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The venture capital landscape has changed dramatically in recent years. 

How can investors move forward responsibly? How can we care for the entrepreneurs we’ve invested in? How do we find hope in the midst of challenges?

We cover these questions and more in this month’s edition of Marks on the Markets.

Host John Coleman is joined by two leaders in the venture capital and growth equity space: Brandon Allen, Co-founder and Managing Partner at TXV Ventures and Phil Jung, Partner at Sovereign’s Capital to discuss how they’re navigating the rocky state of venture capital and growth equity.

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Episode Transcript

John Coleman: Welcome back to the Faith Driven Investor podcast. This is John Coleman and I am joined today by two absolutely extraordinary guests who are going to talk to us about the current markets in venture capital and growth equity. This is our monthly marks on the Market podcast, keeping up with the most recent events in markets. And I think the expertise that these gentlemen bring to venture capital investing is going to be really enlightening at a time when venture capital investing has been a bit rockier than it was for the 15 years prior. Joining me first is Brandon Allen. Brandon is a co-founder and managing partner at TXV Partners in Austin, Texas. Then secondly, coming to us from the DC area is Phil Jung, who’s a partner at Sovereign’s Capital in the venture capital team. After a successful career as an entrepreneur, as a business leader and a venture capitalist as well. Brandon Phil, thanks for joining today.

Phil Jung: Thanks for having me.

Brandon Allen: John. Thank you so much for having us.

John Coleman: So we have a lot to talk about because there have been a few things happening in venture capital markets over the last two years. But before we get into the tumult of that time, including bank collapses and all manner of interesting occurrences, I wanted to throw it out to you all. I know you gentlemen are both motivated by your faith, your people for whom mission is really important. What motivated you to get into venture investing and how does that play into your values? And Brandon, I might start with you, if that’s okay.

Brandon Allen: Absolutely. Thank you again for having us John that’s really exciting and just to be a part of the FDI FDE Sovereign’s Capital family, it’s been such a blessing to Marcus and I, as we’ve been starting this fund, I am reminded oftentimes of the Bible that I got when I was in third grade at my church and the verse that was underlined, there was a challenge. There’s a verse to underline within it, Go try and find it. By God’s grace. I actually found it that day and it was Luke 4:18. The Spirit of the Lord is upon me for he hath anointed me to bring good news to the poor. He has sent me to proclaim the innocence of the captives, recovery of sight to the blind, and to let the oppressed get free, such that they can declare the year of the Lord’s favor. And so when Marcus and I think about what we’re building here, we really think we’re just building something for the kingdom. And there’s an incredible social element to that. We want to support through our focus in human performance technologies that actually increase our ability to live happier, healthier lives. We want to build a culture that people want to come into and that people will grow into and learn from. And then we just want to align with great partners and create value for his kingdom. So our faith is really at the center and the core of what we’re trying to do here in every single aspect and the aspects that it’s not. We’re working on it and the Lord is working on us to make it more so.

John Coleman: That’s awesome. Phil, how do you think about it?

Phil Jung: Yes, I’ve spent most of my career at various early stage venture capital firms, both at a firm on the West Coast in Silicon Valley, as well as here on the East Coast, where I currently am based. And I had a stint where I joined one of my portfolio companies as CFO back when it was an early stage company and we were a tech company in the mental health space. So during COVID, we were one of those companies that were very fortunate to be in a position to help a lot of folks in their mental health behavioral journeys. So we scaled very quickly from about 50 to 350 or so employees. So I’ve been very fortunate to have that experience of being both on the investor And then on the operator side, I met Jake Thompson, who’s the managing partner of sovereign’s venture capital firm, something like eight or nine years ago. We actually were neighbors. We lived on the same street in Capitol Hill in Washington, DC, and he had just joined sovereigns from Booz Allen, a consulting firm at the time. And I started my career in consulting. And so we kind of hit it off. And as I was getting to know him, seeing each other at events and conferences, and he shared more about this thesis at Sovereign’s of investing in excellent entrepreneurs that are building great businesses for good market rate return, but also doing so from a place of deep conviction that how you can love your neighbor is through how you steward a business and how you care for one another and love your neighbor through how you scale a tech company. You know, that was a that was a new concept for me. I was a little skeptical at first, but as we continued to grow our friendship and and I got to meet Henry and the others eventually on the team, and most importantly, I met some of the CEOs in the portfolio. And at the time I hadn’t invested in many entrepreneurs, but seeing and meeting some of these entrepreneurs, they had such a clear conviction that they were building these businesses for the kingdom and not building, quote unquote, Christian businesses, but businesses for the world, but doing so from a foundational layer of bringing forth the kingdom perspective. I thought that was really powerful. And so about a year ago, I had the opportunity to consider joining the team. I met folks like John. I was impressed with what the Sovereign’s team was doing. And in fast forward, I have the privilege of helping to support entrepreneurs as they go about scaling and building their tech companies in the entrepreneurship venture capital space. So it’s been great. It’s been a lot of fun and life giving at the same time.

John Coleman: I guess We managed to talk you into joining in spite of knowing Jake for […..] me, the Phil I’m. To throw it right back to you. And then, Brandon, you can jump in as well if you want. Obviously, the venture environment has changed. You’re a nice old man here. You’ve witnessed a lot of changes in venture capital up to 2021. We were really on something like a 13 year bull run, maybe even longer than that. Talk to us about what that environment was like as a set up so that we can now talk about what it’s been like over the last couple of years.

Phil Jung: Yeah, so I started in the investment world in 2015 and it was an interesting time. As every year passed, the market continued to get hotter and hotter. Back in 2018, you started to see more of a drastic, a rapid change in 19, certainly 19 and 20, where the venture capital market was white hot. You know, everything from seeing headlines in TechCrunch or venture beat of entrepreneurs raising tens of millions of dollars where entrepreneurship really became sexy and people wanted to be entrepreneurs. That’s what people wanted to do to all the funding and capital that was being raised around that time and therefore needed to be deployed. There was lots of funding available for early stage startups, term sheet who are getting done in a matter of weeks and sometimes days with a very light diligence. FOMO was very, very real. Rounds were coming together very, very quickly and companies were raising therefore very quickly. Every 12 months or so, for instance, there was an emphasis on top line revenue growth as opposed to profitability targets. And as companies were running out of cash, it wasn’t a problem because they were able to go out to market, get five or six term sheets and raise their next round of capital at significant mark ups from the last round. So it was it was a very robust time to be a startup founder or even a venture capitalist as you were deploying. When I saw this firsthand being on the operator side as well. So in 2019, i joined Mindoula as CFO and head of h.R. And yes, we’re in the right space at the right time. We’re a tech company in the mental health and behavioral health space. So during covid, we’re able to help tens of thousands of people with their mental health journeys. And that was one of the sectors in the digital health space that was white hot as well. Every other week, it seemed like we had VCs and folks wanting to take us public via SPAC to reach out cold. We got term sheets over the transom from folks that did very little diligence. I remember in 2021 we got a term sheet for $150 million in half in equity and half in debt. And at the time we were only burning a couple of million dollars a year. I had no idea what I would do with $150 million. So it was a very different environment, especially in the last few years from a venture funding perspective, and things have just completely changed in the landscape in 2022 and certainly in 2022 at this point in the game.

John Coleman: Now pick up on that thread Brandon because it has changed dramatically. And of course some of that is driven by the most macro of environments, which is the interest rate environment. Some of it is probably a natural pull down from a white hot market. Previously, if that was the environment up to 2021-22. Brandon talked to us about what the last couple of years have been like.

Brandon Allen: Absolutely, I mean, the last couple of years we just got started. I was a freshman in high school in 2008, so I couldn’t speak to the venture mindset as much back then. But, you know, I remember we kind of went through this exercise where every year it felt like the shoe was about to fall right. You know, the valuations on the public markets continued to expand. The valuations for early seed shows continued to expand. You had these huge capital vehicles, you know, the most prominent of which was SoftBank’s $100 billion vision fund, doubling, you know, the size of the asset class overnight that was coming in. And as a result you had a lot of companies raising megadeals. And so it was incredibly hot definitely at the top of the cycle. But to your point, you know, we have now seen that that cycle is now coming to an end. We see it specifically within our human performance sector, which had a little bit of a market cycle from 2019 to 2022 now, but then also in the macro cycle and then also in the venture capital cycle and the capital market cycle as well. To give you an idea, there was 85 billion of deal volume in 2020, there was 125 billion in 2021 and there was 2 billion and there was 200 billion this last year. And so, you know, a lot of expansion, doubling of the asset class, but we’re seeing a huge pullback right now.

John Coleman: Yeah. Brandon, you know, I’m a fan of your thesis because I’m buying new gadgets all the time. I’ve got my aura ring, I’ve got my GPS watch, my Garmin GPS watch. They’re not sponsors of the FDI podcast, but perhaps they should be. As you think about navigating this environment, you know, one topic that keeps coming up are the different stages of venture investing, right? I know both of you are actually more targeted towards the early stage, but for listeners who are less familiar with the market, you know, they hear early stage, late stage growth equity and they hear that maybe the opportunities are different across those different areas. Phil, would you mind offering some thoughts on just what are each of those categories for our listeners? And do you view them in different places right now?

Phil Jung: Yeah, absolutely. So, you know, there’s a certain journey that entrepreneurs are on for those that are raising, especially tech companies on this venture backed journey. Entrepreneurs may start off with an idea. They’ve identified a market opportunity, perhaps based on their years or decades of experience working in a certain industry. And so oftentimes a founder or founding team will bootstrap or raise a small round from friends and family to get an idea off the ground. Perhaps this is to build an initial MVP or do customer discovery to figure out is this a viable problem in a market that is in need of a solution? At that point is when entrepreneurs typically come to institutional investors, we often refer to that as early stage venture capital. This may be an early stage fund like sovereign’s. It may be others. Then there’s been a proliferation of early stage seed series types of funds that have popped up over the last decade especially. So at this stage, Institutional Capital Partners in the Seed and series A are investing in companies that are typically more than just an idea or a concept. There’s a working prototype. There’s customers. There’s revenue being generated. And entrepreneurs are looking to add fuel to the fire, start scaling the technology or solution out there. So investors are pouring capital in, hoping to invest in marketing or further building out of a sales team to really start scaling this effort of bringing this idea to life. As companies continue to mature into different parts of kind of the life journey of a startup. So perhaps in the mid-stage you now have built out at this point fully fleshed management teams and are building out departments now, you’re building more of a repeatable sales cycle. So it’s more of a rinse and repeat type of playbook. So you may raise capital from VCs or other institutional partners that may be focused on call it the series B or the C rounds. And as companies continue to mature from that point, they’ll hit the growth or late stage part of the ecosystem where these are big, big funders, oftentimes in the billions of dollars that are looking to void capital and companies that are preparing right before they go public. And so this market in that late stage mirrors a lot of what we’re seeing in the public markets most closely, because as a next kind of life stage of the company. So these companies have an eye towards profitability if they aren’t already. There’s an absolute focus on strong repeatable unit economics and margins that investors hope to see a return on. And even in terms of valuation, it’ll most closely mirror what we’re seeing in the public markets, what the goal of these companies eventually going public and becoming IPO’d and providing a return for investors. So there are different funds that focus on different parts of the market segment and happy to touch on any of those segments further. And Brandon can probably share more expertise as he does early and both a little bit of mid-stage investing as well. But at sovereign’s and in the group that I help lead or focused on the early stage typically around the seed or series A.

John Coleman: A Yeah. Brandon, pick up on that if you would.

Brandon Allen: How would you double click? One of the big things that we saw, one of the really huge major trends was the emergence of micro VCs, which Phil just pointed out. And so you had people like Brandon Allen and Marcus Stroud getting an opportunity to raise a fund. If you’re raising your first friend, you’re typically not going out for $500 million or $1,000,000,000 or a billion and a half because you have to prove yourself out. Right, So start small and then grow larger. There was a cultural emphasis on really getting people into business. This is where we get the whole concept of emerging managers. And so when we look at it, we see the capital markets, you know, some of the cultural trends that were happening there, emerging managers coming in and then driving the availability of capital for early stage ventures. And so there was nothing better to be than an early stage founder over the past couple of years that has now definitively changed and changed in a couple of ways. Number one, just anecdotally, in the data that we capture through TXV, we’ve noticed that people haven’t even been coming in to do priced rounds. Right. And so when we talk about seed valuations or C Plus or series A, we’re talking about things that are defined in announced. We’ve seen a lot of investors or excuse me, a lot of companies coming in and saying, oh, we need open ended capital arrangements, we need a convertible note, we want to do some debt, we want to do other types of things. We want to extend our last round. And so that just reflects that. It’s a pretty tough time in the seed markets right now. Another thing that’s happened is even within the seed investing within our sector, we’ve seen about a third drop. And so while a typical seed funding would have been about 8.8 million just last year, now it’s dropped 29% to 6.2 million. And that’s reflecting, you know, just a larger drawdown in valuations as well within human performance. One of the craziest things that’s happening. And this starts to shift over into the growth equity in the later stage is that 40% of the digital health funding was accounted for in the mega deals that happened over the past quarter, too. So 40% of all the funding in the market went to basically about ten deals.

John Coleman: Oh, wow.

Brandon Allen: Which is crazy. So, number one, it’s is that there’s not a lot of early stage version is happening right now, within human performance. And secondly, there’s consolidation at the end of the sector where people are saying, okay, we have all of these companies that have had all this availability to Koppel so far. We need to, number one, choose some winners, and then we need to number two create operational efficiencies within that. Those stories haven’t always been uniformly positive. We think of the example of Tono, which is a really hot, connected fitness device. You put it on your wall and used ML, trained you, and then it used electromagnets to simulate the weight that you were pushing out. We had the operation to look at it back in 2019, Marcus said. We didn’t have a lot of conviction around the early stage connected fitness. At that time we thought Peloton and a lot of these other things were simply, you know, logos slapped on things that we already had. Internal actually just had a round where they lost 90% of their value. Wow. Firms, you know, multi, you know, an over billion dollar unicorn to now needing to take, you know, 110 million because of problems with supply chain because they were growing too fast in a bunch of other different reasons as well. And so, you know, this is new. This is changing. We’re seeing it, you know, again, from the capital markets into the early stage. Markets are down. And that’s really the entrepreneurs who are at the end of that, their behavior has changed as well. And so we’re seeing the feedback cycle come from the LP. So there is founders and back.

John Coleman: Wow. You’re painting a relatively dire picture, Brandon, of the market. We’re going to come to a more optimistic picture here shortly, but I want to pick up on that thread. You’d mentioned how a lot of companies really are struggling with the business model that have been supported by this easy money, low interest rate environment that we were living in, much more availability of venture debt, which is obviously drying up a bit. And we haven’t talked about with signature in Silicon Valley Bank and others, you both have portfolio companies already in the portfolio, entrepreneurs who are living now in this environment where capital is not as available, where they’re having to do layoffs in certain circumstances, reprice rounds down to raise additional capital, to try and extend capital, you know, longer so that hopefully markets recover. As you counsel the entrepreneurs that you’re partnered with, what are you advising them on right now? And Phil, maybe you could start how were you counseling those entrepreneurs now? And maybe it’s FDI podcast, so maybe on a kind of technical business level, but also to spiritually, how are you helping them to weather this storm at the moment?

