This is the story of my father, Burt Walker, a poor kid from Brooklyn who made millions taking the company he founded public — and then lost it all when he left my mother for a younger woman.  I am sharing this personal story to help entrepreneurs.

Background

My father was raised in Brownsville, a poor section of Brooklyn, New York.  He had an absentee father, a crazy mother and a wild younger brother.  He worked from the time he was 9 or 10 years old, including selling ice-cream sandwiches at the Coney Island beach.

My father’s father, Arnold Walker, was the son of immigrants who arrived in this country with nothing but the shirts on their backs.  Grandpa Arnold was a tough, Golden Gloves boxer, who worked at the local railroad and then opened a hardware store with his brother.

Grandpa Arnold

My father’s mother, Goldie, was a High School beauty and then lost her mind somewhat due to medication administered to her during my father’s birth.  Grandma Goldie stayed at home and raised the two boys, but had few tools to cope.  For example, she rarely cleaned the apartment and kept three types of milk in the refrigerator: fresh for my father’s brother; a few days’ old for my father; and sour for my father’s father (who was rarely around in any event).

My father was a good High School student and was accepted for admission at the Brooklyn Polytechnic University, where he studied electrical engineering and paid his way by going ROTC (i.e., by joining the army).  Upon graduation, he married my mother and was stationed at Fort Bragg, North Carolina for two years, where I was born.

Mom and Dad

Scott (the author)

Andy (younger brother) and Scott

Lesson #1: Work Hard and Be Patient.

My father was intensely driven to prove himself.  Deep down, he always felt like “the poor kid with the crazy mother” (as my mother’s mother referred to him when she initially forbade my mother from marrying him).  But his insecurity and drive created in him a powerful work ethic and singular focus to succeed.  Indeed, this is why many CEO’s and other business leaders prefer hiring hungry, working-class guys over the wealthy Ivy-leaguers.

In addition to his strong work ethic, my father had an extraordinary ability to be patient – and this is lesson #1 for entrepreneurs: work hard and be patient.

Step Grandpa Lee, Grandma Goldie, Mom & Dad (MBA Graduation)

My father spent the first 12+ years of his career working his tail off at several different companies.  He even went back to school at night for four years and obtained an MBA-equivalent in electrical engineering.  I remember as a little kid watching him come home from his “day job,” have a quick dinner, and then get back into his car to go to “night school.”  In fact, looking back, it seemed like he had a master plan that he knew from the start was going take many years to execute.

Unfortunately, many entrepreneurs today are looking for the quick homerun — the lottery ticket.  Other than in very rare circumstances, however, it just doesn’t work that way.  You have to grind it out for years to succeed: seven years, ten years – maybe even longer.  Day in and day out – pushing that big rock up the hill, one step at a time.

As David Heinemeier Hansson (the creator of Ruby on Rails and a partner at 37signals) notes in a recent speech to Stanford students: “Nobody is an overnight success.  Most overnight successes you see have been working at it for ten years.  And that’s exactly how it was for us.” [starting at the 0:12 mark]

Gary Vaynerchuk (the founder of Wine Library TV and the so-called “Social Media Sommelier”) made a similar point in a speech at the Web 2.0 Expo in New York: “I used to work in a liquor store from seven in the morning until ten at night for seven straight years, and the only days-off I took were to watch the New York Jets.” [starting at the 3:20 mark]

Mark Cuban (billionaire entrepreneur and owner of the Dallas Mavericks) has a similar story, as he discusses in this video: “I went seven years – literally seven years – without a single vacation.  I didn’t take a day off – I didn’t go anywhere – I didn’t do squat.”  [starting @ the 4:07 mark]

Work hard and be patient.

Lesson #2: Build Strong Relationships with Key People in Your Industry.

When I was about 14 years old, my father quit Comtech Telecommunications Corp., a small public company in Long Island where he was the Director of Marketing, and launched his own consulting firm.  This was the beginning of something big – very big.  While at Comtech, my father had developed strong relationships with a few key senior executives at Nissho Iwai Corporation, a huge Japanese trading company.  They now wanted to retain his services to help them sell satellite earth stations and other telecommunications equipment to US-based companies.

