m happy to be here.

AdaPia d’Errico:

When we had our pre-call, I remember thinking there is no way that we’re going to be able to keep this to under an hour, because you have such a rich story that really in my mind speaks to these threads of fate and faith and a lot of hard work in achieving everything that you’ve achieved in your life and your career. Today, you’re the assistant dean at UCLA Anderson, but let’s start from the beginning of how you got to where you are today and maybe even unexpectedly.

Jeff Scheinrock:

Well, it’s totally unexpectedly. First of all, I have a long story because I’m old. That’s an interesting thing also, because I’m going to be 70 in February. I don’t feel old. I actually think my best years are ahead of me. I used to think when I was a lot younger that 60 was ancient. Now, I guess 70 is the new 40. I have no idea, but as long as I have my health and my brains or lack thereof, I will stay and work at UCLA Anderson. It is very ironic. Maybe I’ll start where I graduated with a bachelor’s degree from USC, the archrival of UCLA Anderson.

Jeff Scheinrock:

Because I got married when I was 19, and had a child just before I turned 21, when I graduated, I was in college, and married my high school sweetheart the whole story. I had to go get a job because I had a child. I was actually planning to go back to get a Master’s, or stay, but I had to go work. When we knew we were pregnant… I mean, I wasn’t but my wife was. I decided to go into accounting because I knew I could get a job in accounting. When I graduated from USC way back in 1973, I was fortunate to get offers from the Big 8 accounting firms. Now there’s the Big Four, but the big eight accounting firms.

Jeff Scheinrock:

I selected Arthur Young because it had the culture that I thought met what I was looking for. It was the smallest of the Big 8, and even though it was very large. I went to work. I don’t know if you know about public accounting. To get your… I passed the CPA exam. It’s funny, I wasn’t the best student. I studied with a gentleman named Dennis Dube, and he actually won the gold medal for the United States as the best paper. I barely passed, but I did pass the first time, which was good in itself, but worked at Arthur Young.

Jeff Scheinrock:

I hated it, but I stayed three years, and got my CPA certificate and went on and started a tax preparation firm, just me, and did some accounting for smaller businesses. Then the whole thread here that I want to get across is luck and timing has a lot to do with everything. I was born and raised in Southern California. For those who know California, there’s a big park near Century City called Rancho Park, and I would play tennis there. I hooked up with a gentleman who was older than I was. We hit it off, and we were playing tennis every week for several weeks.

Jeff Scheinrock:

He learned what I did. He says, “You know, Jeff, I like you. I’m going to change your life.” I said, “You are?” He says, “Yeah. Here’s my card. Come to my office tomorrow, and I guarantee you by the end of the day, you will be a different person.” I had no idea what this guy did. I showed up at the business. I knew right away that this was going to be a unique day. If you know anything about entertainment, the name on the door was Creative Artists, and Creative Artists was the hottest biggest talent agent for sports stars, singers, actors, everybody who was anybody in the entertainment field.

Jeff Scheinrock:

He came out. His name was Bob Goldman. He took me to the corner office and said, “Here’s my boss. This is Michael Ovitz.” I don’t know if you know Michael Ovitz. You may be too young, but Michael Ovitz was the founder of Creative Artists. He caused headlines. You can look this up on the internet. Years later, he left Creative Artists and went to Disney when Michael Eisner was the CEO. I think he lasted six months and was let go, and got a $200 million severance package.

AdaPia d’Errico:

Wow.

Jeff Scheinrock:

That made headlines all over the world. But because I picked up Creative Artists as a tax client, my little firm grew to 30 CPAs in three years. I was the only partner, and then again, luck and timing, I get a call wanting to know if I want to sell my accounting firm. The firm that called was Arthur Young. Arthur Young didn’t do acquisitions. It was very, very unusual, and the reason they wanted is they were big on entertainment. They did Warner Brothers and Paramount and Lorimar and all the big studios and TV stations and stuff.

Jeff Scheinrock:

They wanted Creative Artists as a client, and they could never break into it. They bought my firm for that client actually.

AdaPia d’Errico:

Wow.

Jeff Scheinrock:

I remember, I had two children by then. I’m in my late 20s. My son was very young, came to the office on a Friday, and it’s a Jeff Scheinrock and Accountancy Corp. On Monday, the door said Arthur Young, and he started crying saying, “What happened to our name? Who stole our name?” I said, “No, no, this is good. We’re going to get a Mercedes. We’re going to Europe. This is good.” I tried to explain to him what an acquisition meant. Arthur Young did something very unique then that changed, again, my career and my life.

Jeff Scheinrock:

The accounting firms have a tax group and auditing group and a consulting group. They formed a fourth group, and they called it the Entrepreneurial Services Group or ESG. They asked me to run that and set it up. I did. It was the small business department. They did, and I had a five-year earnout, meaning I got a price when they acquired but if I hit certain milestones, I would get more money. I stayed six years as a partner. I hit milestones every year, and so I got a lot more than the original purchase price in this earnout.

Jeff Scheinrock:

I was on the management committee. But while I was at Arthur Young, me and two other partners came up with a real crazy idea that no one had done at the time, that put me on a direction that again changed. We came up with an idea called the Entrepreneur of the Year. Today, it’s the Ernst and Young Entrepreneur of the Year Awards worldwide. I started that I think it’s close to 40 years ago or 38 years ago. One of the judges, the first year in Los Angeles, was a gentleman by the name of Al Osborne. He was the senior associate dean at UCLA Anderson.