Phil Jung: Yeah, it’s a great question and it’s just a different time today than it was two years ago. And so the advice and how we partner with entrepreneurs looks different to, you know, from a macro funding environment. You know, typically companies have raised every especially you call it the last five years, companies are raising every 12 to 18 months. They’re going back out market. There’s plenty of capital today. That’s no longer the case. We’re telling our companies to plan for at least 24 months in between rounds of funding and to start. Now, look at your budgets now. Every line item there are probably ways to optimize now instead of when you’re at six months before a cash update. We’re working closely with our finance heads and CFOs to help them in the budgeting cycle, to plan for the year and ways to think about profitability as an option as opposed to just waiting to get to the next round of funding when the existing cash runs out. We’re advising companies that 2023 will continue to look challenging from a fundraising perspective. So if you raised last year and are able to stretch the existing runway to get to 2024, we think that’ll probably be a more fertile opportunity to raise where VCs are looking to actively deploy capital, especially as you enter the main or late stage type funding rounds that we alluded to earlier today. And then touch on this for profitability. You know, it’s interesting, it’s not just our portfolio companies, but even early stage companies that are out in market right now. We’re seeing a lot more pitch decks and in meetings that entrepreneurs are thinking about what the clear path towards profitability looks like, not in some distant future, three or four years out, but what it might look like in 12 months and 18 months, and how this round of funding gives them the optionality to get to those goals of profitability. From a spiritual integration standpoint, lots of companies are having to make tough decisions right now. We’re hearing of rifts in the market all the way from big tech down to smaller startups as well. And how do you be a good partner even in those difficult moments? And sometimes it is a business decision, but there’s still a way to honor individuals and employees if you have to make those types of decisions. It’s doing so treating them with respect, being able to communicate very clearly why the decision was made, helping people find, hopefully the next landing spot, vouching for them, or being a reference or being willing to open up your Rolodex of contacts and making intros for folks passing around resumes to your networks or other entrepreneurs that may be hiring and putting in a good word. So there are ways to, I think, honor individuals and employees, even in tough circumstances. And if things are going well, too, it also presents opportunities to really lead by example to be a vocal leader and. Demonstrating, you know, why you’re building what you’re doing and not just because entrepreneurship or startups are sexy or because people want to work at a high growth tech company. But there is definitely an emphasis on the whys today of why you are building, why this company or startup exists and why it’s important, why there is a redemptive element to what you’re building. And I think all of those things matter in where people spend 40 plus hours of their week working and spending time with building.

John Coleman: That background as a CFO is probably helpful for you right now, having run a venture backed startup as a CFO. You know, Brandon, you’ve kind of heard Phil weigh in on this. How are those conversations going for you and Marcus right now? How can you lean in with your portfolio company leaders?

Brandon Allen: Yeah, I mean, we are having those conversations with every single portfolio right now. Some of them are different. Some companies are doing really well, some companies are plateauing. Luckily, we haven’t had any companies that have had a lot of difficulty yet. But, you know, to really double click on what Phil says, you one of the things that we’re looking for, for a company and for a leader is to have a really strong idea of what it is they’re trying to accomplish in this next stage. Right. And so when we talk about even the categories of Seed series A, series B, we’re investing into a seed company. We’re saying, hey, we need to achieve some level of product market fit. We need to know what we’re doing and we need to have an economic story that makes sense by the time we get to our series A. Now, what’s changed relative to what used to happen is now your series A, you get one shot. There’s no Series A one, two and three. You’re not going to have a convertible note before in a convertible note after it. You have to assume that the level of capital that you’ve been able to bring in is largely going to be the capital that you’re going to need to prove whatever it is that that business goal is. On a personal level, yeah, the reductions are really difficult. Market discipline comes for us all. You know, what I found is oftentimes speaking to entrepreneurs, there is such a hesitation to fire people because of the personal relationships that we all have with our companies. But, you know, with the point that we are in the market, you know, right sizing the team and making sure that everything’s operating in the right way is the number one thing that all companies have to be focused on. You’re coming out of that clarity of vision. And so clarity of vision, clarity of operations would be the two things from TXV perspective. We like to help in a bunch of different ways. When we think about platform, we’re talking about capital introductions, we’re talking about help with talent, we’re talking about help with customers as well. You know, in as much as talent is one of the most important things, it is not the most important thing. When you have a company that needs customers. And just the way that we’ve been orienting our scope of action, bringing in customers, making sure we’re really honing the commercial aspect of how the companies are running has been top of mind for us to the point where we’ve actually started saying, Hey, when we talk to our CEOs, we’d love for whoever that Chief Revenue Officer, the Chief commercialization officer, whatever it is should be on or the sales officer to be in on those conversations as well. Because at the end of the day, and this is part of what happens when you don’t have market discipline, people chase these different things, these different macguffins. But, you know, this is a business that has to sell. The economics have to be good. And so just having a focus on that and really walking through those numbers very tightly without being overly driven by a vision of what you could accomplish has really been kind of the conversations we’ve been having with certain entrepreneurs to pull them back a little bit.

John Coleman: And I want to pivot a little bit now because you guys are leaning in with entrepreneurs every day. You’re keeping a close watch on the market. We have painted this dire picture of the last couple of years, and frankly, I’m with you I think the next year. I mean, given what we’re seeing with the financial system, much less financial markets, with the interest rate environment, probably at least staying flat right now, perhaps going up even a bit more depending on things and the likelihood that we are already in a recession or potentially entering a recession. You know, it’s one of those periods that you have to weather. At the same time, I think history would tell us that periods like this create some of the greatest opportunities for investing and frankly, also for startups. You know, my old firm and Jake Thompson and I talked about this, we did an analysis of what happens when tech companies get hit the hardest, like the tech bubble of the late nineties, early 2000. It actually creates a vibrant startup ecosystem because all these folks at big companies that have options that are now not worth as much, you know, the golden handcuffs are off. They go start some new things. You see valuations coming down. So investors have a chance to enter in at a better valuation for companies that are likely to be long term successful. And there are always innovations needed in market, right? Life doesn’t slow down. I mean, I think the most obvious example right now is artificial intelligence, where I think everyone is paying attention to what’s happening with chat GPT right now. And you know, many people saying this is the biggest thing since the Internet, right? Artificial intelligence. So I don’t mean to leave the witness there, but Brandon, maybe start with you. As you look ahead and as you think about investing right now, what are the opportunities that you see in this market to make great investments?

Brandon Allen: Yeah, you need to double click on what you just said, you know, just because we are in a different point in the macroeconomic cycle or the market cycle or the tech cycle does not mean that opportunities is not out there and it doesn’t mean that people should be pursuing opportunities. Right? We had a long ten year bull market run driven by monetary loosening that results in the situation that we’re in now. It is very natural and correct for there to be some sort of rebalancing in that. And all of the people and all of the resources that are being redistributed throughout the economy will hopefully go find the types of companies that we’re talking about right now. And to your point, John, one of the most exciting things that we’re looking at is AI right? And so when we focus on human performance, we’re talking about the modalities of eating, sleeping, moving and mental health. Health care, the healthcare industry writ large is actually one of the industries that is the toughest to go in and to digitize and to go in to innovate because of the heavily structured regulatory environment. What we’re seeing right now is that outside of health care is where a lot of the innovations are being driven, especially through tech. And with the emergence of technologies like AI, we’re going to see a fundamentally different everything over the next couple of years from a, you know, just a human being in front of a computer, chat GPT is amazing. And what happens when chat GPT then becomes integrated into all of the different applications that we see across human performance? What does it look like to have a new generation of companies being built upon emerging technologies? That work is being done right now. We’re starting to see a resurgence, see companies come in that don’t just put AI in the deck, but that have ai really built into their core model. And that technology is really going to even in the limited way that we’re understanding it as a natural language model through chat GPT. There’s going to be a lot of things that are going to change over the next couple of years, and we’re excited about the companies that are going to do.

John Coleman: Yeah. Phil, what are you looking at right now?

Phil Jung: Yeah, and just to really highlight one of the points that you alluded to, John, of why this is a great time to build a company. And what we’re seeing on the investor side, you know, when comp packages for engineers and developers are no longer in the $500,000 a year packages, startups can actually hire great engineers and developers. You don’t have to compete with these big tech firms that are offering these types of packages. And even if you’re working at some of these bigger tech companies and you’re feeling uninspired or don’t feel a call to the mission of an organization, you know, it gives them opportunity to build something that they actually care about. So we’re actually seeing a lot more companies being built from teams and founding teams that are being very intentional and passionate about what they’re building. And you’re able to access talent much more easily than you were able to even two years ago out in the tech market in terms of opportunities that we’re seeing. Yeah, we see everything from large generative, AI, ambitious companies to a lot more unsexy businesses too, that are definitely worth and deserving of outside funding because of the problems thay are addressing. You know, one of the most recent investments that we’ve made from our team is in a company called Relay, or it’s a hardware enabled SAS platform that equips frontline workers. And in today’s world we often think about engineers and white collar jobs, but we don’t think about the front lines. And with the labor shortages that many industries are facing, you think about retail, our restaurants, or even at our hospitality chains. These are workers that are looking to boost productivity and find safer and more compelling opportunities for meaningful work. But these categories of folks are often left behind in terms of how technology can advance the productivity and the work that they do. So Relay as a company that equips them with a hardware enabled communications platform where everything from providing data analytics on tracking to where they can optimize a place in a hospital, depending on where a patient needs are and where your labor personnel are staffed at a hospital to providing panic buttons for hotel workers who unfortunately, there’s been some statistics that have shown that up to 25% of hotel workers made workers have been sexually harassed at some point in their careers. Really, it provides and equips these frontline workers with technology and tools to optimize productivity and communications. So that was a recent investment that we made. We also look at, you know, when it comes to A.I., there’s been a lot of buzz and really interesting and compelling use cases of how AI can apply for everything from shooting movies without having to animate a single sketch, you know, creating music or art, which is all great, and creating LinkedIn photos, simply uploading three or four side shots of your face and creating AI image of whatever context and background that you can desire. But we also think that some of that pickax and shovel plays as it relates to A.I. is going to be where big opportunity lays. So data, place. Everyone needs access to data. So do you have proprietary data that you can support a lot of these AI companies for their training models, for instance? We think a lot of these infrastructure types of unsexy industries and infrastructure, there will be really big opportunities that present themselves in the current cycle.

John Coleman: Yeah, it’s interesting. I do think AI is a real phenomenon right now. I mean, you can’t look at what’s happening with chat GPT with images. Etc. without thinking that it does carry echoes of the whole distributed ledger technology blockchain thing though, where I’m sure a lot of companies are just going to slap artificial intelligence on the name of the company or in what they do and hope that that uses the the valuation guy a lot. It’s got to be discerning about it. And I am entirely confident that the very last field that artificial intelligence can replace will be venture investing. Right. That’s certainly those jobs are safe.

Brandon Allen: The thought has occurred to us or like I say, positioned pretty well over here. You know, no, AI bot is going to talk to John Coleman and we are going to.

John Coleman: Ironically this is actually chat GPT creating this podcast listeners we wanted to spring that on you at the end. Listen guys, I think this has been remarkably informative to our listeners. We’re going to move to this idea of a scripture or a lesson that you’re learning from Scripture that’s moving you right now to conclude the podcast. But before we do, I just wanted to ask you if there are any final thoughts that you would leave our listeners with as they think about investing in venture capital this year? And Brandon, if it’s okay, we might start with you.

Brandon Allen: Absolutely. One of the things I guess we didn’t touch on was Silicon Valley Bank and oh, yeah, you know, I personally and I’m sure I join with a lot of people and just mourning the loss of that bank, especially in the way that it actually ended up turning out. While it was clear that the bank didn’t have the risk management that it needed to. There was a degree to which tech cannibalized itself and created the conditions around a run on the bank that we should be a little worried about. Obviously, with First Republic Now, which is also a big player in our industry as well, and having a stronger balance sheet, having had $30 billion placed on it by some of the bigger banks and JPMorgan still having to come by it. It is unfortunate and there is a degree of capriciousness, I would say, in what’s happening. But, you know, it’ll all buff out and we’ll see how it all lands. But yeah, it is for sure an incredible time.

Phil Jung: One of the things that we’ve been talking about on our team and as we support our portfolio further is especially as capital allocators, the role that we play. Yes, we can do our parts as VCs as investors. You know, we have certain levels of influence where that you may be on a board where that’s formalized as a board vote on certain items. But even if you’re an informal adviser, we have influence. And so how you support the entrepreneurs or companies that you’re backing, maybe it’s, you know, quietly as you’re praying for the companies that you’re partnering with. And they may never know that because you’re doing that in your personal quiet time to sharing insights of what you’re seeing in the market in real time, to being willing to roll up your sleeves a little bit more than you normally would in a different environment, you know, offering your expertise to review a financial model, going out of your way to make a couple more intros than you normally would to potential funding sources or potential customers leaning in to help with HR related issues at the executive level or even at the manager level or below, helping to recruit an interview because your HR team may be a little bit more thinned out than it was a couple of years ago. There are ways that we as capital allocators can have influence on our companies asking how entrepreneurs are doing outside of work right with their home life, with their communities, and just putting aside the business for a moment to care about an individual and their whole self. You know, all these small and big ways we can have influence on the ecosystem. And so I challenge all of us to not lose sight of that. Then even though we support our LPs, you know, Brandon has raised from outside partners, At Sovereign’s, we have as well, you know, keeping them abreast in a period of rapid market dynamism and uncertainty, keeping them updated on how we are thinking through our operations, whether it’s your banking relationships or your portfolio, because in the absence of communications, people will tend to worry or perhaps assume the worst. So being a sound of a steady hand and the sound of reason during a period of otherwise market uncertainty, I think those are all slow and big ways that we can play a role in supporting the broader ecosystem.

John Coleman: That’s great. That’s great. And Brandon, I will mention that our crack producer, Joey Honescko, texted me during this and said to remind people that just last month the marks on the market episode was about the Silicon Valley bank collapse with Zach Mansfield and Justin Sphere. You should check it out if you’re a regular listener because there was a good explainer. Brandon It looked like you wanted to add something there as well.

Brandon Allen: Yeah, we think about the parables a lot here and about verses in a way that they play out in terms of just any of our interactions. And one of the ones is kind of top of mind for us now is a friend loveth at all times, and a brother is born for adversity. And so, you know, when the markets are up and everybody is happy, it is very easy to be a friend that love is at all times. But right now, you know what? We are trying to be just as Christians, as people, here at TXV is the person that you call upon in adversity. You’re not going to call us and we’re going to eat. A lot of companies are going out for follow on rounds. It’s easy to say, Oh, well, the market, you know, we’ve had to pause right now. But having those more difficult conversations both about the companies, about, you know, the willingness of people to strip checks right now and about what may need to change within the company and the leadership in a way that’s loving and really honoring of Christ, I think is one of the things that we’re thinking about at this point in market cycle.

John Coleman: That is an awesome spiritual lesson that the concluding question we always ask on the podcast is just what is God teaching you through Scripture right now that you want to share with others? And Brandon it feels like a pretty good encapsulation of a lesson that we could all learn that you’re ruminating on right now. Anything you’d add that God’s really pressing on your heart right now?

Brandon Allen: Parable of the Sower, you know, reflects the ways in which, you know, you make bets, you spread the seed over the field. And this time, just as you know, an investor or some of those responsible to other people. Just wondering, you know, looking back, why did we take the bets we took? How are they doing? What are the conditions in which we actually made those and how have people responded to it? And so, you know, in that verse in particular, it talks about the different types of things that can happen that would result in a seed not flowering. And, you know, that’s very top of mind right now as well.

John Coleman: Bill closes out on a high note here. What is God teaching you through scripture at the moment?