This relationship with Nissho Iwai would become the foundation of Walker Telecommunications Corporation — and it took years for my father to nuture and grow.  I remember him reading book after book about the Japanese culture and customs, and I remember his many trips to Japan — when my mother, brother and I wouldn’t see him for weeks at a time.  I still have a few of his postcards in my childhood scrapbook.

And this is lesson #2 for entrepreneurs: build strong relationships with key people in your industry.

Many entrepreneurs don’t understand the importance of building strong relationships — or even understand what a strong relationship is.  Building a strong relationship requires time and effort and usually requires providing the other party with some kind of value.  Yes, give and you shall receive.

Strong relationships aren’t built overnight.  Nor are they built by merely following someone on Twitter or friending someone on Facebook.  Perhaps that’s a start, but that’s all it is.  The same way passing-out business cards at an event is just a start.

Indeed, building a strong relationship takes time because the other party must learn to trust and respect you.  That’s why college or business school is often a good place to build relationships.  You are spending years with your fellow classmates; you are developing friendships and trust; and you are working on projects/schoolwork together.

A job is also a great place to build strong relationships – with your boss, your co-workers and/or your customers.  How?  By working hard, by producing, by acting with integrity and by being likeable.

As Tina Seelig, Executive Director for the Stanford Technology Ventures Program, explains in this video clip:  “It is a very small world….You are going to bump into the same people again and again and again….You need to make sure that the relationships you build now and as you move forward are ones that you’re proud of . . . and are not going to come back and bite you in the behind.”

Gagan Biyani, the Co-Founder and President of Udemy, discusses in this video interview with Andrew Warner of Mixergy.com how his initial fundraising failed because did not have any strong relationships.

[N]one of these people knew us. . . . We’d show up at the pitch meeting, and we were some random guy who came in through an introduction.  It was really hard to convince them that we were worth their time.

So what I did for the next six months after that, after we had failed and closed down the fundraising process, . . . I spent the entire time meeting as many people as possible.  So I’d go to tons of Silicon Valley events.  At night when I was dead tired from working all day, I would get myself up and get in the car and drive over to San Francisco or drive over to Palo Alto and attend an event and give out my business card and get business cards.  And that was super important because I got to know a lot of these investors.  Like Dave McClure definitely saw me 15 times before he invested in my company.  He met me at conferences, he met me at dinners.  I attended his events.  I was friends with all of his friends. . . . So when I go to raise money, he’s like, “Oh, I kind of know this guy.” [starting at the 35:39 mark]

Again, build strong relationships with key people in your industry.

Lesson #3: Don’t Mix Business with Pleasure.

My father was highly successful in his consulting position and was instrumental in a number of significant sales of earth stations and satellite equipment.  Accordingly, Nissho Iwai developed a lot of confidence in my father’s business acumen and offered him the exclusive right to sell in the United States high-tech business telephones manufactured by a top Japanese company.  As a result, Walker Telecommunications Corporation was born.  This exclusive distribution agreement was indeed so valuable that my father was able to sell the story to Wall Street and go public, raising millions of dollars to scale his new company.

From there, the company’s growth was extraordinary – with expansion into other markets, including car phones, cell phones, fiber optic networks and other telecommunications equipment, and offices in New York, San Francisco and Toronto.  In fact, by the time I was a freshman in college, Inc. magazine named Walker Telecommunications Corporation one of the nation’s fastest-growing companies.

But then it all came crashing down about five years later.  Why?  Probably a few different reasons, but the one that stands-out above all others is my father’s relationship with the wife of the company’s West coast distributor, whom he eventually married (and then divorced shortly thereafter).  She was also a headhunter, and my father started utilizing her firm to hire key executives at the company.

Moreover, so-called “business trips” became secret rendezvous with his paramour.   As my Uncle Herb euphemistically put it: “Your father’s priorities have changed.”  In short, this relationship was the beginning of the end for Walker Telecommunications Corporation – and the third and final lesson for entrepreneurs: Don’t mix business with pleasure.