Jeff Scheinrock:

He followed my career. Being on the management committee of Arthur Young, I knew a merger with Ernst, and when he was coming. I didn’t want to be part of it. My earnout was over. I went to go work for one of my clients which was fairly controversial. I’ll say some things here so you don’t think I’m bad. This may come across… It sounds like it’s anti-semitic, but I am Jewish. I went to go work for three crazy Israelis. They came to me, and they needed a professional front man basically.

Jeff Scheinrock:

They had a company at the time called Cal-Abco. I worked with them. Long story there, which I won’t go into of how I picked them up as a client initially, but they had a very unusual business that these three people would make 20 million in one year, and then lose five million the next. They were in a commodity business, and they sold what’s called DRAM for computers. They asked me to help negotiate the purchase of a name, because they wanted to get into a product business.

Jeff Scheinrock:

Make a long, long story, we purchased the name called Packard Bell. Packard Bell was owned by Teledyne at the time. They asked for 10 million. I offered 10,000. After several months of negotiating, we purchased the name for 90,000. I learned a valuable lesson in what’s in a name? Packard Bell, if you’re from the west coast, your parents and grandparents probably had a Packard Bell electronic. Actually in the Smithsonian Space Museum, the first computer for the space program is a Packard Bell computer.

Jeff Scheinrock:

Packard Bell went from zero to seven billion in revenue in six years. I was the vice chairman of finance and strategic planning. That was another being in the right place at the right time. I set up operations all over the world, never done it before. I’m leaving out a lot of stuff, but everything that could go wrong went wrong at Packard Bell. I learned by just doing it. I’ll give you an idea of what could go wrong. Basically, we never made profits. In 1994, there was a big earthquake in Southern California, the Northridge quake.

Jeff Scheinrock:

Packard Bell literally was totally destroyed. The building collapsed. Thank God, everybody was at a break, because we were running 24 hours a day. The building collapsed, and all the pipes broke, water pipes. We didn’t have money for earthquake insurance, so we didn’t have any. Luck and timing again, we had unlimited water damage coverage, and because everything was underwater, because the pipes broke, we ended up negotiating the largest settlement ever with Lloyd’s of London, took three years.

Jeff Scheinrock:

We also received the largest federal disaster loan until Katrina. We’re literally bankrupt, and then people really… I mean, Intel, Microsoft, all the big technology companies, because Packard Bell was so big, we were their largest customer. They came and supported us tremendously because we were literally… We had no inventory. Everything was destroyed, so everybody offered us additional credit even though we had lousy financials. A few people tried to gouge us.

Jeff Scheinrock:

We remembered that when we got back on our feet and stopped doing business with them.

AdaPia d’Errico:

Sure. Wow.

Jeff Scheinrock:

The story continues as Packard Bell, we were in the negotiations in 1995, ’96 to sell the company. We attempted to go public in 1992, and it failed. Literally, we were almost bankrupt then also, and everybody knew our financial so everybody tried to kill us, IBM, Apple, Compact, HP, everybody.

AdaPia d’Errico:

Can I just ask a quick question? They tried to kill you in ’92, but then they helped you or some of them did after-

Jeff Scheinrock:

Not our competitors, the suppliers.

AdaPia d’Errico:

Got it.

Jeff Scheinrock:

The competitors saw our financials, and this was their chance because at the time, believe it or not, we were the largest personal computer company in the world. It came out of nowhere.

AdaPia d’Errico:

I believe it. I was going to ask-

Jeff Scheinrock:

It came out of nowhere.

AdaPia d’Errico:

… how many people were employed?

Jeff Scheinrock:

When I left, 7000, and we were worldwide. We were in 22 countries. What happened was because we didn’t go public, it failed. We were fortunate, and we picked up money from a French company called Groupe Bull, and then another minority investment from NEC of Japan. If you can think about this, we had the French, we had the Japanese, and we had three Israelis. My job was to coordinate the culture, which was impossible, but we did it. Because NEC came on board, they had the NEC, if you’re a golfer, NEC World Series of golf.

Jeff Scheinrock:

I got to go and play golf with all the pros, which was quite an experience. I also got to go to all the Super Bowls. The suppliers would wine and dine us. Then an unfortunate incident happened in 1996. The day before the Superbowl in Arizona, I was in a bad accident, and I broke my back. Again, we won’t delve into all that, but when I took the air ambulance from Arizona back to Los Angeles, they did an MRI. They said that I shattered a few vertebrae, and I probably would never walk again.

Jeff Scheinrock:

At that time, my wife of 26 years left when I’m in the hospital. She basically said she couldn’t handle this, and she was leaving. That was a pretty dark time. I didn’t know if I was going to walk again. I’m in the middle of negotiating the sale to two offers, one from Sun Microsystems, all stock, and one from NEC, all cash. I stayed until the sale was completed, June 30th, 1996, and started to recover. Because of Packard Bell and our information was public and an S1, I’m trying to learn to walk again.

Jeff Scheinrock:

I actually tried to resign from Packard Bell, but the three owners made it very lucrative for me to stay and finish the negotiation, so I did.

AdaPia d’Errico:

From the hospital. From the hospital.

Jeff Scheinrock:

From the hospital. The negotiations were at the hospital. That’s when I met another… Another luck. Our attorney was the law firm of Wilson Sonsini Goodrich and Rosati. If you’re in technology, you know who that is. Larry Sonsini himself was our attorney. He became a very dear friend, and helped us through the whole sales process. But what happened was I’m recovering, and I get a call from a gentleman asking if I was the Jeff Scheinrock that raised all the money for Packard Bell.

Jeff Scheinrock:

I said, “Yeah.” He goes, “I want to hire you.” I go, “You don’t even know me.” He goes, “I don’t care, I need to raise a billion dollars for an aerospace company. I saw the S1, if you can raise money for that pile of shit, you can raise money for anybody.” I said, “Look, I’m in California. I can’t walk.” He says, “Look, I’m going to send the young lady down there. Her name is Marian Joe. She’s right out of college. She’ll be like your gophers. She’ll be your right-hand person. We’ll open an LA office. We can do it from your house, but I need to raise this money.”