Phil Jung: You know, what’s been lately on my heart is, you know, the concept in scripture over and over of God’s promises and his covenant with his people, you know, in Genesis with Noah after the flooding, promising covenant to never do that again to the ultimate fulfillment of God’s promises in Jesus Christ, in the gospel message. And I’ve been reading this book, Habits of the Household, at the beckoning of some of my colleagues, and it’s been great, or I have been reminded of the commitments and the promises that we’ve made, for example, in marriage to your spouse of, you know, despite how you may feel or despite what you may cost you as an individual and your desires and what your wants may be at the time that you’ve made a covenant to support and love that individual. And I’ve been thinking a lot about that. We have a young child, we have a puppy. So sometimes, you know, patience is thin, but we’re being reminded of that has been top of mind and it actually has permeated through how I think about our portfolio to right when we enter in a partnership with a company, you know, one of the promises that we’re making not just to be there when things are good, but to go the extra step, to go the extra mile despite what it might cost me on a time and resource perspective from our connections to really care and serve our entrepreneurs and our companies, especially during this market time, that’s been something that God has been challenging me on.

John Coleman: Phil, Brandon, we’re really grateful for you joining us today. I know you guys are experts at what you do. You’re doing a great job throughout these markets and it’s a privilege to be able to host you on the Faith Driven Investor podcast and I hope we can get you back very soon or maybe a year from now. We’ll do a Mark’s in the Market podcast about the recovery in venture capital markets and get to revisit. Thank you both for joining today.

Brandon Allen: Thank you so much, John. So encouraged by you and the rest of the sovereigns team.

Phil Jung: Thanks, John. Thanks, Brandon. It’s been fun.

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Most of us know the verse in Genesis where God says it’s not good for a person to be alone. 

But do we let that affect our view of investing?

We understand the truth but still find ourselves going through our careers in isolation. 

We keep our guard up and our heads down. 

What would it look like to change that narrative? What would happen if we rallied around each other, both personally and professionally? What would that lead to?

Brent Beshore and Marcus Stroud join us today to talk about how they’ve found great joy in building a community of investors and to give practical guidance on how others can do the same.

Check it out wherever you get your podcasts and don’t forget to review, follow, and share the show with others.

Events mentioned in this video:
Main Street Summit: https://www.mainstreetsummit.com/

Episode Transcript

John Coleman: Welcome back to the Faith Driven Investor podcast. This is John Coleman and I am very excited about our podcast today, both because of the topic and the men we have with us today. Today on the Faith Driven Investor podcast, we want to talk about community and the role that community plays in investing and in this world that we live in, where we’re all working together to be capital partners, trying to serve a cause greater than ourselves by investing together in service of that, we have two of the most interesting investors in the world, I think in very different segments of the market, which I’ll let them describe. First off, we have Marcus Stroud. Marcus is a remarkable early stage investor, founder and CEO or managing partner of TXV Partners. We had his partner, Brandon, on the podcast recently. They invest in a variety of technologies, including human performance. And one of the things that Marcus will talk about today is a human performance summit that they’re actually putting together along the lines of this community that they’re building. Second up, we have Brent Beshore, Brent is a celebrity among middle aged men all over the country. Brent is a Grade A Twitter personality. He’s the founder of Permanent Equity, one of the most interesting private equity vehicles in market. That’s done a remarkable amount and some of the most interesting businesses in Missouri and elsewhere in the country. He is the informal mayor of Columbia, Missouri, I think, and we could talk about that more and is also the founder of Capital Camp and the forthcoming Mainstreet Summit, which will dig into which are just two of the most premier gatherings of investors and also people building businesses in the country. And these two gentlemen know a lot about faith. I know a lot about investing and know a lot about creating community. Marcus and Brent, thank you so much for coming on today.

Brent Beshore: John Thank you so much for having us. And I just want to say thank you for telling so many very gracious lies about at least about me. They’re all true about Marcus, but I’m grateful for you.

Brent Beshore: He’s like the guy that runs on that stage before the concerts and, like, swings the towel, you know, he’s like.

John Coleman: I am a hype man, I’m a hype man, actually, like the mighty, Mighty Bosstones, who used to just jump up and down. Is that to Yes. Reference at this point?

Marcus Stroud: Yes. Yeah, I know, I know, I know. what you are referring to, my man, oh this is amazing, super fire up to be here.

John Coleman: Well, before we get started, guys, just a little more about you, Marcus, maybe you could start off tell us a little more about TXV and human performance.

Marcus Stroud: Yep. So we are a multi stage investment firm focused on human performance and software, and we just added a new strategy where we’re investing in minority stakes within sports teams. And so we’re based in Austin, a small team, roughly ten people. And our idea is we believe the next dimension of health care is going to be a consumer oriented approach. And so we’ve tried to model this thesis out by investing in companies such as oura, which is, you know, one of the top sleep wearables in the country right now, as well as level’s health, was continuous glucose monitor. I see my guy John rocking the ring. It’s incredible and other technology in that category. And so everything that we invest in as a thematic investor touches that principle. And we believe there’s a lot of connectivity between, you know, this new dimension of health care as well as sports, which has led us to our new strategy. But yeah, really, we are really tied to share more, but we’re building.

John Coleman: A note for those who are listening. Audio only. Brent Beshore use the opportunity that Marcus supported by mentioning levels, which is a continuous glucose monitor by a friend of ours, Sam caucus that you wear on your arm. Brant used that as an opportunity to actually pull up his sleeve and flex on the podcast, which was a real way of intimidating both.

Brent Beshore: Mark I don’t know if you guys can see it. I’m wearing the levels right now. Look at let’s.

Marcus Stroud: Go, let’s go. I love it. I love it.

John Coleman: Marcus That’s awesome. And before we move on and I want to get to Brent and permanent equity, what was your path to investing and why Human performance in software?

Marcus Stroud: It’s a great question. And so I had a very unique path, not as unique as Brent. As you guys will hear, Brent has the most interesting story. Like John said, in all private equity, this guy truly is a celebrity. But you know, I was fortunate to have played football at Princeton and at Princeton. I was around so many incredible investors that would come back to campus. And I knew early on that was kind of the career path. I wanted to take that unique background in which my father played the NFL and I was around so many athletes growing up. And so this idea of health and wellness and sports selectivity was always kind of like right in front of me. I think as we started to move into investing, you know, progressing through the career ranks, I started to just get this idea of what is an area of the market that folks were deeply interested in are actually pretty consequential. Software has been arguably the most consequential technology of the last ten, 15 years. The reason we’ve had such an incredible bull market know software is the world. You know, I was a firm believer and Brent was a firm believer that human performance and this kind of consumer oriented approach to health care would be kind of this next dimension of growth within our economy. And so that’s kind of what led us to invest in this area. It’s something I’m deeply. I set about, as are a lot of people, because I see you’re wearing the warrior ring and what was also obviously you guys both care about your health as well. And so that’s what led us to invest in the space.

John Coleman: Brent and I need a little more help on our health than you Marcus. So we’re deploying any device that we can at this point. Brent Beshore, you founded I think Permanent Equity in 2007 or eight, and it is such a unique model. Talk to us a little bit about permanent equity in your path.

Brent Beshore: Yeah, I appreciate that. You know, not all of us are equally blessed. And John, you and I did not get the, you know, maybe the looks or the physique of a Marcus Stroud. You know, I just some of us are built more like Greek gods, and some of us are built more like not Greek gods. So, you know, we’ll leave it there. Yeah. So I joke that I’m the Forrest Gump of private equity because I’ve never taken a finance class in my life. I can barely open a pixel. I’ve never worked at another firm. It was really, truly me falling backwards into the world of private equity. I was an entrepreneur, started a business, started a number of businesses kind of around that. They were okay, they weren’t super successful. And then I had a mutual acquaintance, a should meet this guy. He got left at the altar for the second time trying to sell his business. I said, Oh, well, obviously that means that I should try to go buy it, right? He had no idea that’s what was going to do but meet with this guy. And I was, let’s see, 24 at the time. I looked about 14 and the guy literally said to me, What am I doing here? Like, two grown men have tried to buy my business. Like, what are what in the world? How could you do it? I said, I don’t know. We’ll figure it out. Anyway, seven months later, bought the business. Lots of trial and error. Did well with that investment started rolling cash flow paid off the SBA loan early. But I took out I asked my newly married wife to sign a personal guarantee. She was like, What’s that? I was a guy. Don’t worry about it. They’ll be fine.

John Coleman: Marriage advice from Brent Beshore.

Brent Beshore: Yeah, yeah, maybe that’s a whole separate topic. But anyway, it and it working out quite well Started rolling cash flows, bought a number of other businesses and then in 2017 partnered with the O’Shaughnessy family, the Vlasic family, and raised a $50 million fund and then in 2019 raised a $3 million fund. But in many ways, we’re kind of the opposite of traditional private equity. So traditional private equity, a joke that employs the buy lever strip and flip model, we’re doing the exact opposite. So we’re buying with no intention of selling the business. We’re typically using no debt in our transactions and really trying to be long term with all the stakeholders and have it be a win win, a sustainable win win over a long period of time. So we’re really trying to be thoughtful towards not only the seller but the executive team, the employees, the suppliers, the customers and the community, maybe even regulators, depending on the industry. So very different form of private equity. And we love it. We think it’s a privilege and an honor to be able to help steward family owned businesses that are really the backbone of this country. And so hence I’m wearing my American flag shirt that I don’t know if people can see today, partially because I’m just trying to keep up with you and your, you know, your dashing looks and Marcus and his snappy dressings.

John Coleman: That’s great, Brent. And you know, it’s interesting because this topic of permanent capital, I feel like has become a really hot one. You guys were very early in this space. I know we’re starting to experiment with it and as you mentioned, for the right type of company and it’s an excellent model because you can carry things out in perpetuity and you know, you don’t know how long that will last. It’s a Berkshire Hathaway type model you can’t hold forever, although you don’t necessarily have to. You obviously, things move in and out once in a while, but for some opposite’s a great model too, because it reduces the friction of reinvestment. It can reduce tax consequences to individual investors, for example. And so it’s interesting that you guys were really a pioneer in the space, you know, starting more than a decade ago now, 15 years ago.

Brent Beshore: Yeah. I mean, I would say it’s actually the optimal structure for every investment. It is just providing optionality. So, I mean, that’s one of the key things that when we talk about and I would love for everyone to raise functionally permanent capital, I mean, we have an initial 30 year term on our capital, which is functionally permanent, like technically permanent. But that long time horizon doesn’t mean you have to hold the assets for that long. It means you can hold the assets for that long. And the dumbest thing you can possibly do is be a forced buyer or forced seller. And unfortunately, short duration funds both cause you to buy stuff that you don’t want to buy and sell, stuff that you don’t want to sell, which is definitely not good for the investor, but is even worse for the companies. And when you add in a heavy amount of debt onto that, which is what traditional private equity has done, you create this really volatile cocktail that you’re taking an already difficult company, right? I mean, you know, small companies don’t stay small on purpose, right? These smaller companies are going to be more volatile. And then you add on top of that the fuel of debt. And then on top of that, you add a forced selling. I mean, it is not a good situation. And this is where you see a lot of carnage, unfortunately, with especially amongst the employees, but also with customers and suppliers. I mean, there’s a volatility, too. You know, when a private equity firm buys a company, everyone kind of stops and cringes. Right. Everyone’s wondering what’s going to happen next. And there’s a reason for that. Now, there’s a lot of great people in private equity not to say that there aren’t, but in no ways can you tell me that. The traditional private equity model is better than the model that we have.

John Coleman: So interesting, you know, it probably warrants a whole podcast on fund structures at some point because there are so many innovations today and I would love to spend time on it for the purposes of today. I want to pivot a little bit to community, if we could. And Marcus, I might start with you. You know, community is obviously important to us. I think faith driven, entrepreneur and faith driven investor were set up with this idea that living a life of faith in the context of building a business or building an investment firm or trying to invest in opportunities is actually better in community that by coming together, the weight of the community can be better than any of us can be in isolation. It can be an encouragement to us in our faith and certainly in sovereigns. We have seen that as well. Why is community important to you in the context of the work that you do at TXV and how does that manifest?

Marcus Stroud: That’s an excellent question. I think I didn’t really understand the significance of community until I was probably 20 years old. You know, growing up, my mom would always say, You guys have to go to church four days a week. So we’d be in church on Sunday, We’d be in church on Monday. It would be in church on Wednesday, It would be in church on Saturday. And she was so serious about the groups we’d be around within the church and she was like, Your friend group from the age of 10 to 17 has to be the kids in the church. And I was just like, Why are you doing this to me? And then I realized she was trying to instill the significance of community, how, you know, to your point, you can spread the good, you could spread the bad. It’s so good to have folks who truly do life with a real meaningful and vulnerable way. And so community became super important for me, I would say, at that age. And then as I got to business, I began business as a pretty isolated guy. I would take a lot of stress that I had by myself. I wouldn’t go to anybody. I would just help on my own. I’d go to my business partner. But after a while, you know, it starts to just continue to manifest the stuff, just the two of you, you know, because then it affects your friendship, affects your relationship with your personal relationships outside the business relationship. And I think it wasn’t until this is actually crazy how this was all kind of full circle. It wasn’t until I was on a plane with Brent and he was sharing his story with me, and Brent was so kind. We were at a men’s retreat in Texas, and he was so kind to fly me back to Kansas City with him and just sharing his story. And after Brent and I had spent a lot of time together on that plane. I just started doing a lot of research on capital Camp, started doing my research on Brent. I started reflecting on the time we had spent together in Texas at that men’s retreat. And I thought to myself, Why did I feel so hurt and love and seeing at that time? It’s because it truly was a meaningful time where we could really use this to really open up. And so I think as that relates to me as an investor now, as we run a firm, as we invest in performance space, it’s just a unique opportunity to just truly grow together. I started off in venture capital as very competitive, like we all want to work with that firm over there. We don’t do any of that with these people. Screw those people. We want to win. I don’t want to share deals with them. I want to be isolated. But we realized that there was so much more to be gained working together, building together, sharing wins together, sharing loss together, sharing together, sharing together, then apart. And it’s insane. The relationships, the places in the opportunities that have come as a result of us really starting to put emphasis on community. You know, we’ve had chances to go to Africa, we’ve had a chance to go to Madrid, just go to Brazil. It’s truly incredible the things that this community has brought us in with the faith driven investor community has been an absolute game changer for me. Say, okay, I’m not going to be too busy to do this. I’m going to actually lead a group and I’m actually going to really make sure that I have the set aside time. Every Tuesday morning might have been one of the most consequential this is in my life, because now the newest partner we hired was from that group of people. And.

John Coleman: Wow, Is that right?

Marcus Stroud: Yeah, literally. So we got a testimonial whenever y’all want it. And, you know, we had that time together. And I’m going through life with one of the persons in that community right now who’s going through a really heavy season with health. But it’s just so cool that this group of ambassadors could come together over this zoom every week from all over the world Singapore, Africa, Alabama, Missouri, Texas, and truly do really meaningful life together and really makes me understand that God had put me on this earth just to be on this campus. There was so much more behind that, and community really helped me understand that concept in a real and deep way. And so, yeah, I give a lot of this credits. I think I’m serious. I think if you ask any person, Brent’s a pioneer in the space of truly creating meaningful community and sovereign capital as well. The chance to go to the some in Colorado that you guys had and I was like, Wow, this is different. This is insane. To see the portfolio companies right beside the investors and the limited partners together. I’d never seen anything like that. So really do life together. It’s really, you know, share ups and downs together. And I was like, this is just so different. And so those things have led me and Brandon and the rest of our team to really try to create meaningful ways. Incorporate true community experiences.