Now, no matter how many times entrepreneurs hear this basic advice, there will always be a handful who will ignore it.  “What’s the big deal?”  “Who’s going to find out?”  “Why should anyone care?”

Jodie Fisher

Folks: it doesn’t work!  Do not mix business with pleasure!  To put it more bluntly: Don’t sleep with your team!  You have to separate your company and running a business with your personal life.  Just ask Mark Hurd, the former CEO of Hewlett-Packard, who was terminated as a result of his relationship with Jodie Fisher, an actress and reality-show contestant hired as a contractor for H-P.

As the Wall Street Journal aptly points out in their post, “When Workplace Flirtations Go Bad”:

[T]he [Hurd] fracas serves as a reminder that office relationships can be fraught with landmines.  Even strong flirtations among co-workers that don’t culminate into full-blown affairs can have real and serious consequences — and can change the mood and equilibrium of the office.  For one, it can be tough for other co-workers to concentrate when two colleagues are engaging in flirty banter or making googly eyes at each other.  And if feelings change or aren’t fully reciprocated within the couple, then office tensions can run high.

David Letterman also learned the hard way about office affairs and discussed this issue and the related alleged extortion on The Late Show about a year ago.

Conclusion

The foregoing lessons are simple: (i) work hard and be patient; (ii) build relationships with key people; and (iii) don’t mix business with pleasure.  Like anything else, however, it’s the execution which is so difficult. (Note: the foregoing post was originally published on “A Smart Bear,” a great site for entrepreneurs.  This is an updated version, with new family photos.)

My blog post last week addressed angel financing and included five legal tips for entrepreneurs to help them through the angel financing process.  I had intended to post a part 2 (adding five more tips), but I thought I would try something different to break things up a little.  Accordingly, below is a brief video of three lessons that I learned in the big-firm trenches as a young corporate associate in New York City.  

Oddly enough, I actually look back with fondness on those eight years (including all the all-nighters and weekends working on deals) because of the solid training that I received – which I can finally appreciate practicing law out here in California.  Here are the three lessons: (1) do your due diligence; (2) watch-out using forms from other deals or off the web; and (3) create a competitive environment.  This is part one of an ongoing series.  (Note: videos are tricky and can put some people off; thus, I have also included below the substance of the video in written format.) 

www.youtube.com/watch?v=hqAmVCkSmhA

Lesson #1 – The Importance of Due Diligence

Let me set the scene very quickly:  I’m a second-year associate, and my firm is representing Sony in connection with its acquisition of CBS Records (a $2 billion deal).   I’m spending 15+ hours a day at Blackrock, the CBS Building in New York City, reviewing corporate documents as part of a legal due-diligence team of six other corporate associates.  We’re all young and inexperienced — and we really don’t know what we’re looking for.  But then we found so-called “change of control” provisions in the contracts for Michael Jackson, Bruce Springsteen and some other major artists, which provided that if there were a change of control – e.g., if Sony bought CBS Records – the contracts would automatically terminate unless the artists consented in writing.  Obviously, these provisions were very important to Sony – and the value of CBS Records would be much less if those artists did not consent.  So there was my first lesson: the importance of legal due diligence. 

If you’re buying a company or investing in a company (or if you’re selling a company and getting stock as part of the purchase price), you have to get the lawyers and business guys (and gals) to review the material contracts.  Entrepreneurs must understand this – and they also must understand that if they’re trying to raise capital, the prospective investors (including angels and VC’s) are going to conduct legal due diligence, and thus all their papers need to be in order; and contracts (such as IP assignments and employment arrangements) need to be buttoned down.