Jeff Scheinrock:

I decided to join them, and it was very interesting. Kistler Aerospace was run by all the ex-NASA people who retired who ran the Apollo program, so the Tom Hanks movie, all that, all the people that were shown in that movie were executives. I learned the aerospace very quickly. We were having trouble raising the money, and we had a board meeting. I was asking one of the executives, his name was Dan Brandenstein, who was the commander of the space shuttle three times.

Jeff Scheinrock:

What’s the most interesting flight? He says, “The most interesting flight was when I flew to the space station, and I took a member of the royal family of Saudi Arabia, Prince Sultan of Saudi Arabia.” I couldn’t make this stuff up. That was the aha moment for Kistler. I’m listening, and I said, “Can I ask a stupid question?” We have a great board with very big executives, people’s names you wouldn’t have recognized. They go, “Yeah, you can ask a question.”

Jeff Scheinrock:

I said, “Did anybody ask the prince if he’d invest?” It was dead silence. Everybody said, “What a great idea.” We had Dan Brandenstein call Prince Sultan the next day in Saudi Arabia. Six weeks later, roughly, Dan and I were in Riyadh. Now, what’s interesting there, and comes back. I don’t want to get into religion and all this stuff, but back then and maybe even now, if you were Jewish, you could not go into Saudi Arabia. On the form, you had to say your religion, and everybody was saying, “Don’t put Jewish. Don’t put Jewish. Don’t do it. Don’t do it,” but I was the chief negotiator.

Jeff Scheinrock:

I put Jewish. I said… I’m not religious, by the way. I’m not religious at all, but I’m not going to lie about my religion. When we landed in Saudi Arabia, we got the invitation. I’m on a Saudi airplane from London, and we land in Riyadh. We go past the main terminal, and all these soldiers come in. They yell, “Jeff Scheinrock!” I’m going, “Oh, my god, they’re going to kill me.” They took me out in the royal terminal. I never went through customs, because we were a guest to the royal family.

Jeff Scheinrock:

My passport was never stamped. Fast forward… I won’t go into some of the stories that were said, but fast forward, the next day, I’m doing a presentation in front of all these people in Saudi Arabia. I go to slide one, Kistler Aerospace, slide two, we’re looking to raise I think it was $400 million. The prince stops me on slide two and says, “Look,” and he brings Dan up, and he puts his arm around him. He says, “Look, I put my life in his hands.”

Jeff Scheinrock:

He went around the table. You’ll invest 25 million. You’ll invest 25 million. These are all the biggest executives that ran companies in Saudi Arabia. Can you imagine? In two slides, I raised close to $400 million.

AdaPia d’Errico:

You’re a miracle worker.

Jeff Scheinrock:

Am I good or what? I’m only there overnight. The next day, he goes, “You’re not going back to the United States with Dan.” I go, “Okay, here it comes. Now they’re going to kill me.” He goes, “I’m going to send you to another country to meet my best friend.” I go, “Who’s your best friend?” Sultan of Brunei. I flew to Brunei, another 25 million the next day. It was quite an experience. In three or four days, we raised close to 400. We ended up raising the billion, 300 from Northrop Corporation in kind money, but 700 million in cash.

Jeff Scheinrock:

I left after seven months of working there, and continued to recover. That’s when another piece of luck came.

AdaPia d’Errico:

Hold on. Is that a record?

Jeff Scheinrock:

It might be. I don’t know, but it was really… By the way, Kistler ended up going bankrupt.

AdaPia d’Errico:

Oh no.

Jeff Scheinrock:

I was gone. That nothing to do with me. We were way ahead of our time. We were literally like SpaceX in 1998. I mean way back when, but I then continued to… I did a consulting firm, Scheinrock Advisory Group. Because of the Kistler experience, I get a call one night at my office. It’s me and Marian. Marian left when I left Kistler. Marian actually married one of our engineers named Jason Andrews. This becomes a big story too. I get a call to Marian and I. This guy says, “I’m Vance Coffman.” I don’t know who Vance Coffman is.

Jeff Scheinrock:

He’s chairman and CEO of Lockheed Martin, which is pretty amazing. He says, “Look, I was told to call you by Dan Goldin.” Now, that name I knew. He was the administrator of NASA. “Dan said what you did for Kistler, and I’m about to hire Goldman Sachs. We’re going to retire the space shuttle, and I need to hire somebody to help me with the business plan, the financing plan, the marketing plan. If I send the Lockheed Martin jet because they’re in Bethesda, Maryland, for you, can you come talk to me tomorrow? I need to make a decision by Friday.”

Jeff Scheinrock:

I said, “Can I put you on hold?” Marian goes, “Go. Go.” I go, “I can clear my calendar.” I flew to Bethesda on the Lockheed Martin jet, met with Vance Coffman. He says in his office, “Okay, I need a proposal from you now. I need you for one week, a month for three years. You’re going to be out at Skunk Works in Palmdale. You need to come up and help us figure out how we’re going to finance the replacement for the space shuttle, because the government doesn’t want to finance it.”

Jeff Scheinrock:

I said, “I have two questions.” He goes, “Yes.” I said, “Can I give you my proposal in the morning?” He says, “Yes.” He goes, “What’s your second question?” I said, “Can I use the jet to go back home?” I went back home on the Lockheed Martin jet. Then Marian and I are sitting there, and she goes… I go, “What should we bid? It’s the two of us for a week, a month.” I said, “What do you think?” Three-year contract, I said, “25,000 a month?” She goes, “You’re competing against Goldman Sachs. Why don’t you say 50?”