John Coleman: What an awesome story. Marcus and Brent, I want to ask you about that conversation, if you remember it with Marcus and where that came from. I will note Marcus was so kind to mention faith driven investor does host these weekly small groups. Basically, the next cohort is starting in June, which is what he was talking about it last nine weeks for one hour a week. And it’s basically almost kind of like a church small group. But around the topic of investing, you meet weekly, you get to talk about things that are great leaders like Marcus. And I know FDI has now had more than 1500 people go through their small groups. I think faith driven entrepreneur has had 30,000 people go through the small groups at this point. And full credit to that team, to Henry and Justin and others for creating those experiences. And awesome to hear your testimony about that. Marcus. Brent, I mean, you obviously made an impact on this guy. Do you remember that plain conversation and kind of has that always been the way you’ve been wired, or how did you come to this community orientation?

Brent Beshore: Yeah, I mean, I very much remember the conversations that that one of my favorite conversations I’ve had in the last, gosh, by five years, I don’t know. You know, we are blessed to have community at the highest level. If you think about, you know, Yahweh, the God we worship is three in one has been an everlasting community. And so the grain of the universe is to be in community. I mean, just what we’re doing now with the three of us just coming together to have a conversation like you can feel it. This is a beautiful thing. This is a highlight of my day. I feel like.

Marcus Stroud: You’re better preach, brother. You better preach.

John Coleman: Amen.

Brent Beshore: No, I mean, it’s just, you know, when I met Marcus at that men’s retreat that we were at, you know, I felt my heart pulled towards his, and I had no idea where he was trying to go. And when I heard he was trying to come into my neighborhood, I said, Hey, what if we traveled there together? Let’s get to spend some more time together. And the conversation on the plane was just a beautiful thing. It was about life and really deep, meaningful things, hard things. And I think that is the key is to be real. I feel like that, especially in the investing world. But, you know, amongst men and we’re all trying to build, right? We’re all in a build phase right now and there’s so many masks we put on like, right. That is the temptation to be whoever we should be to the people were around. And the bad part about that is that what we think of and this is the way that the devil works is the lie that we’re told, right, is if we’re really who we are, we won’t be loved. We won’t be successful if people knew us for who we really were. So what should we do? We should hide. And so I feel like that most of my life was me hiding in plain sight. And I just. I’m tired of it. You know, the consequences are dire. It creates isolation. You know, when you’re wearing a mask and somebody says something good about you, it hits the mask, it doesn’t get through. The only thing that gets through is the negativity. And so I live my life in a way, really, until I was rescued by Jesus, where I was terrified I’d wake up every day. I had sweaty armpits, sweaty palms. It felt like I was in a knife fight every day and, you know, unbelievable anxiety. And I was just desperate to prove myself, to try to build myself into something worthy. And I know I wasn’t worthy. And it’s just been beautiful what’s happened ever since. I mean, I feel like God’s grabbed my heart. And the more that I lean into him and try to empty myself and just be filled with whatever he wants to fill me with, including wonderful people like you who put into my life. The better life goes for me and everyone around me, and I get to see these amazing things happen. Which I mean, again, I joke that I’m the Forrest Gump of private equity. Like, there’s no way to explain how we’re doing, what we’re doing other than God’s got a plan and we’re just along for the ride.

Marcus Stroud: You see why that plane ride is 3 hours of fireman. You see the gift this guy has? It’s unbelievable, man.

John Coleman: This is why he has 100,000 Twitter followers, too. I mean, this is unreal. So good. Brent No, I mean, legitimately, what an amazing testimony and so heartfelt. And I’ll tell you, I mean, just briefly on my story, you know, I came to sovereign’s a little over two years ago out of the kind of mainstream investment world. And I think one of the biggest changes is exactly what you described, Brent and Marcus, where everybody is super open handed. You know, we’re as much collaborators as No one, I think, feels like a competitor, really. Marcus To your point, we have no problem putting our LPs and portfolio companies and our investment team together because we’re all in the same mission, right? Sometimes getting to that mission is a little bit bumpy. Sometimes you have to deal with tough stuff, but at the end of the day, you’re all striving to do the same thing. You’re doing it for the same entity, you’re doing it for the same God, and your values are the same, right? So it’s really just working out how you get there together and encouraging each other along the way and being there for one another along the way. And, you know, just such a radically different approach to investing. I think on every side, if I could get a bit tactical with the way that you. Do it. Marcus, I want to come to the summits that you guys are hosting in a moment, which are these very concentrated community events. But in the more informal way that you deal with portfolio companies, limited partners, your team. Marcus outside of these very formal structures, how do you seek to build community amongst those different groups and what does it look like for you to encourage them?

Marcus Stroud: Yeah. So one thing we did last year and one thing we’re doing more of this year is just truly bringing people together. And so by that we brought four of our portfolio companies together early last year. We all went to the Rams football game and fortunately we have a few friends that play for the Rams. It was an incredible game. Those Baker Mayfield first game actually as the Rams quarterback and he had a heck of a game. He had brought them back. They’re playing the Raiders beautiful stadium. It was amazing. But, you know, these portfolio companies, these guys and gals, they were massive football fans. But football is just such a unique place to gather together because you’re sharing a experience where you’re champion somebody and the outcome is just easy to become invested in. And so it was really cool to see them just jump up and down and have that excitement together, but then also start to kind of share some of the things that they’re experiencing with each other, their portfolio companies, their ups and downs they’ve been dealing with in business. And then you were able to remove this kind of veil of like, you’re the investor and we’re the portfolio company. Like they need to be the super on edge the whole time. It’s like, no, no, no, no. We’re all trying to figure this out together. Your success. My success rate was my failure, but let’s really just get to know each other. A personal and real level and the vulnerability that came from that, that small investment wasn’t a great investment at all. One of the large investment, but that small investment. It’s insane how, you know, the multiple that has returned. We have such great relationships, those for portfolio companies in general, because it was an experience they never had before and it was just so much more ability displayed. I think within our team internally, we’ve tried to do that as well. Brent and I, we have our on site summit this week and with each person when we hired them, we really invited them into who we are. We are a firm that has a lot of different views and belief systems across the team. But we were like, This is me and Brent’s belief. We believe in the Lord. You know, we are followers of Jesus. We came together as friends over a shared testimony. This guy helped me through one of the darkest places in my life. And it’s really cool because that vulnerability has caused other folks, our team, to be more vulnerables as well. And so now we do quarterly dinners, we do monthly dinners for the folks within Texas. We make sure we see the people that aren’t around. And the thing that’s at the center of all of this is just true vulnerability in removing that lens of just like on this buttoned up investor. And, you know, we need to be a certain way at a certain firm. And I’ll be honest, that’s how I want to be. Early on, I would study for hours this equity, I would say 4 hours. Blackstone I would say 4 hours KKR. And I was like, How could I be Steve Schwarzman? How can I be Robert Smith How can I be, you know? Don Valentine And I’m like, Is that really who you want to be? Marcus And nothing against those people. And they listen to this podcast, you guys all great in your own ways, but that’s not who I want to be. I don’t want my colleagues or employees ever look at me as just the investor or the boss or whatever. I want them to like somebody that actually had a meaningful and future life and saw them and heard them for who they are. And I think that’s the beauty of community is really getting a chance to really see and hear somebody for who they are, whom God made them to be. So yeah, that’s kind of like technical how we’ve tried to do it a little in our bigger ways.

John Coleman: Well, you know, being an entrepreneur, as you guys both see every day, is one of the hardest things in the entire world, right? I mean, the risk is high all the time. The stress is high all the time. You’ve got all these competing demands that are impossible to reconcile in it, yet it can tear marriages apart. It can send people down bad paths with substance abuse or with their mental health, with their friendships, with their teams. And, you know, to have capital partners who are just capital partners who are just putting money in, rather than trying to invest in those folks and be a counselor to them through those difficult times, it feels like you’re only really doing part of the job and maybe not even the most important parts of the job, like you said, Marcus I mean, to be able to come alongside folks during those periods.

Marcus Stroud: I mean, you’re a great example of that. I want to shout John out. You know, we both you guys know we had a very tough season last year that was really heavy. And, you know, for John to set aside his time, which is incredibly valuable and there’s a lot of folks running on this calendar for Brent to pull me aside and pray over me. I mean, those things are so important. And I think, you know, that is the beauty of community and that speed of having partners and people like you, John and Brent, to truly walk alongside really, really tough and difficult season because it’s easy for all of us to celebrate. Columbia, Missouri. Things are going really good. And Brent has all these incredible chefs making this great foodie capital. Kip You know, it’s hard when things are really tough and you don’t know if you’re going be able to see the next day. So I just want to applaud you both for being men who truly exemplify that.

John Coleman: That’s awesome. Marcus Thank you for that. And maybe.

Brent Beshore: John, can we talk for a second about like that’s the norm? The norm is what Marcus just said, right? That we feel burdened, right? Entrepreneurs, investors. I mean, I would say that the norm. In our industries of entrepreneurship. Investing is people who feel deeply burdened and are trying to medicate their way out of it in any way they can. And sometimes medication looks like going to church. Sometimes medication looks like alcohol and drugs and sex. Sometimes it just looks like that drive towards achievement or even going to the gym. Right. But we’re all trying to cover that thing up that we feel insecure and fearful about. And I think that’s the norm. And I feel like it doesn’t get enough airtime of like acknowledging that and saying, hey, there’s something in us that is broken. Like, we are lost and we are broken. And until we acknowledge that that’s the case, there’s no healing, right? In fact, there’s only hiding. And so, you know, I would just encourage anybody who’s listening to this, if that resonates with you, if you feel burdened, if you feel heavy, like that is a clear sign that there’s something that you need to give up and that you need to get the Lord involved. I mean, that’s the thing is for me, I didn’t know where to take my burdens. And, you know, when Jesus rescued me, and the more that I can lean into that, the more it can be less of me and just be filled more with him, the more that I mean, Jesus said, my my yoke is easy. My burden is light. So I’ve just realized in my life if anything feels heavy laden, if anything feels burdensome, it’s me trying to carry it and me not giving it up and let Jesus carry it. And so, you know, I feel like that is the norm, though, and it’s completely normal to feel that way. We just got to figure out what to do with it.

John Coleman: Man. What a good word. What a good word, Brent. And, you know, one of my favorite commencement speeches was by a guy who was kind of nominally Catholic, potentially, maybe not even religious guy named David Foster Wallace, who gave a speech at KENYON College called This Is Water, which is one of my favorite speeches. And there’s this wonderful passage in there where he talks about what we can worship. Right. And it’s kind of what you’re talking about, Brent, where you can worship money, you can worship good looks, you can worship all those, you know, the material things. But at the end of the day, those things are going to eat you alive, right? That by turning to those, by letting those be your crutch, the thing that you depend on, the thing that you get value out of all of those things are superficial material, temporary, and they’re just going to increase the burden that you feel. And it’s really only by finding God some connection to something greater than yourself, which we three think is Jesus and think is the God of the Bible. And you know that you can really relieve that and that you can find your place in the universe and you can worship something you can rely on, something that won’t fall away, that won’t eat you alive. And I think that, you know, gosh, I’ll say in my own personal journey, like you, Brent and Marcus, like without that, you know, some of these stresses that we face every single day where, you know, your banks are collapsing, you know, or here, you know, the stock market’s falling, something goes incredibly wrong. A regulator suddenly comes through your door and you’re nervous about that. Like there are just things that go wrong every day. And I don’t know what life would look like if I didn’t have a faith. Allow me to submit that all to God and to kind of trust in his will for my life. And Brent, I think that’s exactly right. You know, we all deal with it in some way. And the question is, are we gonna deal with that in a way that actually relieves that burden and helps us with it? Or are we going to deal with it in a way that potentially makes it worse?

Brent Beshore: And I mean, in that Ken College speech, it’s a beautiful book that was turned into called This Is Water, which is what he said. You know, he has this amazing quote that I remember when I was an atheist and I read this. He said, In the day to day trenches of adult life, there is no such thing as atheist. We worship something. And that was a major shift for me. I mean, you talk about water in the desert. That was me saying, wait a minute here. I thought I was secure in my atheist. Maybe I was an atheist in my twenties, hard core militant atheist in my twenties. And I remember that was a major shattering because when I read it, I was like, That is truth. That is truth and I’m living a lie now. I didn’t know Jesus at that point. I didn’t know who Jesus was, but I knew that I was worshiping something. And it was a realization for me that I wasn’t worshiping nothing. I was worshiping something. I was just worshiping the wrong things and things that were fragile and were going to break and die.

John Coleman: Amen. Hallelujah. Brent. Man, we could continue on this thread all day, and maybe we will, in the context of this next question, I do want to get to this contribution you’re both making to the world. I think with these summits that you’re hosting and the kind of very formal, explicit ways in which you all are building community amongst diverse people, but hopefully anchored in the values that you guys are talking about now, hopefully, you know, offering up people the right way to think about investing, the right way to think about entrepreneurship. Brent, I might start with you and then turn to you, Marcus. I mean, you are very well known as one of the greatest hosts in the investment world. I think I’m not, you know, I’m dead serious when I say that, right? I mean, Capital Camp is this legendary forum right now, which I’d love for you to describe. You’re launching something called the Main Street Summit this year, which is basically the democratization of capital camp to some extent. Would you talk to us about those two forums briefly and just why they were so important for you to start?

Brent Beshore: Yeah, I mean, the joke is for capital camp that I’m running a food and wine festival and my partner, Patrick O’Shaughnessy, is running an investing conference.

John Coleman: So it’s not really a joke, by the way. That’s.

Brent Beshore: Yeah. Well, my hope is that every time he comes to capital camp that even if you don’t have a single good conversation, it was still worth it just based on the food and drinks. So know, that’s the standard I’m trying to hold. Yeah. Look like I think that capital camp. I mean, everything’s born out of a need. And I had a felt need for community and in a way that I didn’t see it happening. So I go to invest in conferences and everyone’s buttoned up and there’s bad coffee and rubber chicken lunches and everyone’s slinging business cards and all, you know, blue blazer top. And it’s like it felt almost like there was this like really boring bad play and everyone had a role in it and everyone’s like, Well, that’s just life. I mean, that’s what, you know, is part of our jobs is what we got to do. And I remember I called Patrick and I got back from one of these, and it was just awful. It was in a ballroom in Manhattan, and I just had the worst time. Everyone was stiff and masked up. And it was just it was not fun. I got back from that. I was like, there’s got to be a better way. So I called up my buddy Patrick. I was like, Hey, I’m just going to launch this thing. I’ve no idea if it’s going to work or not, but I kind of just want to be the Willy Wonka of finance events and just see what we can put together, right? And he said, I’m in just like, Tell me. He’s like, I’ll fund half of it. You know, tell me what we should do. And that’s how Capital Camp came about. So, yeah, so we have 400 ish investors coming from, I think this year, 15 or 16 countries. I think there are a total of four people coming from the state of Missouri. So it’s almost nobody locally. And everyone from the coast comes to Columbia and we try to put on three days of at the end of the day, what we’re trying to do is just have fun. It’s supposed to be unbelievably fun, dress down shorts and flip flops. We have a ton of just interesting people. So, you know, you the option is you can participate in an in-depth discussion on investing in South America. And then next, you can go to butcher a hog, and then the next thing you can do is go break down doors with the Navy SEALs and learn tactical shooting. Right. So it’s like this like smorgasbord of fun activities. And the whole idea is everything is an excuse for relationship. And in general, like, what if we looked at investing and really just business in general as the excuse and not the purpose, but what if people were the purpose and what if business was the excuse? How much different would our days be and how much lighter would we feel? And so I think that’s what we’re trying to bring, whether it’s Capital Camp or Main Street Summit, which, as you said, is a very much a democratization capital camp is expensive, We have to have big budgets to be able to provide all these incredible experiences. Main Street Summit is going to be 500 bucks. It’s in November and we are hoping to get over 1000 people there the first year to really celebrate, learn, encourage one another in operating and investing in small and medium sized businesses. So that’s the goal. But the really the goal is just to be with people and be for people. And I think that if we aim for that, we can’t miss.