Lesson #2 – Watch Out When You’re Using Forms from Other Deals

Here it is a couple of months after the Sony-CBS Records deal closed, and I get tapped for another major acquisition; and the senior associate on the deal instructs me to take the first crack at the acquisition agreement.  Being a clever guy, I figured – OK, I’ll just take the agreement from the Sony-CBS deal I just worked on, and mark it up, plug in the new deal terms and change the names.  So I got a copy of the executed agreement, I mark it up, I give it my secretary and then send it to the senior associate for her review.  Little did I realize that I had included a number of pro-seller provisions that had been negotiated by Cravath, which is the prestigious law firm in New York City that represented CBS, the seller.  Boy did I get a chewing-out from the associate (luckily it wasn’t a partner).  The lesson, of course, is that you have to be very careful when you take agreements from other deals and start using them for your deal.  So when you are playing lawyer and pulling forms off of the Web, you better remember that the agreements are final, executed agreements, which have been negotiated often over many months and reflect input from both sides of the table.    

Lesson #3 – Create a Competive Environment

Now I’m a third-year associate and I have two deals on my plate: one is a divestiture – the sale of a division of a multinational corporation being auctioned by an investment bank – and the other is the sale of a private company to a competitor (with no bankers involved).  In both deals, my firm is representing the sellers, but as we worked our way through the negotiation process of each deal, we ended-up with two completely different agreements with respect to the material legal provisions.  In the auctioned deal, because the ibanker was able to play the prospective buyers off of each other and create a competitive environment, the final agreement was extremely seller friendly (including broad materiality qualifications, a huge basket and a cap on liability of 10% of the purchase price).  In the private-company transaction, there was only one prospective buyer, and he knew the seller was anxious to sell and thus was playing hardball.  Accordingly, in that deal, the deals terms ended-up being extremely buyer friendly, including a big escrow of the purchase price and a cap on the seller’s liability equal to 100% of the purchase price.  

The lesson I learned here, of course – which applies to all deals – is that you must create a competitive environment (or the perception of same) in order to have strong negotiating leverage.  (See tip #3 of my post “Doing Deals with the Big Boys: Ten Tips for Entrepreneurs.”)

Yesterday evening, Michael Arrington of TechCrunch posted an interesting piece entitled “TweetPhoto CEO Says Too Much In Interview, Gets Fired. And That’s Just The Beginning…” (which has been subsequently re-posted throughout the blogosphere).  Unfortunately, Arrington has gotten his facts all wrong — at least according to Dan Caulfield, the CEO in question.

Arrington sets forth in his post that Caulfield “apparently said too much in [his podcast] interview [with Frank Peters], disclosing confidential information about partnerships [and] was fired by the company for the transgression.”  In the comments section to the post, however, Caulfield denied that there was any connection between his firing and the interview.  First, yesterday evening, he noted that: “I conducted this interview on [the] Morning of Nov 9th.  It had nothing to do with me leaving the company”; and then, this morning, he added that: “I was terminated a week prior to anyone hearing the interview.  Events not connected.”  Caulfield also retweeted the TechCrunch link to the post yesterday evening with a “Totally false!” insertion.

Arrington responded to Caulfield in the comments section this morning that: “Whatever you did or didn’t do, I think it’s pretty obvious what the company thinks” (citing a letter from the law firm Wilson Sonsini to Frank Peters demanding that he remove the podcast interview from his site).  Caulfield did not respond back to Arrington.

Needless to say, all of this made me scratch my head and wonder what the hell is going on here.  So I picked-up the phone and called Caulfield (he had given his telephone number out during the podcast), and I got the full scoop.

Caulfield’s Version of the Facts

I had a very good telephone conversation with Caulfield, who was gracious enough to take my call and answer all of my questions.  The bottom line is that Caulfield was “voted off of the island” (as he put it).  Indeed, Caulfield reiterated that his firing had nothing to do with the Frank Peters interview — he did the interview at 9am on November 9th (and no one at TweetPhoto was aware of it) and was fired at 2pm that afternoon.  The interview was subsequently posted and available to the public on November 16th (one week later).  According to Caulfield, it was just a matter of the founders “[wanting] to go forward without me.”  He explained that he was originally brought on by the founders to help them as a Board member; he then was appointed CEO.  And he emphasized that he was very disappointed (particularly in light of all the work he has done to help TweetPhoto), but does not want to do anything to hurt the company.

Caulfield seems like a stand-up guy, and if you listen to his podcast with Frank Peters, it is clear that he added a lot of value to TweetPhoto (including executing a significant partnering agreement on behalf of the company with Kodak).