Jeff Scheinrock:

I called Vance Coffman. Literally, as soon as I said 50,000 a month, he says, “You’re hired. Can you start tomorrow?”

AdaPia d’Errico:

Oh my goodness.

Jeff Scheinrock:

When I hung up, Marian goes, “I should have said 100.” If you watch the Discovery Channel, the program was the X33. That’s the predecessor vehicle. VentureStar actually never happened because the technology was too advanced, but because of that, I got hired by NASA to be a special advisor, and I helped put together the RFP, that SpaceX one. Talk about networking and being in the right place, right?

AdaPia d’Errico:

Oh my gosh.

Jeff Scheinrock:

During all of this, Al Osborne’s following my career. Al Osborne from UCLA.

AdaPia d’Errico:

Yup.

Jeff Scheinrock:

He calls me one day when, again, luck and timing, I’m… I’m leaving out a lot, but I fell into being asked to be a general partner and the chief investment officer at a fund to funds. I didn’t even know what a fund to funds was. This young lady, Erica Bushner, asked me, and I said yes. When I joined her, we had 30 million under management. Within six months, we had a billion too. We picked up the New York State common retirement fund, state of Pennsylvania, Northwest Mutual Life, a lot of yada, yada, yada big companies.

Jeff Scheinrock:

I learned the venture business by doing due diligence as the chief investment officer on close to 100 funds, and we invested a little over a billion dollars in 67 funds. I sat on 32 advisory boards. I learned the venture business in a unique way from the venture side out. Al’s following my career. Our CFO happened to be an Anderson grad. His name’s Brian Newton. He re-introduced me to Al. Al said, “Would you be a faculty advisor for the executive MBA program? I need somebody with international experience. What you did at Packard Bell, would you do this?”

Jeff Scheinrock:

I said, “I’ll do it under one condition, that I will… I want to teach.” He goes, “Jeff, Jeff, you have three strikes against you.” I go, “What are those?” “You went to USC?”

AdaPia d’Errico:

Of course.

Jeff Scheinrock:

“You don’t have a master’s, and you don’t publish, and it could take 10 years.” I said, “Fine. I can wait.” I’m in my 40s at this time. Fast forward, I do the faculty advisor role for two years, and I get a call on a Thursday afternoon from Al Osborne. He says, “You want to teach?” I go, “Yeah.” He says, “I have a class for you. It’s business plan development.” I said, “Okay.” I said, “When does it start?” He goes, “Monday.” I go, “Whoa, whoa, whoa, how am I supposed to prepare?”

Jeff Scheinrock:

He goes, “You’re the entrepreneur. Figure it out,” and he hung up. I called the professor whose class I took. His name was Bob Foster. He gave me all of his slides. I used them with his name on it and everything, and then adopted the class for me and the rest has been history. I’ve been at UCLA since 2006, one of my part time. Then in 2010, I’m leaving some stuff out. I joined another company called Originate, which is a really cool company, and stayed there for 10 years.

Jeff Scheinrock:

I just left. I resigned from the board April 30th of this year, and left as the president and CFO in December. I’m focused fully on UCLA now, but this UCLA journey is unusual. I did well teaching these classes. Then they asked me about five years ago when I was part time there to take over one of the master thesis programs called the business creation option. This is where the students came up with an idea and wanted to start their own business. When I took it over, we had four teams of five students.

Jeff Scheinrock:

We changed it. Again, another piece of luck and timing I left out, while I was at UCLA, I wrote a book with one of my students. It’s called the Agile Start-Up. I did publish, but it caused a lot of uproar, because if you look at the book, and you can go on Amazon and look at it, it’s 162 lessons of 200 words or less of everything I learned in business. Each page is a cartoon caricature, and it’s in full color. I had a really… They go, “This isn’t an academic book. This is like a book for dummies,” but it’s been very successful.

AdaPia d’Errico:

Sure.

Jeff Scheinrock:

When I went to publish it, I couldn’t get a publisher. Remember I said I was in the fund to funds? One of the companies we invested in was a company called Foundry Ventures in Boulder, Colorado, founded by Brad Feld. Brad Feld is also the co-founder of Techstars. Brad was published by Wiley Corporation, and he was very successful. I called Brad, and I said, “Do you remember when we were the first institutional investor in Foundry one?” He goes, “Jeff, I’ll never forget it, because when you came in, then everybody else came in. Nobody wanted to be first.”

Jeff Scheinrock:

He goes, “What can I do for you?” I said, “Well, funny you asked. Can you go to Wiley, and ask them if they’ll publish my book?” Within five days, I had a contract. Talk about networking.

AdaPia d’Errico:

Yes.

Jeff Scheinrock:

Also, because of that, Brad and another person I know, Michael Abrams, who I’ve invested with over the years… Michael was the Senior VP in charge of innovation at Walt Disney Corporation. They wanted to start an accelerator. Michael asked me. Also, David Min was running it also, and he was one of my prior students from Anderson. They asked me should they hook up with Y Combinator or Techstars. I told them what I knew about both. Make a long story, they hooked up with Techstars, and it became the Walt Disney Techstar Accelerator.

Jeff Scheinrock:

They asked me to be a lead mentor. I did that. With the permission of Techstars and Disney, I took what I learned there, and put it into the UCLA VCO program. This is where networking and everything goes around. It’s been very successful. VCO, this year, we’ll have 60 teams over 300 students, 51% raise money and launch. We’ve had a couple of big wins where they’ve raised over 100 million, but most of them are lifestyle businesses where they raise 500,000 to two or three million. It’s just been really great and a lot of fun.