John Coleman: I’ll just say little promotion here. I’ve been to Capital Camp in the past. It is pretty remarkable. The food is almost too classy for me Brent and I don’t know what to do with myself. As someone who kind of grew up on Taco Bell Mexican pizzas, it’s overwhelming how classy it is. And Main Street Summit just looks fantastic this November. I know we’re going to send members of our team Sovereign’s Capital. We’re going to refer it out to some portfolio companies, because that community that you’re building there is just phenomenal and unique. Marcus, I know you are in the midst of planning your first kind of formal event like this, you know, building on the type of form that Brent and others have put together. Can you talk to us a little bit about what you’re putting together and what that might look like?

Marcus Stroud: Yeah, for sure. And to echo what you said, John, I mean, Brent it’s just a phenomenal job. And he is a celebrity in our world of doing these things. And like I said, he’s been an encouragement for me to do something like this. And so, you know, we were in Brazil and, you know, so many people kept wanting to talk to us about where we were investing it. And we were like, this is crazy. You barely can speak English, but you understand our thesis to a tee. And it made me realize there is this deep desire for people to have more control and understanding of their health and their wellness because they recognize that this contributed to their happiness in a sense. And so fast forward, we went to this incredible conference in Hawaii called the Lobby conference put on by David Hornick from August Capital, great ambassador, great guy, and it’s really cool conference. But there was a couple breakout sessions and the largest breakout session was a health water session. And you’re looking at all these incredible investors from Redpoint, from Google Ventures, from first round Capital. I mean, all these folks that are premium investors insight partners in software companies, but wanting to learn more about health and wellness for their own personal selves. And so as I started describing our thesis, because I was one of the folks leading this breakout, so many people like Marcus, you guys have to do something. We need to bring all these people together. And so we reached out to an agency that we were very close with, had done some really good events for us that does investment in some of the large firms. And we start calling some of our friends in the podcast space. Some of the professional athletes have had long careers hit a certain quarterback who, you know, we are almost kind of lined up to be one of the keynote speakers and we’re like, Can you come do this? And everybody was like, Yes, this is so important. I would love to be a part of this. And so that’s kind of what led us to do this. Which is just a desire to to really create awareness around this technology, around this information, around this industry that affects all of us each and every single day, and just really create ownership over our own health care. That was kind of the purpose of this. And so this is new for us. This is interesting. You know, at first we were still guarded from doing these things because we’re investors. We’ve only been around for a couple of years. We haven’t been in the game for 15 years, like permanent equity or sovereign’s capital. We’re just getting started and we want to be known as really good investors before anything else. But we realized there was so much value in bringing together people with these interests. So yeah, that’s kind of our first swing at it. We’re really excited. We’ve sent some promotional things out to some of our portfolio companies, people around those portfolio companies, and the interest has been way too overwhelming. We’ve had to kind of scale up. And so it’s going to be the better we open up to a lot more people than we initially anticipated and we’re really excited to get it going.

John Coleman: That’s awesome. Marcus And, you know, I think one of the neat things about these experiences to build on what you said is that, you know, you want to be good investors first, but the point of being a good investor is you actually care about the industry. You’re investing in, the people you’re investing in like you are. A great investor is on a mission about what they’re doing, and forwarding that mission can look like building a community that helps forward it, right? Like you think about human performance, you guys are investing in it because it will make money for sure, right? For a limited partners, you have to do that. That’s the bare bones. But also because you believe in this sector and you want people’s lives to be improved by these tools and technologies for human performance and this convening power to get people together to create more momentum there is ultimately good for the world, at least the way that I know you guys invest, where the things you’re investing in are good for the world. That may not always be true at every firm, but I know, at least for y’all, it is. Sadly, we are coming up on the end of our time together. We try and end each podcast by just asking each person for kind of 60 seconds on something that God is teaching you through Scripture now that you’d want to share with others. So just anything in your study life, anything that you’re looking through in the Bible right now, where God’s teaching you something that you’d want to share with others as we wrap up here and Brent, I’ll put you on the spot first.

Brent Beshore: Well, I just want to encourage Marcus. I couldn’t be more excited about his event. And when you’re thinking about designing the event, you might want to consider John Coleman as the peak of human performance. Man if you want to.

Marcus Stroud: Yes sir.

Brent Beshore: A mascot for the event, I think that, you know, mentally, physically, spiritually, I mean, the man is just we’re in awe of peak performance.

John Coleman: I’ll check my modeling calendar and see all that week if there are no cover sheets anywhere. Thank you, friend. Yeah.

Brent Beshore: Yeah. What is God teaching me? I feel like God is teaching me so much right now. You know, one of the things recently that has has been healed is so for those of you who aren’t familiar with Enneagram, it’s a way of kind of categorizing people into general tendencies. What we would say is how God’s built you and maybe where your flesh is still present. And as an Enneagram three, my worst fear has been a sort of deep emptiness that I don’t really know who I am. And I think this is again goes with mask wearing. So I put on a lot of masks to try to put layers between the world and what I fear might not be something underneath everything. And it was just really in prayer and deep reflection recently that God revealed to me that that is actually the emptiness that He wants, that is the surrender that he wants, and that he will fill that emptiness. And so it’s actually if I can remove all the masks, if I can strip away all the fleshy parts of me, that I shouldn’t be worried that there’s an emptiness there, because there actually is an emptiness there. And that’s okay. That’s actually what God wants is for us to lay it down. You know, we always in church, we go, you know, palms up to receive. But before we go palms up, we’ve got to go palms down. We got to drop a whole lot of the stuff that is junking up our souls and occupying our minds and causing us to focus on ourselves. And I don’t know, there’s just a comfort that I’ve received recently from the Lord in that He will fill the emptiness with something way more beautiful than I could ever dream, and that I shouldn’t be fearful of that emptiness. So I don’t know if that resonates with anybody out there. I would just encourage you to go to the Lord and do the deep work of laying things down, going palms down before you go palms up, because you can only hold things if your hands are empty.

John Coleman: That is beautiful. Truly beautiful. Brent, geez Marcus there’s no pressure, man. That’s. Oh.

Marcus Stroud: Yeah, Yeah. Well, I take layers off the bird, and then the fire got my ears hot and then. Goodness gracious. Wow. How do you follow it up? You know, I just finished his nine month intensive course at my church, a pre seminary course, which is truly, truly so deeply revealing, especially as I’ve been navigating this process of seminary myself. And one of the concepts within that we learned that just has really stuck with me was just the doctrine of Providence and just God’s complete sovereignty and control over everything. And, you know, as an investor, it’s so easy to have this idea of control at the root of everything. Oh, my gosh, I got to do this or this company can perform, I got to do this or these outcomes can take place and manifest. And I think with these bank failures, with these reduction in valuations across these companies and with just the ups and downs, I mean, like I’m 29, this was my first swing at a down market. Know it’s super easy to find yourself measuring your worth in your abilities on what’s happening around you. And just really trusting and believing that God’s providence is real and it is true. And he is in control of everything, and my identity is not bound in our investments. My identity is not found in these reduction evaluations. My identity is not found in these bank failures and having to kind of scramble and figure out how do we support these companies, how to support ourselves as an emerging venture capitalist firm has been really, really, truly revealing. And just like, you know, it’s just been a great way to truly see who God really is and truly see this image that, you know, that is God. Because I feel like for so long in my walk with Christ, it has been sometimes a little too rosy. You know, I haven’t really sat at the meat of my theology because, you know, a lot of Pentecostal folks growing up, I’m not really identified for the culture any more. But, you know, our theology is very much kind of pie in the sky, like worship based theology. I think really how to dive into the meat of what we actually believe, which scripture actually says is true and real about who God is and who God made us to be has been so revealing for me. And this season in particular, it has provided me a piece unparalleled anything. And so I would say that’s been the biggest. There is a little bit longer 60 seconds, but the Lord put some of my heart, so I had to figure it out. But that’s what’s been at my heart these last few months.

John Coleman: Guys. That was phenomenal. Phenomenal words for everybody. You know, you guys are both such a reflection of faith driven investing. You’re such a reflection of people who are motivated by this deep and authentic faith in Jesus that I know you both follow to do the right thing in the world, to treat people well, to invest well. And we’re just so grateful for your witness in the marketplace and for the fact that you are partnering with these companies that can help change the world and change the lives of individual human beings. And and that’s such a service. This is Brent Beshore from Permanent Equity today with us, Marcus Stroud from TXV Partners. We would encourage everyone to go check out the Main Street Summit and Capital Camp. I know capital camp’s in a waitlist right now, but Main Street summit is open to all I think at the moment. Have Google those things and Brent Beshore & Marcus has his Human Performance Summit coming up at the beginning of next year. And gentlemen, I know will pay attention to that. And then just a shameless plug here. If you are interested in faith driven investor groups, they’ll kick off again in June. You can go to the website and find those. It’s nine weeks, an hour a week where you can build community with other investors. But Marcus and Brent, thank you so much for being with us today. Thanks for sharing your story.

Marcus Stroud: Thanks, John. You’re that man. Man, you’re gifted. And thank you so much.

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Sometimes you just have to flip the script and shake things up, and that’s exactly what we did with this episode.

On a special edition of Marks on the Markets, we play a little musical chairs and put John Coleman, who usually hosts the show, in the hot seat so he can field questions about the state of the markets so far in 2023.

He joins Richard Cunningham to talk about venture, the debt ceiling, AI, public markets, and more. Plus, Richard gives some exciting updates about what’s happening across the movement. 

If you like this episode, make sure to follow, review, and share the show.

Episode Transcript

Richard Cunningham: Well, good afternoon. Good morning. Wherever you are tuning in, friends, welcome to the Faith Driven Investor Podcast. Welcome specifically to our monthly marks on the Markets segment. We are really grateful to have you joining us today. And now you might be wondering, hey, why does the voice of the host sound far less astute today than it normally does? And if that is the case, you are spot on in your observation. And that is because I am not John Coleman. My name is Richard Cunningham, and I have the privilege of serving on the faith driven, entrepreneur and faith driven investor staffs. And the reason you’re not hearing John Coleman is because we have a flip the microphone around today, folks. We are playing a little bit of musical chairs. And John Coleman, your normal faith driven investor podcast host, is in the hot seat today and he will be the interviewee as we dive into this month’s segment of Mark’s on the market. So your normal host is going to be the one fielding the question today. This is going to be a lot of fun. John how are you, friend? Welcome on.

John Coleman: Yeah. Richard You guys are really scraping the bottom of the barrel. I’m convinced Joey and the producers just wanted to make everyone feel grateful for the real experts that we bring on regularly. And so they thought they’d give them a glimpse of what the world could look like without that expertise by putting me on the mic. So happy to be here today.

Richard Cunningham: You know, most podcast producers are playing checkers. Joey is playing chess. This is an opportunity to say, Hey, let’s do the guest orientation. Let’s get John Coleman on. And what it will do for future episodes is just something that is just the furthest thing from the case. And here’s why. John, everyone knows you and appreciate you as our podcast host. Let’s take an opportunity now for people to understand your day job, what you do, a little bit of your background because it is expansive. We love you as a writer, as an investor. Your work at Soveregin’s Capital, obviously, but to yourself up a little bit to kind of frame this conversation and just who you are, where you come from, a little bit of your story.

John Coleman: Yeah, absolutely. Richard. So my background is I’ve spent most of my career between management consulting and investment management. I actually graduated college thinking we were just talking about this before the show started thinking that I’d be a journalist or an academic. I read a lot of liberal arts stuff in college, but somehow bounced into a first job as a quantitative energy hedge fund trader right out of school. I was objectively the world’s worst quantitative energy hedge fund trader, and so then quickly moved on to a consulting firm called McKinsey and Company. Spent a few years there before and after graduate school, did business school, Public Policy School, and then before joining Sovereign’s, I spent about nine years at a large publicly traded investment manager called INVESCO in a variety of roles, and then about two and a half years ago had the great good fortune to join the team at Sovereign’s Capital. Luke and Henry recruited me on as Henry was moving over to do more on the ministry side to help lead Sovereign’s alongside Luke. And it’s been an amazing ride. It touches on everything I like to do. I love the investment side of the business and I still get to do a little bit of that. I love thinking about the market environment. I love thinking about trends in the industry, including faith driven investing and how that’s evolving and how we as faith driven investors can get more sophisticated about that, can really develop the right frameworks to make that a positive thing. And then I have retained some of that liberal arts urge in that I still write a little bit as well. So I’ve written a few books over time, write a few articles once in a while, and it’s a way that I kind of process what I’m learning. So that’s a little bit about me.

Richard Cunningham: Man that’s fantastic. I know our listeners will love kind of the opportunity. You’re the one usually getting to ask that question. Hey, tell us about yourself. Tell us about your journey. And so a rare privilege to get to ask the host what makes up their story. And real quickly, double click on the writing piece, because I know there are just a lot of exciting things happening. In your work with HPR, you released a book recently, a hit that real quickly.

John Coleman: Yeah, absolutely. So I’ve been writing most of my life. I started back when I was in high school on the school newspaper. So it’s just it’s something I’ve always loved to do. I find it really cathartic. I joke some people golf, I’m not very good at golf, so I write as a hobby. I’ve done a few books over time. My first book was actually a Christian book with Crossway, which is the publisher of the ESV Bible. And then I did two books with the Harvard Business Review, both of them on purpose, meaning Next Generation Leadership, one called Passion and Purpose about 12 years ago, and then one just last year called the HPR Guide to Crafting Your Purpose. And My beat with HPR is really to write about leadership, personal and professional development broadly. That can be about strategy. It can be about the ways in which leaders lead, but it also has a real focus on purpose and meaning. You know, as a person of faith, that’s always been incredibly important to me. I’ve struggled with how do I achieve greater purpose and meaning in the work that I do. It’s part of what led me to Sovereign’s Capital. Actually, the story for me is I signed up to write The HPR Guide to Crafting Your Purpose in 2019. And in the midst of writing that, it got me thinking about the next phase of my career, about the type of work that I wanted to do, and I figured I’d better take my own advice. And so I ended up joining Sovereign’s, helping out with some of the faith driven investor movement. And it’s been such a joy. I mean, I feel like I’m achieving more purpose and meaning in the work that I do now than I ever have. And in the latest book has been totally off the wall. I actually wrote a novel called Miracles that hopefully everyone goes out and buys at least ten copies of. There is kind of a Christian book and a novel about what would happen if miracles started happening out in the world today. So on YouTube, on social media, Tik-Tok captured on iPhones. If something undeniable was happening, how would people react? In my my guess throughout writing it was that it would still be really divisive, just like it was in Jesus’s time. And so I follow a young woman who’s a newspaper reporter as she’s covering these miracles, and you get to see the world react around her to these miracles taking place in my home city of Atlanta. And that just came out about five months ago, right at the beginning of the year. So that’s a little bit of the writing I’ve been doing. And then I write a little bit for faith Driven Investor for Christianity Today and a couple of other publications on the topic of faith driven investing.