Lessons for Entrepreneurs

The foregoing may be interesting from a personal-interest perspective; however, as a corporate attorney, I am more interested in the lessons that can be learned here.  Below are my takeaways.

Lesson #1: Diligence the Guys on the Other Side of the Table. As I have discussed many times (including in “Mistake #1” in my post “Five Mistakes Entrepreneurs Make in Dealmaking”), in any deal or business relationship, entrepreneurs must investigate the guys on the other side of the table.  This means getting references and speaking with other entrepreneurs or CEO’s who have worked with the guys on the other side of the table in order to make an informed judgment as to whether they are guys with whom the entrepreneur should be doing business.  As Caulfield noted to me, “at the end of the day, people have to work in a harmonious environment.”  The implication, of course, is that things were not “harmonious” at TweetPhoto.  Did the founders diligence Caulfield?  Did Caulfield diligence the founders?  It seems like there was a trial period where they got to know each other while Caulfield was a Board member.  Accordingly, there should not have been any surprises once Caulfield became CEO.

Lesson #2: All Employment Relationships Must be Documented. As I discuss in tip #8 of my post “Launching a Venture: Ten Tips for Entrepreneurs,” if any employees are hired by the company, they should be required to execute two documents: (i) an offer letter agreement and (ii) a confidentiality and IP/invention assignment agreement.  The offer letter agreement will set forth all of the employee’s respective rights and obligations, including position, compensation (including stock options and/or other incentive compensation), benefits and, most importantly, whether the relationship is “at will.”  The confidentiality and IP/invention assignment agreement is designed to prevent disclosure of the company’s trade secrets and other confidential information and to ensure that any IP developed by the employee is legally owned by the company.

Caulfield advised me that he signed the “same agreements” as the founders, which means they were likely pro-company, not pro-employee.  From an employee’s perspective, you obviously do not want your relationship to be “at will”; instead, you want a fixed term with appropriate protections against termination by the company without “cause” or if you (as the employee) terminate the agreement for “good reason” (e.g., because your title/duties have been substantially diminished or if you are forced to re-locate).  Such protections include severance payments, acceleration of vesting of options, etc.; however, as I note in tip #5 of my post, “Founder Vesting: Five Tips for Entrepreneurs,” startups will push back on this issue because (i) they need the flexibility to make personnel changes if things aren’t working out (like at TweetPhoto); and (ii) it is difficult to establish “cause” or negate “good reason” from a legal perspective.

Lesson #3: Employees and Consultants Must be Required to Execute Confidentiality Agreements. As noted above, it is imperative that all employees and consultants be required to execute confidentiality agreements to prevent them from disclosing any of the company’s confidential and proprietary information.  Such confidentiality obligations generally run indefinitely – i.e., apply even after the employment or consultancy relationship has been terminated or has expired.  Perhaps this may have caused Arrington’s confusion – not recognizing that the Wilson Sonsini letter to Frank Peters was citing Caulfield’s “continuing” confidentiality obligations (despite his employment termination for unrelated reasons).

Lesson #4: Retain a Small, Experienced Law Firm for Small Projects. As I discuss in my post “Behind the Big Law Firm Curtain: The Good, The Bad, The Ugly,” it doesn’t make practical sense to retain large law firms to handle small corporate projects.  I’d love to know how much Wilson Sonsini billed TweetPhoto for the one-page letter to Frank Peters.  Indeed, Arrington hits the nail on the head: “amateur hour.”  Having worked at two large New York City law firms, I can only imagine the hours of research and drafting by some young Wilson Sonsini associate trying to meet his annual minimum billable-hour requirements.  What are these guys thinking sending a threatening letter to a blogger for posting a recorded audio interview of a company’s CEO?

Conclusion

Arrington is a superstar blogger, but missed this one.  Caulfield is a solid CEO, but got mixed-up with a couple of flakes.  Frank Peters is sweating bullets.  Wilson Sonsini is spinning their wheels.  And entrepreneurs hopefully can take-away a few lessons.