Jeff Scheinrock:

I love what I do. I mean, I’m making a difference. I mean, it’s just been phenomenal. Based on the success there, they then asked me to take over the applied management research master thesis program for the full-time students. Then on July 10th of this year, they asked me to take over the Global Access Program for the fully employed MBAs and the strategic management research program for the executive MBAs, and something called NUS Practicum with the National University of Singapore and UCLA.

Jeff Scheinrock:

Now, I have a really big job. It’s one of the reasons I stepped away from Originate. I’m running the largest program at UCLA Anderson. This little boy from… Well, I’m a big boy. I’m over six feet tall, but I’m running the master… They hate when I say this. I’m running the master thesis program, and I don’t have a master’s, but I have a lot of practical experience. That’s my journey. I’m very fortunate. I’ve left a lot of stuff out, but it’s just luck and timing, working hard.

Jeff Scheinrock:

Look, I’m not the smartest guy in the world, but I do work hard. One of my students was Fark. Fark is your partner.

AdaPia d’Errico:

My partner.

Jeff Scheinrock:

He asked me… I have to be careful. I really don’t invest. I’ve only invested in three of all these years, only three UCLA companies. I put a small amount of money into one of your investments that did well, by the way. Thank you very much.

AdaPia d’Errico:

Thank you.

Jeff Scheinrock:

That’s a plug for them, everybody. I don’t invest very often because I… Can you imagine, I have 60 teams this year? They’re all going to ask me to invest. I probably won’t do a lot more venture investing at this point. I’m being a conservative CPA. I’m probably very aggressive when it comes to investing. I’ve only invested in one of your deals. I may or may not invest in others. Because of my age, I don’t know what new investments I want to make, but I know you want to get into investment strategy and stuff at some point.

Jeff Scheinrock:

That’s my story. I’m very happy to be at UCLA Anderson. I hope to make a difference there. It’s my way of giving back by opening my network up to the students, which I’ve done. No one helped me when I started when I got married at a young age. Actually, my parents said, “You’re on your own. We don’t think you should get married.” Back then, they had assigned for me, “You had to be 21,” and so I think I pushed myself partially because they said I wouldn’t succeed.

Jeff Scheinrock:

Now, I did get a divorce. I left that out. The good comes out of that. I can walk. I’m fully recovered.

AdaPia d’Errico:

That’s an important part of the story.

Jeff Scheinrock:

I left that out. I recovered. I have a very bad back, and I’ve had several surgeries, but this is a mellow me, believe it or not. One of the lessons, and I tell the students, is, “Look, I did not have a balanced life. I’m actually closer to my children.” In fact, yesterday was my daughter’s 49th birthday, if you can believe that. I have four… excuse me, five grandchildren from 16 months up to 16 years.

Jeff Scheinrock:

I’m closer to the grandchildren than I was to my own children, and that’s a bad thing. That’s a sad thing, because I was working at Packard Bell as they were growing up. By the way, I left something else. I also had eight million frequent flyer miles, because I was running every two weeks around the world to Japan with NEC saying I need more money, then to France to graupel, and then all the suppliers.

Jeff Scheinrock:

I was almost George Clooney. If I would hit 10 million, I would have got a black card from American Airlines, but I have a platinum for life.

AdaPia d’Errico:

Wow. I was going to say does that get you your own private jet if you have that many?

Jeff Scheinrock:

It gives you… If you hit 10 million miles on an airline, you get a black card, which means you could first class everywhere for coach. With a platinum, you get upgrades if there’s a first class seat, so it’s come in handy. By the way, in the divorce, my ex-wife got four million miles, half of it.

AdaPia d’Errico:

She wanted miles? Sorry.

Jeff Scheinrock:

She wanted half… Look, we had nothing when we got started, so we just split everything 50/50 down the middle, but good comes out of bad.

AdaPia d’Errico:

Oh my goodness. Always.

Jeff Scheinrock:

I’ve been with Marlene, my fiance of 20 years.

AdaPia d’Errico:

Wow.

Jeff Scheinrock:

She won’t marry me because I’m a nut, but we’re… Again, I’m very fortunate and been around a while. This whole thing with COVID is very disturbing, the whole thing with the protests. Protests are fine. The violence is extremely disturbing. I won’t get into politics even though I did touch religion. I think this is a really critical time, and it’s hard for me to believe. I don’t know if you even… Today, the market’s way up again. I don’t understand this with unemployment the way it is and everything, but I like it because I’m heavily invested.

Jeff Scheinrock:

I just think in bad times, in times of crisis, there’s good times. A lot of people make a lot of money. Another plug for you and others in real estate, real estate’s a safe investment. Over the years, if you’re buying good properties, you should do well. Now, with COVID, with rents maybe not being paid and all that, it’s a challenge, I’m sure, for a lot of properties. People need to be real careful, but I’ve always invested for the long term. If you’re younger, and you have a 10, 20, 30-year horizon, I think having a balanced portfolio, which includes real estate, maybe some venture…

Jeff Scheinrock:

By the way, when I did the fund to funds, interesting, the largest pensions plans in the world, people who are really sophisticated, they allocate 10% of their money into what’s called alternative investments.

AdaPia d’Errico:

Yes.

Jeff Scheinrock:

That’s venture private equity hedge funds. They also allocate into real estate, and then they allocate it into bonds and stocks and a variety of buckets. That’s what an individual investor should do. Be diversified. And then, maybe because I’m diversified, I may not do as well if things really go well, but I’m also protected in a downside. That’s my story. I probably took too long. I don’t even look at the time, but-

AdaPia d’Errico:

No.