Richard Cunningham: Awesome. Awesome. Well, you heard it go out and buy miracles. And then I just loved the 2019 testimony of writing about your purpose, and all of a sudden the Lord starts doing the work in you and brings you over to Sovereign’s capital. And here we are. We’re on Marks on the market. We’re talking today, you know, just what’s happened inside of 2023. It’s been a full five months. And for those that don’t know and I’m sure you unpack this a little bit more, you know, Sovereign’s Capital is a multi asset investment manager across five asset classes. So you see it across five different verticals, whether it be venture capital, private equity fund investing, real estate and now in the public markets as well. And so with Sovereign’s, you’ve got a vantage point of kind of taking all of this macro data that’s happened in in 2023 and seeing it across a wide breadth of strategies. So, you know, before we dive in kind of on an asset class specific kind of rabbit trail of each of those, John, give us some just kind of macro perspective what’s happened this year, some of the kind of the key events frame this conversation for us, if you will, and kind of how you’re seeing all of that and your vantage point.

John Coleman: Yeah, I think this is one of the most unique macroeconomic periods in any of our adult lifetime. I mean, you’d be hard pressed to find someone who invested through a period that even resembled this. I mean, the closest was probably the late seventies, mid to late seventies, with this intersection of supply chain shocks, global political unrest, high interest rates, raising interest rates, high inflation, potential economic impacts of that, etc. The great financial crisis, obviously in 2007 to 2009 or 2010 had a totally different set of characteristics. It was shocking at first, then led this massive bull run that was supported by extremely low interest rates and extremely easy money. And what we’re seeing now is that popping, right? We’re seeing an end to that period. We’re seeing the restoration of a series of global macroeconomic events, whether it’s the rise of China, whether it’s the Russian invasion of Ukraine and the international response to that, whether it’s all the lingering supply chain issues that were initiated by the COVID crisis, but have continued to filter or on the money side, whether it’s the end of this massive expansion of money where the Fed has raised interest rates from effectively 0 to 5.25%, most recently just a dramatic upturn in interest rates, which we then seen manifest in bank failures. Two of the three, I think largest bank failures in US history just over the course the last few months. And it doesn’t even feel like that’s been one of the more notable stories as you look back given the global pandemic and things like that. And so I think we’re in this incredibly unique time. I think given the bank failures where we stand today, I do think the Fed is at or near the end of its interest rate hikes, especially considering that inflation seems to have slowed and begun to decline. Rising inflation and lowering inflation are always lagging. Right. And so there’s an art and a science to trying to capture those. And I think from my perspective, the Fed likely has raised interest rates enough, particularly given the instability in the banking sector, which is also cause contractions. I was catching up with our public equities team recently. We’re actually seeing a real contraction in M2, the money supply right now, which indicates to us that it’s working. Inflation is so persistent. The late seventies taught us this stuff hangs around much longer than you think it will. But the Fed is constantly trying to weigh different factors, which is how much real economic instability and banking instability are we creating? There is a lagging impact. We don’t want to overshoot and have the economy fall into two deeper recession. And so they’re navigating that right now. I guess we’re within 25 basis points of the peak rate unless something goes wrong. And if I had to really guess, they’ll stop right now and see what happens. I think what everyone’s watching now is the impacts on real economy and whether we fall into. A recession. You know, one of the shocking things about this period from 2021 to present. We thought we would go into recession much faster. Typically, when you raise rates like this, what you’re trying to do is provoke a recession, which will end inflation. That recession is accompanied by rising unemployment and a series of other things, and we just haven’t seen that yet. We’ve seen some big tech companies trimming people. We’ve seen startups starting to trim people, which we can get into, but we haven’t seen huge movements in unemployment broadly, and we haven’t seen us really slip into a recession yet. And so employment and economic growth has remained more persistent than I think folks thought. Even as asset prices, which we can get to in growth, equity and venture etc., popped big time last year, you know, some of those are coming back now and housing prices have stayed up. And so it’s this weird economic environment where I think a lot of the levers that we would typically see being pulled or a lot of the impacts that we would see from those just aren’t working like they have historically. And that’s one thing that makes asset by asset classes such an interesting environment to look at.

Richard Cunningham: Yeah, those are really, you know, intriguing insights there because what you kind of said there at the end is like some of those levers or those things you would expect to move in tandem, almost feel like they’re moving in juxtaposition directions, if you will. And so it’s a kind of a first of its kind and, you know, interesting insight. And I think you’re right when it comes to, you know, the interest rate and the Fed’s and what they’re doing, you know, they’re next time to convene is June 14th. And you saw this morning in The Wall Street Journal recording this podcast episode on Thursday, June 1st. For those listening, their next time convene is the 14th. And it sounds like, you know, there is some mixture views as to if they will continue the hike in rates. But John, your points, it feels like we are reaching an end, if you will. And then yeah, let’s go right there to that specific asset class, the venture. Let’s get as close to the action as you can in terms of kind of the earliest stages the founders building at the earliest stages. Talk about just perspectives in the venture capital markets. What you all are seeing, you know, Sovereign’s is in, I believe, fund four on a venture side. So this is somewhere you guys have been for almost a decade now, if not more than a decade. So talk there.

John Coleman: Yeah. Venture capital has been such an interesting environment over the last 18 months or so. The venture market went on this incredible bull run from at least the financial crisis. I mean, you could argue back to the dot com bust and then the subsequent recovery. It’s been on this remarkable bull run, partially encouraged by these incredibly low interest rates since at least the financial crisis. And that kind of ended at the end of 2021 into the beginning of 2022. You know, we were seeing record deals in venture markets. We were seeing record capital flow into it and all that stopped in 2022. You typically see that begin to impact the publicly traded growth equity and technology firms first, and then that kind of filters through growth equity deals on the private side down that kind of Series B and C down to kind of early stage seed in Series A, And the question was always, will those trickling impacts really get all the way down to seed in Series A and start to impact those valuations? Or will the economy recover fast enough that you might not see as much of an impact there? I think we’re seeing a mixed bag right now. Obviously, public markets got just destroyed last year. A number of growth equity stocks were down really substantially. I mean, you’ve got stocks that are down 70, 80, 90% or more sometimes from their highs over the course of 2022 and that trickle down into growth equity markets. We had a partner show us some statistics probably four months ago now. So it might be a little out of date where the average growth equity multiple. So that’s private deals. But nearing public markets, typically pre-IPO investment in private markets had gone from something like 14 to 14 and a half times revenue in 2021, all the way down to about five times revenue. So about a two thirds drop in 2022. And that was beginning to trickle down into the early stage venture markets. I think that’s continued. Compounding that, the banking trouble that happened earlier this year had a disproportionate impact on venture and venture backed companies. You know, Silicon Valley Bank and First Republic and Signature Bank were all three, some of the biggest supporters of venture capital markets in the market. And so venture firms and their portfolio companies were directly impacted, but it also led to a dry up in the venture debt markets, right, Because Silicon Valley Bank and Signature, for example, were two of the leaders in venture debt. And so some of the capital that you would typically see available to venture firms outside of equity raises dried up, even as fundraising has dried up a lot. And so what we are seeing in early stage venture right now is valuations definitely have stabilized. We’re not seeing quite as dramatic a series of drops, I think, early stage as we do late stage in venture, but it’s definitely come down. We’re definitely seeing a lot more companies being very judicious about their cash, trying to extend their cash runway 18 to 24 months venture. Firms are encouraging them to raise additional cash, even if they have to do a flat round or a slightly down round to secure themselves against the prolongation of this dry up in funding for venture. And it’s just a really tough market. Now the other side of that, which we may get to in public markets shortly, is that the public markets in technology have suddenly begun to recover. And so this year you look at the S&P 500 is up about 10%. The Nasdaq is up about 25%. And if you look at the S&P, it’s really been a rally in megacap technology stocks that has led that. If you take out the seven best performing mega-cap tech stocks, the s&p is actually down for the year. And so they’ve driven this 10% outperformance of the entire index. So that’s a little bit on what we’re seeing in venture. We think it’s an opportune time to be looking in venture and to be investing because we do think it’s stabilized a lot. We do think there’s the ability to do great deals right now, but we’re also just like everyone else, encouraging portfolio companies to be very thoughtful about their cash.

Richard Cunningham: And that’s what I was going to ask you. There is is first off, these are just remarkable insights. So the question I’m going to ask you there is, you know, Sovereign’s capital in the venture space led by Jake Thompson, see the series a investor. And when you net it all out and you think about all of the competing factors, you know, the venture debt market, you know, almost drying up the fund raising trail, it feels like there’s just a remarkable number of funds that market right now kind of hunting that same capital from institutional investors, family offices, what have you. Who is at the advantage, you know, is the valuations coming down to the benefit of the venture investor. Is this just a remarkably difficult time for everyone involved? You mentioned this is a good time to invest. How how are you all looking at it right now? Just kind of from your perspective?

John Coleman: Yeah, liquidity is light in the markets right now. Fund raising, if you’re a venture firm, is very hard fundraising. If you’re a venture backed firm, is really hard raising your seed round or series A, you know, it’s just not as explosive as it used to be. It’s taking two or three times as long. We’re seeing a lot of venture and growth Equity funds delay their fundraisers because of that environment. So definitely liquidity has dried up. You know, our perspective right now is you can never perfectly timed these things right. There are some folks who are just entirely sitting out this period. The challenge with that is if you miss the initial upside of a turn in these sorts of markets, it tends to be pretty damaging to overall returns. Just like, you know, in public markets, you always hear catching the five worst down days is 90% of the losses in the five biggest up days is 90% of the gains. You know, something on that order, you can’t really time a lot of the venture markets. So our perspective is just to remain really steady. Right now. We’ve reset our expectations on what the valuations of these rounds are going to be. We find that because liquidity is a little light in markets, there are a greater variety of deals. So deal flow is looking really good right now because there are a lot of deals that are looking for capital to sustain them through this period and that’s great. But it also means that we have to be very thoughtful about evaluating the quality of those deals. Given that the future is uncertain, the near-term future is uncertain. That said, I think, you know, we are moving forward in a steady way on the investment side because we do see really good companies out there and really good valuations. And ironically, I think some of this can actually be good for the venture backed companies as well. And this is my personal perspective, Jake or Phil, who lead our venture fund, might have a slightly different perspective. You know, I think the valuations that we were seeing were making it very hard in tech world because options were constantly under water. People were convinced as talent that they weren’t going to get the value of their options because valuations were too high. And so it was actually difficult to get and retain talent if you were a big venture backed company before. I think that’s recovering a little bit, especially as labor markets in tech have gotten tighter. And I think this is encouraging some discipline that’s healthy for early stage companies as well. You know, before it was all revenue, even the revenue was all subscriber growth or it was all user growth. And then sometimes it was revenue growth. And now I think there has been this realization that, wait a minute, these companies have to make money at some point again. And so there’s more of a cost discipline, more of a planning discipline than I’ve seen in some time. And I think overall that’s really healthy for the market and I think it’s healthy for those venture back companies in the market, though it can seem painful in the moment.

Richard Cunningham: Well-said. Yeah, a little bit of a reshift in what fundamentals, what things do we have the microscope on and should the bull’s eye be, you know, shifting appropriately at an appropriate level, if you will. All right. Well, let’s go venture before we go into private equity and real estate and kind of transition markets and asset classes, let’s see the maturity of venture kind of into the public markets. You leaned on it a little bit. And what’s happened in the S&P this year and NASDAQ as well. Any commentary on the public markets? And one of the things that, you know, I think everyone. Is reading any type of headline as focused on, you know, go up into the kind of the congressional ranks. Right now, we’ve got this debt ceiling crisis. Some people are throwing that word around there. There’s, you know, just bipartisan efforts to try to pass a bill that kind of potentially prevent any type of crisis. So any commentary there and what you’re seeing in the public markets and what’s going on and how this debt ceiling situation and the approaching ex date that Congress has tossed around.

John Coleman: Yeah, obviously super hot topic right now. I want to make one kind of 60 seconds comment before I get into that even is the Faith Driven Investor podcast. One thing I would note is this is an awesome opportunity for people of faith who are venture investors to support their founders spiritually, mentally. This is a super stressful time. I’m kind of talking about the potential silver linings and things like that for venture investors, for limited partners and certainly for founders. This is a really, really stressful time and we are seeing some companies that simply don’t make it right, which is always true in venture, but I think we’re acutely aware of it now. And my encouragement to the folks that are listening is, you know, if you’re a venture backed founder, lean into your real identity. You know, our identity is in Christ. It’s not in the money that we make. It’s not even in the success of our companies that we want to do well by those who have backed us. And if you’re an investor, whether a limited partner or a fund. Never forget the spiritual component of this and never forget that even in the midst of difficult decisions, sometimes, you know, we’re called to be good counselors to others and encouragers to others. And there are ways you can do that even while making tough business decisions. And so I think for faith driven investors, that’s important to remember as we dovetail into the public markets in this big macro fight, it looks like the debt ceiling fight is over. So again, we’re recording this June 1st. This week, they had announced that McCarthy and Biden had reached a deal, I believe it was yesterday that it finally passed through the House. It ended up that it had more Democratic support than Republican support, which was a surprise. There is a lot of criticism on all sides right now. It is one of the most bipartisan deals I’ve seen lately in the sense that, you know, basically everything we see right now is either know, 100% Republican against 100% Democrat or vice versa. This was mixed. It was mixed, Right. I don’t think anyone’s happy because it was a compromise solution. But I believe they reached a deal to extend through 2025. And so the immediate term crisis of potentially defaulting on the debt has subsided. It’s over. People were worried about that and it was delaying deals. I think it really it caused some tumult in public markets. But public markets have been super interesting this year. There have been a couple of runs that have really defined them public markets over the last five months. I mentioned one earlier, which is these technology based mega-cap stocks that just got crushed last year have been on an incredible run. I did pull up a couple of statistics this morning because I’m a nerd, but I mentioned the Nasdaq’s up about 25, S&P is up ten. The S&P would be negative without the seven biggest movers in tech rally. And if you look at those and this is not an endorsement of any of these companies, I’m just reading off statistics. Apple has been up 36% this year. Microsoft, which obviously did the deal with chatGPT Open ai to incorporate AI, which is a huge thing, up 37%, alphabet up 39%, Amazon up 44%, NVIDIA, which is effectively the chipmaker behind all the artificial intelligence right now, up 159% this year, 159%, Meta up 120%, Tesla up 66% this year. And those seven stocks have effectively created all the gains in the S&P 500 this year. That’s interesting because some of that is simply a reversal of some of the losses last year. Some of that is a flight to quality where these mega-cap stocks, the ones that I mentioned, are largely profitable companies that we know are sustainable, that aren’t going to disappear. I think the growth stocks that are still mostly underwater, those without profitability, where they’re still struggling to get margin, where the companies I read off by and large are not. And then there’s been an interesting artificial intelligence angle to this where, you know, I talked to a lot of people right now and they think artificial intelligence is the biggest thing since the Internet. And I would probably agree actually, this is probably the biggest thing to happen in markets in at least 25, 30 years in AI has the potential to fundamentally transform life right in the way that the Internet did, maybe even more. And so what you’re seeing is companies that may benefit from that, they’re in the mix for that are just exploding like Nvidia, like Microsoft. And I think that’s going to be a persistent theme. The other side of that is that for the first time in a while, Smallcaps have really lagged the mega-cap especially so we’ve seen. Huge headwinds in small caps. And if you look at the statistics right now, I talked to Matt just in our public equity teams, you know, small caps look like a value for the first time in a while. Right now, they’re undervalued relative to the large cap stocks. And so if you’re looking at markets, there’s been a run in growth recently after the big collapse last year, but there might be some value to be had moving down market to small and mid-cap stocks.

Richard Cunningham: I mean, there’s a lot there, you know, you talk to NVIDIA and just kind of the the AI frenzy that is taking place. I believe NVIDIA touched $1,000,000,000,000 market capitalization, which is just staggering, shocking when you think about it.

John Coleman: Has like an Nvidia tattoo. I think I saw somewhere.

Richard Cunningham: Sovereign’s capital tattoo.

John Coleman: Who says I don’t have one? Richard So.

Richard Cunningham: That’s awesome. So one of the directions I want to go quickly before we kind of have you speak to what Sovereign’s is doing in the public markets and kind of some final commentary there is, you know, Faith driven investor podcast. You made the remarkable comments just in terms of the opportunity for investors to lean in with more than just capital in this season, specifically in the venture markets, those that are angel investors, venture capitalists, that you have an opportunity here to be the hands and feet to love God, love neighbor in a very real way. You know, it is for founders who are experiencing a lot of pressure and and kind of on the front lines of what is a tougher time talk about, you know, from a faith driven investor lens, the AI frenzy. There’s a lot of people who are sitting there and saying job replacement, the ethics that can be at play here in terms of how far AI can go. Any commentary or insights there? In a ways, you kind of are looking at that.

John Coleman: Yeah. Wow, such a good question. I haven’t thought a ton about the intersection of the Faith and AI component. I would say, and this is a personal perspective, so not everything I say certainly is on behalf of FDI or Sovereign’s. I think being a person of faith means that I don’t have to get quite as worried about technology trends as some people seem to. You know, that’s good. I think, A, if you believe that Christianity is true, then we are in touch with fundamental truth about human nature that are not going to change. Right? God is sovereign. He has a plan, right? We are following that plan. He has plans for the world are beyond our comprehension. But I don’t think we fundamentally have much to fear either in scientific discovery, because ultimately that’s always going to align with the truth that we know or in technological innovation, because he is sovereign. And, you know, even if AI ended up eating the world and one day the world may end and nuclear crises could in the world, you know, we have confidence that our future is secure because of our faith. And so I probably tend to be a little less alarmist about those sorts of trends in general. I also think from a practical perspective, every time we’ve had a panic about technology ruining employment, making life more difficult, etc., it’s proven false. It’s factually never been true in the history of human nature. So if you go back to the Industrial Revolution, what was it? It was Captain Swing or something. There were all these movements basically where workers of the world were just like raiding factories and destroying factory equipment because they thought it would put everyone out of work and that employment would skyrocket. Only the owners of the factory equipment would effectively have any future. And of course, that didn’t end up true, right? The Industrial Revolution had bumps. It certainly had many negative sides, but at the end of the day, what it actually did was relieved a lot of individuals of incredibly grueling manual labor that was unsafe and improved worker safety standards. It opened up freedom of movement for workers to do more innovative and exciting things over time. The Internet revolution did the same thing right. The automobiles and airplanes that we invented did the same thing, electricity did the same thing. So if I had to guess, artificial intelligence will dramatically shift the economic landscape. It will be a difficult adjustment in the near term, but it will ultimately help improve humanity’s ability to pursue the things that they love. It might even make our lives easier, like most technological periods in the past. I do think that raises a spiritual crisis, right? Because if you look at markets or if you look out at studies right now, we’re the most prosperous, the most safe, the most healthy we’ve ever been in the history of the world, ten, 20,000 years, history of humanity. And yet statistics on happiness, loneliness, purpose are all pointing in the wrong direction. We’re seeing statistics come out right now about, tragically, things like suicidal ideation among teenage girls, loneliness and depression, mental health issues among people of all ages. And all of this prosperity has not helped that it’s actually maybe made it worse. And there are underlying factors for that. And so I think the real spiritual challenge of the age might be how do we deal with the spiritual crisis that can erupt when societies become prosperous, when they become less in need of God, when leisure time increases and when people start to lose hope? How do we deal with that? Spiritual crisis. So I’m much more worried about that than I am an economic crisis on the back of AI.

Richard Cunningham: Really, really good comments. All the more reason to go back to the point you made at the beginning about this of the worship of a sovereign God. Anything happening on this planet did not happen by surprise to him. It did not pass through his hands as a surprise. He didn’t miss this one. And all the more reason to go back to that sovereign God and ask for his will, his design for our specific stories, and then beyond that, our companies investments as a byproduct of that kind of overflow. So great comments. Thank you. Well, hey, I want to close on the public markets and we’ve hit on AI we’ve hit on what’s happening with these mega-cap stocks, just kind of what’s happening at Sovereign’s Capital in the way you are specifically investing in the public markets. I know this is a newer strategy for Sovereign’s. It’s been a really exciting one. Couple of comments there and then we’ll move into, you know, the real estate market. In the private equity market.

John Coleman: I won’t get specific just because of […] limitations on this. Maybe I’ll make a couple of general comments, Richard, just about my outlook on public markets. And I think our outlook, you know, one of the other interesting trends and this will dovetail into the FDI conversation, I want to get your update on where faith driven investing stands as well. I’d love to have a dialog about that. Marks on the market today, June 1st, the last 12 to 18 months, we’ve seen the biggest push back in the mainstream values investing movement, which is basically synonymous with the ESG movement in decades. Right. 23 years ago, ESG was almost nothing. I think now it’s somewhere around $35 trillion. I looked at the latest statistics. It’s been booming. I mean, sometimes doubling in a given year, although that’s slowed a bit. The growth in ESG declined 76% in 2022. And there’s been this massive pushback from the left or from some people that has been a pushback against greenwashing or justice washing this idea that ESG is really a commercial grift, you know, it’s not authentic from centrist or slightly right leaning groups. You see push back on performance. ESG is hampering performance. It’s not in the fiduciary interest of folks or asset managers are voting ESG stuff without telling their constituents that they’re doing it. Denying them that choice is the wrong thing to do. And then I think people on the political right or sometimes people of faith have pushed back on the nature of the policies embedded within ESG, that they’re more progressive politically. They’ve been very focused on things like climate diversity, social justice, so to speak, those sorts of things. And there’s been a pushback on the political right. And so ESG has actually began to retract. And I think correspondingly, awareness of ESG and values investing is the highest it’s ever been, the highest it’s ever been. I think five years ago, the average investor didn’t know much about this. It was driven by institutions and asset managers. Now everybody knows about it. I think that is a massive opening in private and public markets. To do something different is, I think, the right way to push back. If people want to push back on ESG, it’s not to simply say all this is wrong, right? We want to get rid of it. Because to get rid of something, you have to replace it with something. I think it’s an amazing time to posit a positive vision for the future, to say these are the things we don’t like about the existing mainstream approach. But here is a way that we can create love of neighbor and human flourishing in companies in real estate developments. Here’s what is fundamental about our faith and what that implies for human flourishing. How to make people’s lives better, which is what faith driven investors want to do, right? We want to make their lives better because of love of neighbor. And how can we begin to advocate that in public and private markets? That’s what we focus on every day, is how can we advocate for human flourishing, love of God, love of neighbor in the companies and real estate developments that we work with and do so in such a way that leads to outperformance because we believe great cultures are the greatest competitive advantage in business and they have the opportunity to outperform if done well. And so I think my hope right now is because of all this awareness to be the pushback against ESG, people are now more aware of the impacts of their capital, good and bad, in the world. We say all investing is impact investing, right? Just what impact you’re having. And I think our opportunity as faith driven investors in public and private markets is to redefine what values investing looks like, to really set a new standard for what can authentically create human flourishing in the marketplace, and to do so in a way that continues to unleash the innovative and economic power, the creative power of capitalism, which I think is not necessarily in conflict with those things. And so I know that’s not specifically an answer to the public equities question, Richard, but that’s kind of where my head is at right now. And what I think the massive opportunity for us and for others in this space is at the moment.

Richard Cunningham: I think that’s fantastic commentary, John, because I think what you’re advocating there I think is really a good conviction push to our listeners, to our audience is saying, hey, unlike ever before in history. There is an axis of information, there is a proximity to the investment process and methodology that otherwise might not have existed. You know, I’m Joe and Jane Smith, and I invest with my financial advisor and I kind of leave all of the decisions up to them. And I trust that my financial advisors, a good guy or good gal who has my best interest in mind, there is now an opportunity to get as close as you can under the hood as possible and look under that hood and say, Hey, what am I in? What am I actively deployed in? And like you said, there’s been pushback to ESG. You know, just this morning, Delta was sued for greenwashing and a massive kind of class action lawsuit. And there’ll be, you know, multiple years of that playing out. But you’re starting to see kind of mainstream media wake up to the fact of like, oh, we really pushed this hard. And so what is that alternative? What is that replacement is faith driven investors like you’re saying there is a real call to stewardship here, a real call to have the information is accessible, unlike it probably was ever before for you to lean and understand, Hey, this movement of this dollar pushing this capital towards something is almost an endorsement. It’s impact investing. So what kind of impact do I want to have? You know, whose hands I’m going to leave that impact? And so I appreciate your commentary there. All right.

John Coleman: So what are you saying? I mean, you sit at the center of the world here as part of faith driven investor. What are you markets right now? What do you think is happening?

Richard Cunningham: I mean, that’s a world class question. I appreciate you asking, know, quick commentary. I would have, as you know, our one of our co-founders, Henry Kaestner, who I know many of you know on the face you’re an Entrepreneur podcast, is on the feature and investor podcast as well. He’s in Africa right now, and by no means is this an advocacy that the only faith driven investing can happen in emerging markets and frontier markets in places like Africa? But we were talking this morning on the phone this the encouragement he has from the people who are flocking to this concept in an economy like Africa, you know, the big four markets in Africa are Lagos, Nigeria, Nairobi, Kenya, Cairo, Egypt, and then is kind of broadly South Africa. The youth on this continent, like if you look at that kind of population demographic and how much of Africa’s massive population is concentrated at the younger end of the spectrum and how many of these people are well-educated, coming out of school but then do not have access to work because of just a work shortage crisis taking place in Africa. The youth in Africa are building. They’re in the entrepreneurial space. They’re showing up by the hundreds to faith driven entrepreneur events, which is just such an incredible encouragement. And then what I believe is even more encouraging from kind of the faith driven investor aspect is the local capital, the local skin in the game, The folks that want to say, Hey, I want to back what’s taking place in my backyard. It’s no longer that an African entrepreneur or a Southeast Asia based entrepreneur has to fly to New York, has to fly to San Francisco as really the only source of capital. There are leaders in their own economies who can be those friends and family investors, who can be those angel investors. And so that’s one aspect that is just remarkably encouraging is just what’s taking place in emerging and frontier markets, the innovation, the building, you know, the ai frenzy, the Internet, kind of democratizing availability to technology is something that’s remarkably encouraging. I’d say another trend and I’ll finish here is just we talked about this earlier in the podcast as the number of funds and markets just led by exceptional Christ followers who have something inside their thesis that it really gravitates you in from a faith driven investing standpoint. So, you know, sovereign’s, you all invest explicitly in Christ following owners and operators because you believe the best cultures are set forth by those leaders. And there’s alpha to be had there. There’s other fund managers and funds out there and market who are investing in what we’re calling the great wealth transfer. Now there’s going to be $60 trillion handed down from really the baby boomer generation into this next millennial, Gen Z, Gen-Y gen X, next generation. And what’s also being passed down in that great wealth transfer is a number of Main Street businesses and it’s people waking up to the fact of like, well, this is a rare and privileged opportunity to go and acquire these family owned businesses with great legacies that employ dozens, if not hundreds of people. We can go in and compensate the baby boomer for really a job well done at a really healthy, fair. You know, Ebro multiple, whatever it might be kind of in the private markets. And then we can now operate that business, keeping those values intact. And so there’s a number of those funds and markets out there saying, hey, let’s be the next generation, next next kind of owners, if you will, of the baton that’s being passed. So I think that’s really exciting. I think there’s a huge push to philanthropy and generosity unlike we have ever seen. Folks are waking up to the incredible tools within the donor advice fund markets and things of that nature. And a lot of that wealth that’s transferring is being passed down in a state that’s being passed down in charitable vehicles. And so people are saying, hey, what am I waking up to that I’m uniquely called to that. Now I have $500,000 in this trust that I can’t access for my family, but I could potentially access for good in the world, whether that be impact investing, whether that be giving to that charity that I’m extremely passionate about. So that be kind of my general commentary around. FDI and what’s happening in the world of faith driven investing. And I think the last thing I would say is this is not a prescriptive or presumptuous movement. Faith driven investing is just as much backing an early stage entrepreneur and their very beginning stages of growth as it is being a financial adviser, walking alongside families. And they’re primarily invested in the public markets because they aren’t an accredited investor, a qualified purchaser. They’re kind of the retail investor who just wants to be an excellent steward with what they have in their 41 K or their IRA. And so I think that’s just as much the faith driven investing conversation.

John Coleman: And let me take a moment to pitch Richard’s incredible platform, which is if you think that sounds interesting to an investor now has a series of small groups you can be a part of, you go to the website and sign up on those. Richard and team have created genuinely one of the most fascinating libraries of content. I think out there. Experts that we’ve had around the Finny Kuruvilla all over the world, the Andy Crouch is of the world, you know, etc. Shundrawn Thomas, all these awesome, awesome people who are in investment management. And I think you guys do a great job of supporting those who want to lean into this with content like the small groups which people can sign up for, of creating content that help to educate people and also just highlighting the amazing people in the space because there are many more Christians who are very serious about their work as investors and very serious about their faith. And people realize, I think you can clearly see to think that investments is a space without that kind of moral compass. And Richard, you and I know that we meet people at all these amazing firms. We just have Brent Beshore for permanent equity, Marcus Stroud from TXV. We’ve had Evan Beyer from Warren Capital and Victor Hugh from Lumos and all these other folks. And they’re just amazing firms out there doing the right thing. And I think a kudos to you, Richard, for creating a platform. I think that’s so adept at helping people to lean into their faith as they invest.

Richard Cunningham: Appreciate that, John. I think the the commentary I’d give there is this is a it’s a big, large conversation and faith driven investing for us as Christ followers. We do not want to put a box around it and limit, you know, what the Holy Spirit can do in the work of someone’s life and what that actually plays out in terms of how they run their business. As the entrepreneur of the faith, you’re an entrepreneur. And then also how they steward capital is the faith driven investor. And so to the groups portion of what you’re talking about, that’s a lifetime of wrestling to come up with that maybe investment thesis as a family, as a fund manager, as someone who stewarding capital, as an advisor, or maybe just your everyday kind of personal angel investor, It’s a lifetime of wrestling. So that’s what these groups are for. That’s what our website, this podcast, these resources that we produce, are forced to essentially help you take that first step of, Hey, what is practically getting in the game look like for me and my spouse, my family, my children, you know, the generational impact I want to have. And so I appreciate your kind words there, but we are coming up on a close here before I have our kind of legendary FDI question where we get to ask you. So plant a seed here about what you’re learning in scripture. Real quick commentary on anything you’re saying specifically just in the private equity markets and the real estate markets. And then we’ll close.

John Coleman: Yeah, absolutely. I’ll just touch on real estate briefly. What a confusing real estate market right now. No kidding. No kidding.