Jeff Scheinrock:

… that’s what it is, so there, top that.

AdaPia d’Errico:

I don’t think I can top that. I didn’t even want to interrupt you, because, I mean, the reason we wanted to have you on was to tell this amazing story. I think behind it all are just an immense set of values that you have. One of the things that you were actually touching on right now with the investment and stuff, but and also COVID and throughout your story is uncertainty, which right now we’re in probably the most uncertain times, but there’s the short-term view, the medium-term view and then the long-term view and then the view of self and what one has within themselves to overcome or live through, let’s say, uncertainty because…

AdaPia d’Errico:

You mentioned a lot of times luck and timing, but you probably left out all the times that were except for a couple of really big dark times, but there’s a level of resilience in you as well. What are some of your values, and what have you learned through these times?

Jeff Scheinrock:

Well, one of the things I left out, which is not a good story, is when I had my accounting firm and my largest client, which was a car automotive dealership, didn’t pay their bills, my invoices. I had all these people at work that I was responsible for, and I couldn’t make payroll. I couldn’t get a line of credit because I was a new young CPA. I learned a very valuable lesson there, when if you wait until you need money to go ask a bank for money, you’ll never get it.

Jeff Scheinrock:

I missed three payrolls, and nobody quit. Nobody sued me. Then when I did finally get paid, I gave everybody a bonus. I had a very good year, so I went and got a bank line of credit. To this day, I still have that line of credit with Union Bank of California from the 70s, by the way, or 80s. I’ve never used… I pay an unused line fee every year. I call it preventative banking, and God forbid of an emergency, I can always call upon it. My values, I think, are always tell the truth.

Jeff Scheinrock:

I also learned a valuable lesson when bad things happen, and you borrowed money or you have investors, you go to them and tell them right away. People hate surprises. If you tell the truth early, you can usually work through them, and that’s one of the things that made me successful at Packard Bell because we couldn’t pay people on time. I went to them, Intel, Microsoft, Seagate, Western Digital, big companies, Conner Peripherals, Panasonic, NEC, all these companies. Because I was always up front, and even though we paid late, we always paid.

Jeff Scheinrock:

I think that’s why they helped us with the earthquake and things, because we were always very honorable. I also learned another valuable lesson at Packard Bell that I left out. The CEO is a famous guy here in LA. His name is Beny Alagem. He owns the Beverly Hilton and the Waldorf at Wilshire and in Santa Monica Boulevards, very valuable. Beny taught me a lot. One of the things he taught me, he treated everybody with respect, so when we were dealing with the largest retailers, whether it be Best Buy or Costco or Walmart or any of the big, big retailers, most of them gone, CompUSA, and people like that are gone.

Jeff Scheinrock:

He would treat the buyers with a lot of respect, and so when we had hard times, they stuck with us even though our competitors tried to kill us saying, “Drop Packard Bell. Go with us.” I learned always to treat people with respect, treat people the way you want to be treated. Don’t lie. Now, Marlene will tell you, my significant other, that I may be embellished sometimes. I can’t help myself, but I don’t remember what I say, so I don’t lie.

Jeff Scheinrock:

Even in bad times, I mean, some of the closest friends I have are people I fired, because… They go, “I don’t know how you did that. You fired me, but I feel good.” They went on to bigger and better things. The guy that wrote the book, Matt Sand, he is raising a Series B now. He has a company called 3DEO. He’s raising a $30 million series B. I introduced him to a lot of the VCs that invested.

Jeff Scheinrock:

Now, they didn’t do it because I introduced them, bur it’s, again, if you have a network and you take good referrals to people, this is something very important too. Don’t refer something that you don’t believe in, because that’ll be the last referral you ever give if it’s not at the top quality. I kept my network alive. I learned to… Even Larry Sonsini, to this day, we’re very close friends, and it’s been years. He’s a reference for me. My reference, Arvind Sodhani, who was treasurer of Intel, who went on to be president of Intel Capital is a reference for me.

Jeff Scheinrock:

I mean, these are… If you throw a name out, assume someone’s going to call. If they don’t speak well of you, you’re screwed. When you’re negotiating, don’t bluff if you don’t have a backup. I learned all this stuff over the years. Be true to yourself. I mean, I don’t need to work. I’m not rich by any means, but I’m comfortable. I work because… I’m in a position now where I’m doing what I love, and that’s a great position to be in. If I was younger, my goal would be always keep some cash on the side in case of an emergency, and be diversified.

Jeff Scheinrock:

Try to get to a place where you can work with people you want to work with, not with people you have to work with, which I did when I left that one job in between that I actually hated and I quit. It was very distressful at the time. To work at a place that you don’t enjoy, and you work with people you don’t respect is really bad. If you’re fortunate enough to plan, I would highly recommend that you do that.

Jeff Scheinrock:

Don’t leverage yourself too much too early, because things happen. Who knew we were going to have a pandemic? Does that answer… I don’t know if I even… I ramble. It’s a senior moment.

AdaPia d’Errico:

No, you did good.

Daniel Cocca:

Jeff, I feel like, for me, as I hear you talk about your story, and you talk a lot about good luck, good timing, what I’m actually hearing is more putting yourself in the right position, building the right relationships, being able to extract value from your network. In this current situation we’re in in the world, what’s your advice? Whether you’re younger or older, further in your career, how do you put yourself in the right position to find all these opportunities?

Jeff Scheinrock:

It’s work. Don’t be lazy. Over the years, going all the way back to my own accounting firm and then Arthur Young and coming forward, I, to this day, still reach out to say the top 50 of my contacts on a quarterly basis just to say hi. Whether it’s email or a voicemail, just to say, “Hey, I’m thinking of you,” you never know when you need a favor. You never know… Never ask… This is really key. Never ask for something for nothing. Always offer something, because people don’t like people who try to take advantage of them.

Jeff Scheinrock:

There are takers, and there are givers. I would try to… If you can afford to do this and stuff, be a giver. Then when you do need a favor, you’ll be shocked at how many people will support you. It’s work to keep your network alive. Believe it or not, I mean, everything’s online now at UCLA. This is a really unusual time. We’re not having any classes on campus this fall, which starts very shortly. Zero. Everything’s online. Here is the amazing thing.

Jeff Scheinrock:

The students are upset, because part of the experience is being together on campus and all this, but because of these programs I run at UCLA, people need to do a lot of research, secondary and primary research. We have found that it is easier now, even though they’re not traveling and going up. People are stuck at home. People are bored. People will take the time to talk to you. Reach out. Ask how people are doing. Then ask if you need a favor, or ask what you can do for them.

Jeff Scheinrock:

People will take the time to talk to you. Be genuine. I mean, don’t do this because I’m saying to do it. Do it because you want to do it. That’s what I’m giving, I think, the students. I mean, I’m trying to… I actually tell them about the divorce and having a quality of life, and to try to have a balanced life. I didn’t, and it costs me. I mean, unfortunately, everything works out. As I said, good comes from bad. I’m very, very fortunate.

Jeff Scheinrock:

My kids, I can’t replace that time when I didn’t go to the baseball games for my son or the classes for my daughter. I tried to go to my grandkids’ stuff, well, not in COVID but I actually flew to… My son and daughter-in-law are in Texas. I have two granddaughters there. I actually flew to their ballet recital and surprised them. I never did that for my kids. I mean, it was funny. In the middle of the recital, my youngest granddaughter stopped and said, “That’s my grandpa. He came from California.”

AdaPia d’Errico:

While she was on stage?

Jeff Scheinrock:

Yeah.

AdaPia d’Errico:

That’s so cute.

Jeff Scheinrock:

What’s that worth? I mean, so things like that. I don’t know if that answers your question, but it’s work to keep a network. It’s work… Things aren’t free.

Daniel Cocca:

I think as we talk about building wealth, and we think about building wealth, there are these questions around, “How do you actually do it? Do you show up to a job, where you’re a W2 employee, and just go to work every day, and hope that things work out, or do you take active steps to position yourself in a way that gives you these opportunities to take risks?” I think I read on your bio at UCLA, you talked a little bit about…

Daniel Cocca:

I’m summarizing here, but I wanted to work hard. I wanted to earn more, and so I took a risk on myself. I think that’s a question that a lot of the people in our network have is like, “Am I willing to do that?” It’s a really hard question to ask because everyone wants to think they’re willing to take a risk on yourself, but when you weigh all the other things that come with that, sometimes it’s challenging. You have family. You have other obligations.

Daniel Cocca:

You’re not always willing to do it, and so I think your story is a great one for people who just want to think a little bit more about their own journey and the different opportunities that could be presented to them.

Jeff Scheinrock:

Well, you hit on most of the things, believe it or not, specifically with the fully employed and the executive MBAs because they are a little older. They have families. They have careers. One of the classes I teach is venture initiation and entrepreneurship. Always in the first class, someone will say, “When do I know it’s time to take the leap?” I mean, you hit on some of the things. I said, “Let me just ask you these questions. Are you married? Yes or no? Do you have children? Yes or no? Do you have a mortgage? Yes or no?”

Jeff Scheinrock:

Then the hardest question of all, “Can you afford to live without getting a salary for 18 months?” Depending how you answer that question is the way that I would answer, “Do you take the risk?” Try to do it when you’re young, if you can. The younger you are, if you’re able to answer those questions and be able to live now, why do I say 18 months? A lot of investors, if you’re going to start a business, want to see you put sweat equity, and don’t want their money to necessarily go out into your pocket.

Jeff Scheinrock:

They wanted to stay in the company. Now, some investors will actually sit with you and say, “Okay, what do you need to live?” Because if you don’t have the wherewithal, then you’re not going to be paying attention to the business. You’re going to be out trying to earn money somewhere else and not running the business. By the way, don’t do a business part time and take other people’s money. You can do that if it’s your family maybe and your own money.

Jeff Scheinrock:

If you’re going to start a business, it’s really hard. It has to be a full-time focused effort. I don’t know if that answers your question, but I would say answer those questions and others, and depending on how you answer them, it’s time to take that leap or not.

AdaPia d’Errico:

It’s really such great advice when you were saying this about the the being young part. I think in media, entrepreneurship is very romanced in media, and we focus on the big, big successes. There’s not a lot of focus on the work and the grit and the resilience that goes into it, and also this idea of energy and youth, but it’s not really about that, like you said. It’s actually much more practical consideration that… I know when I was younger, and I didn’t have anything to lose, so to speak, or I didn’t have a husband, I didn’t have a mortgage, I wouldn’t even necessarily think about it in the same way that I might be thinking about it now.

AdaPia d’Errico:

I think it’s great advice because it brings it to a very practical level. That tempers these dreams that are very easy to latch on to but very hard to accomplish, especially if you’re worried about your mortgage or your kids. I mean, I had that experience too where I can’t be creative. I can’t focus, because in the back of my mind, I don’t feel stable. Unless somebody is able to live in that state emotionally and psychologically, it’s very challenging.

Jeff Scheinrock:

Very challenging. Two other things, I think, I should point out. One is if at all possible, make sure you have health insurance. Figure out a way, I mean, with what the government has now and all these things. I’m fortunate because I’m at UCLA, and we have a really good health plan. Thank you for… If you’re in California, thank you for your tax dollars, because we’re in a public university. Make sure you have health insurance, especially if you have a family, because you don’t know, God forbid, when something’s going to happen.

Jeff Scheinrock:

The other thing is if you’re going to be asked to sit on a board of directors, be very careful. Make sure they have DNO directors and officers liability insurance. Rather than sit on a board, even though it sounds really good, go on a board of advisors. A board of directors can be sued. A board of advisors won’t, and so just some things if you’re… I mean, I would think a lot of people that might be your clients or potential clients are successful and had successes and might be asked.

Jeff Scheinrock:

I’ve been sued a couple times in my life. I don’t sit on a public board anymore. I got sued twice. Even though we had DNO insurance, I hired my own attorneys because the most important thing you have… This is probably the biggest lesson. Your reputation and respect is more… People go, “Do you want to be friends with your employees?” I don’t need to be friends with the people that I work with. What’s more important is that we have mutual respect. I defended against these baseless lawsuits even though I came out of pocket, because the attorneys on the DNO insurance represent the company.

Jeff Scheinrock:

Even though I was on the board, their first interest is the company. The cases got dismissed, and they didn’t have any merit, but people will sue people for… Especially if you have some assets, people will consider you for no reason, and hope that you settle. Just be very careful. That’s probably preaching a little bit, but I think it’s important.

AdaPia d’Errico:

It’s great advice. It’s great advice. I know a lot of people that… Like you said, it sounds good to be on a board of advisors, but that’s actually real responsibility that comes not at a small cost.

Jeff Scheinrock:

Board of advisors are safer than board of directors, okay?

AdaPia d’Errico:

Yes. One final question, and what does wealth mean to you?

Jeff Scheinrock:

That’s a good question. I mean, they’re all good questions. Again, I’ve done fine. I’ve saved… Wealth means to me… I think one of the things that I said to you that give me the ability to do and work with people that I enjoy versus having to work with anybody just to live. Having enough to where I can live comfortably, I’ve been, again, very fortunate. I’ve set up trusts and things, and so my kids and grandkids have actually are taken care of. I was able to do that. But again, I’m not so young.

Jeff Scheinrock:

I mean, I can’t believe how old I’m going to be, but having enough assets and liquid assets to where I’ll have less stress and be able to do things. I mean, I’m not extravagant. I worked hard to have zero debt other than a car lease, which I don’t know why I have because I can’t drive anywhere, but being fortunate to not have a lot of debt and be able to live comfortably. Believe it or not, up until COVID, Marlene and I, we work hard, and we play hard.

Jeff Scheinrock:

She also has a full-time job and is a very successful attorney. We would go on four to six cruises a year. Guess what, no cruising now. I don’t even know if we want to go back. We have to figure out you where we’re going to travel and do things. It’s a little scary right now, but I would also highly suggest, I don’t do it, but do what I say not what I do. Try to take… Every day, clear your head. Take a walk. Just do something. I’m busy. I feel because of UCLA and stuff, there’s no shortage of things to do, but this is getting to me, too.

Jeff Scheinrock:

I mean, this lockdown and stuff, I’m sure it’s affecting everybody. I can’t even imagine if you have young children and you’re homeschooling them. I mean, I’ve been on Zoom. I’m sure you have been. If you’re talking to somebody, all of a sudden, a child comes flying through jumping on their lap or whatever. I mean, I can’t even imagine what it’s like. Try to make sure you take enough breaks and things.

AdaPia d’Errico:

That’s great. That’s great advice. That’s great advice. Well, Jeff, thank you so much for taking some time to be on our podcast and tell your story, and just really provide so much wisdom. It’s meaningful, because I think just to summarize, one of the things that strikes me about you is this wanting to give back from the wealth of your experience, and you’re so generous in everything that you do. There’s so much generosity woven through your story, and it really comes through, so really, really appreciate you, very grateful for your time.

Jeff Scheinrock:

Well, that’s very nice of you to say. I think one of the reasons I do it is no one really helped me when I started. It’s hard if you don’t have a mentor, somebody you can lean on. I mean, that guy Bob Goldman didn’t take me on, and we didn’t… If I hadn’t met him, it would be a totally different… I mean, I’m sure I would have done fine. He just accelerated it, I mean, so fast. I’m indebted to him forever. I mean, why me? Why me? Maybe because he beat me at tennis all the time.

AdaPia d’Errico:

If that were the reason, that would actually be really funny, but I’m sure it’s because-

Jeff Scheinrock:

No, I don’t know.

AdaPia d’Errico:

… he saw something in you that clearly a lot of other people have seen. I think it comes down to that working hard and that the trust and the generosity and the genuineness that really you exude.

Jeff Scheinrock:

Well, good luck with everything. Stay safe. Stay healthy. Stay sane. If I can help you in any way, let me know.

AdaPia d’Errico:

We appreciate that so much. Thank you.

Jeff Scheinrock:

You’re welcome.

Daniel Cocca:

Thanks, Jeff.

Jeff Scheinrock:

Thank you very much.

AdaPia d’Errico:

Thanks for tuning in to Real Wealth Real Health. We hope that you’ve enjoyed today’s episode and found it both informative and insightful. We welcome all your questions and your feedback about today’s episode, and especially, we welcome your questions about specific topics that you would like us to cover. Shoot us an email at [email protected] If you have a moment, we really appreciate ratings and reviews as it helps us grow our online community and our interactions with you.

AdaPia d’Errico:

We’ll also be linking to a number of relevant articles on topics that we might have touched on during our conversations. Some of them are broad. Some of them are technical, but we’re always aiming to provide information that helps you better understand the mechanics of building this healthy financial foundation, especially if you’re looking to do this with real estate.