John Coleman: We’re all waiting on pins and needles to see what happens in office, in retail right now, with rates resetting, with leases resetting. I think I’m nervous about that space in housing, single-family housing and multifamily housing. There was this COVID boom in home prices, the greatest gap between median home price and median income in the history of the United States. We all thought rising interest rates, which have effectively doubled the cost of owning a home because of mortgage rates, would lead to falling house prices. But what’s happened is because no one’s selling their houses and there’s a structural shortage, even though it’s more expensive to buy a house. With mortgage rates rising, the prices have not come down because no one’s selling. So the supply is incredibly limited. And so I think private equity is going full steam ahead right now. You know, leverage is has been a problem. If you were a private equity firm banking on leverage to help you do deals, I think you’re in trouble if you’re more operationally focused. And I think a lot of private equity is doing well. I think real estate is a very intriguing sector right now, let’s say, because the dynamics with interest rates, with office occupancy, with a structural housing shortage, have just created some of the most fascinating moments in markets that I can remember.

Richard Cunningham: Yeah, that’s right. That’s really well. So one of the things I sit there and think is, you know, if I’m a homeowner right now and I bought ten, 15 years ago, whatever it might have been, and I was, you know, buying it with almost free money, a two, 3% interest rate, why would I ever want to go refinance? Why would I want to sell in this environment to go now lock in a new 30 year fixed mortgage at 7% or 6%, whatever the new kind of going rate is that’s available in your local financing context. But then I drive around here in Austin, Texas, where I’m based, and there’s for sale signs everywhere. Once again, it’s kind of those those levers you would expect to move in tandem feel juxtaposed. And I think you’re right, we’re all kind of waiting on pins and needles to see what plays out. So. John, That is remarkable commentary from top to bottom. I know for your listeners there, we hit a lot of markets. We went from venture to private equity to real estate. We touched on what’s all happening in ai the public markets. John, of course, hits all of it with just excellence. He is far more than just a podcast host. He’s proven himself a capable guest. And so, John, we’ll close here. What’s the Lord teaching you in scripture? Take us home there. That’s an encouraging word of what God’s kind of showing you on that side.

John Coleman: Well, the good news, Richard, is anything that I got wrong today, I’m going to hear from the various leaders of our teams within 24 hours of airing about all the statistics I got wrong. So, you know, caveat emptor, the passages that a few of my partners and I have been lingering on lately is Luke 16, 11 through 12, which people know is the true riches passage. It says if then you have not been faithful in unrighteous wealth, Mammon money, right? Money. Who will entrust you with true riches? And if you’ve not been faithful in that which is in others, who will give to you that which is your own. And really, I’ve been trying to reflect on this passage in in effectively two ways. One is this is a call to be faithful in the stewardship of wealth, particularly the wealth of others. Right. Which is the game that we are in. This is my profession is how do I try and take money that others have worked very hard for that supports their retirement, their missions, their charitable giving, and try and help them get a return on them that allows them to do more good work. Right. So it is a conviction that we as stewards of our own wealth and of others wealth, need to take that very seriously. It is also a reminder that money is not true riches. I think the easiest thing to get sucked into when you’re in the investment world, I see this among wealthy people. I see this among professional investors. Wealth managers is you keep score with money. It’s easy to measure, it’s easy to manage. Your world, start to become money. You start to view that as something more important than it is. I saw a shocking Wall Street Journal ORC poll just a few weeks ago that people now in the United States value money more than religion, more than community, more than their profession, more than patriotism, more than this host of other things. They value and trust money more now. And I think that’s part of this hollowing out of society that we’re struggling with. Money has always been a tool. Money is a great servant and a poor master. And the Bible talks to us a lot about serving money, but it warns about almost nothing more than the love of money, right. And being a servant to money. And so we’ve been reflecting on that passage a lot. This idea of true riches, both in terms of how can we be better stewards, but also how can we keep front and center for us and for those that we serve? That money is actually not a good measure of value. That money is not true riches in the Christian faith. That money has a role to play as a tool, but it never touches on what’s so unique about our Christian faith in the eternity that we’re targeting. And so I think that passage is one that my partners and I are batting around, and it’s one that I’m trying to kind of reflect on and understand. And I think it’s one that all people of faith, all people of means should really take seriously in terms of what it calls us to do on both sides of the equation.

Richard Cunningham: Man John Coleman, that’s a fantastic word. Let’s reframe the conversation. Let’s move the balls out of faithfulness and let’s get it off of money as the scorecard. And so, John Coleman, thank you for being on the day of.

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Many investors from other religious backgrounds are asking the same core question we are: how do my beliefs shape the way I think about my work? 

While theological differences will always come up, we can still learn from their perspectives. That’s why we’ve invited Michael Eisenberg back on the show. 

Michael has joined us before both on the podcast and at the conference, providing us with incredible insight about how the Hebrew Scriptures give us practical wisdom in business. 

We welcome Michael back for an open conversation about how his Jewish faith influences his views of investing. 

Find the episode at the link in the comments and don’t forget to rate, review, and follow the show.

Episode Transcript

John Coleman: Welcome back to the Faith Driven Investor podcast. This is John Coleman, your host. And we have a very, very exciting episode today, I think, with a great friend of the Faith Driven Investor podcast, the Faith Driven Investor movement, our firm Sovereign’s Capital. Michael Eisenberg Michael has been on the podcast before talking about his wonderful book, The Tree of Life and Prosperity. But today we’re going to get to delve even deeper in what the Jewish Scriptures and Jewish philosophy say about investing in financial life. Michael is a long term venture capitalist. He co-founded and now leads Alef, a Tel Aviv based venture capital firm that invests in technology companies. He’s a frequent author on many different topics, and we’re going to talk about a massive writing project that he’s taken on with multiple books now. I’ve had a chance to read one. I’m anxiously awaiting the translation into English of the others, and we’ll get into that more deeply. And he’s also a family man, and we can talk about that large family there, all of whom are remarkable people and has been deeply involved in community service and government since he migrated to Israel from the United States in 1993. And so we’re very, very privileged to welcome Michael on the podcast. Thanks for joining us today.

MIchael Eisenberg: Thanks for having me, John. And I’m looking forward to welcome you back to Israel personally and physically so we can share a handshake and a hug.

John Coleman: Awesome. Awesome. I did get to visit Michael last year, last spring in Israel. It was my first trip to Israel, although my wife had been a couple of times and he was a really gracious host in his beautiful office there. So we were very grateful to visit. Michael You know, one of the things that impresses me most is just your remarkable capacity for intellectual exploration, for ideas, for writing. And that’s been a part of your life forever. Talk to me a little bit before we get directly into the investing side. I think this will lead in. Where did you first get interested in writing and grappling with ideas through writing?

MIchael Eisenberg: I had a ninth grade English teacher whose name was Ms. […..]. We used to call her the little lady. She was tough as nails. I mean tough as nails. About five foot one. She yelled all the time at us, but she forced us to write. We read a book, I think it was every two weeks or maybe every week. I can’t remember. And I think it was Wednesdays. She would say 20 pages, write. And you start writing and you had to kind of quickly organize your thoughts. Sometimes she would just give topics and say, seven pages start writing. And I thought she was amazing. And I kind of became interested in writing, I think, through her, funny story about it I had her in both the ninth and the 10th grade, and she taught 11th grade too, but everyone wanted out of her because she would often she put you in the corner. She had this great line. She would say, Do you see what’s written behind the me on the on the blackboard? You know, says, No fidgeting, No, stop fidgeting. And everyone wanted out. But in 11th grade, I wanted to go back there and I went to the principal because they put me in a different English class that I’d like to go back to Miss [….]. They go, Nobody wants to go back to Miss […..]. So no, you can’t. And they didn’t let me go back. But I. I give her a lot of credit for my love of writing.

John Coleman: Well, what I love when I read your stuff and maybe it’s the same for you. I write because I know so little. I feel like when I’m interested in and passionate about a topic, the best way for me to explore it is to research it well enough to write about it, because I figure if I can write about it well and teach others, that means that I’ve actually taken the time to understand it. And I can sense that kind of intellectual exploration in your writing to where you’re really reflecting deeply on the topics that you explore. Is that something similar to the way that you approach it, and how do you pick the topics that you’re going to write about Michael?

MIchael Eisenberg: I’ll start with the second question first, which is how do I pick the topics I don’t is what happens. So I think life happens and in my life I’m an investor, I’m a venture capitalist and a person of faith. And we read, as is the Orthodox Jewish tradition, we read the Hebrew Bible every week in synagogue, and you read one portion of the Bible, and so you run into it every week. And as you kind of run into it, you develop your own lens. And I think we need to take these things seriously and I take them seriously cause you to ask questions, particularly as a modern person. And when you ask questions as a modern person, both of the texts and of other people and you want to take it seriously, you need to figure out both how you apply it to modern times and to kind of what is the intent here, even if the situation is different than an old agrarian economy. And that’s what I found myself exploring. And at the same time, I literally just finished yesterday what you call a […..]. So in Jewish law, which persists, the way it evolves is through questions and answers. It obviously started to evolve through the Talmud and then through questions and answers. And I’ve run into particular questions. When Silicon Valley Bank failed, it was Sabbath in Israel. And so how do you deal with a failing bank when you’re, you know, 9 thousand miles away, and it’s the Sabbath under Jewish law. So I just finished yesterday the a two and a half month journey that describes exactly what you said, which is I got to figure this out. And so I spent together with my study partner and writer of my book, two and a half months deep in this topic. And we sent out the 23 page response yesterday to ten rabbis to get their feedback to see what they thought about the Jewish legal analysis of this problem of what happens when Silicon Valley Bank fails on the Sabbath. Wow.

John Coleman: Wait a minute. I almost have to ask the follow up now. Any early insights into how a faithful Jewish believer can approach that question?

MIchael Eisenberg: So in general, under Jewish law, we have a rule which says that things that endanger your life allows you to violate the Sabbath. This obviously doesn’t qualify as something that endangers your life. It’s very fundamental. There is a a commentator from about 300 years ago. It was called the McGuane Abraham the Shield of Abraham, who writes that in certain conditions of massive financial loss, you can violate rabbinic prohibitions of the Sabbath, but not biblical prohibitions of the Sabbath. And there’s more to it than that. We took an entirely different approach because we think it’s very difficult to figure out how this is a risk to your life. And also, we think the notion of a large financial loss is a very blunt tool. But we think in the digital economy, which is I think was very different here, we had a digital bank run within 48 hours. Depositors withdrew their money and sank a bank. And we think in a digital economy, things both like cyber and digital bank runs fall into an entirely different category that has been lost to the Jewish people for 2000 years. But it does appear in the Talmud because we haven’t had sovereignty. And so what we suggested is that in a sovereign country, businesses and particularly digitally connected businesses are actually part of the piercing of sovereignty when they fail. And because of that, it would be permitted to violate rabbinic prohibitions on the Sabbath in order to make sure that the businesses stand up or businesses are not attacked either by digital bank runs or cyber attacks or whatever it is. That’s the approach we took, you know, still under investigation and dialog. We’ll see how it comes out.

John Coleman: Man, Michael, I love this. I love this. And I want to follow up about this broader reflection on the Scriptures, on the Bible that you’re doing and how that integrates with economics and technology. As I understand it, like you said, you’ve been writing about that intersection for some time on a weekly basis. And I think one of the things that I’ve come to admire the most about my Jewish friends is the deep reflection you do on the Scripture portion every week and how that begins to inform your evolving faith and how much debate there is about that. You know, it’s really an active intellectual life. Talk to me about this massive writing project that you’ve taken on, starting with the Tree of Life and Prosperity and how that intersects between those three things your faith, technology and economics.

MIchael Eisenberg: So first, you give me more credit than I’m entitled to. You described it as a massive writing project. I actually didn’t sit down to do this. It’s kind of happened in waves along the way. I sat down to discuss the topics with my kids at the Sabbath dinner table, and I started writing myself notes. It evolved into longer form items and then it evolved into the first book, and then I became obsessed. And I’m now four volumes into the five books of Moses. So I’ve done Genesis, Exodus, Leviticus and numbers, and I’m already kind of done with the rough infrastructure of Deuteronomy as well in Hebrew. And I think as I was saying before, one of the benefits of being in synagogue every Sabbath and kind of, you know, coursing through the Bible every Sabbath, is that you become familiar with the text. But I find that too often there is a dichotomy between our modern situation, let’s just call it and text that we consider to be eternal, but we actually don’t treat them that way. They’re kind of some nostalgic thing we put on the side, and I consider myself very fortunate that our own rituals put us in this context of the biblical scriptures every week. And so when I sat down to do was to look at how you apply scripture to an active, technologically advanced economy, what are the foundational principles of the text itself? Reread There was a commentary in the Middle Ages because there was Rabbi Samuel, the son of Moses, who was a grandson of the famous Jewish [….] named Rashi. Rabbi Solomon Isaac or a son of Isaac who said that there’s something called the Scriptures that are reinterpreted in every time. What does that mean? If we think they’re eternal, it means that they have meanings that we can then infuse with what’s going on today and then try to apply them as faithfully as possible to the problems we have today. And my own view is that the Hebrew Bible and this may be controversial. My own view is that the Hebrew Bible in particular is not just a set of metaphors and. It’s not just a set of precepts. It’s actually a blueprint for life and society. And if you take that seriously, then one should attempt to apply it to a modern life in society. And I take that seriously. By the way, I think the founding fathers of America thought the same thing. You know, if you believe in the Declaration of Independence as a foundational document, they were talking about people created in the image of God in that way. And they kind of had a blueprint for a very tolerant America, tolerant of religious freedom. But at the same time, much of Christian society in large ways. I know that’s not politically correct to say today, but I think it’s what the founders had in mind. And so they attempted to apply in the separation of powers. I think the same biblical text where the Hebrew Bible had a king, a prophet and judges. Right. And you had, you know, during the time of Ezra, the scribe, who is mentioned in the Book of Ezra, which is an Old Testament book in the Scriptures. He had a council of elders, which I think is the way to think about the US Senate. And so I think they took this really, really seriously. I mean, I think we need to as well at a societal level.

John Coleman: Wow, I absolutely love that. That’s really interesting. And it is interesting if you date back to the beginning, you know, in some respects, not completely, but in some respects, the American founding was the story of religious refugees generally. And there is evidence, at least in many parts of the country, and especially amongst the founders, that Jewish people were part of that They were welcomed with open arms, at least in many circles. And that is hopefully a credit to the country at that time. You know, as you think about the project that you’ve taken up, and maybe this helps us reflect as well in a way that Christians can help to understand the Jewish scriptures more. Talk to us about this book series that you’re publishing that began with the Tree of Life and Prosperity. I think the next book title from Remembering Properly is Everyone Can Be Moses, which is being translated and then the Land of Milk, Honey and Uncertainty, which is coming out. And you’re kind of marching through books to the Bible, talking about really interesting, counterintuitive scriptural lessons. Talk to us about what’s there, what’s that evolving into. And also just how the Jewish scriptures are unique from what we would consider the Christian scriptures, where the difference is there as well as the similarities.

MIchael Eisenberg: How many hours do we have?

John Coleman: As many as you want, Michael. I know I ask a lot of questions, all bundled up in one there.

MIchael Eisenberg: So like I said, I’m for books in on the biblical series. I also have a book I wrote years ago on the Book of Esther, which is about Jewish identity, by the way. Funny story. And the one I wrote on the Book of Esther, I got a call from a Catholic friend of mine in Los Angeles who called me up saying, You know, you could have written that book about Catholics as well, and not just about Jews. So I told him I would, but I didn’t have the same experience. So he was free to take it and adapt it as he saw fit in the biblical series of the five books of Moses. So I’ve done The Tree of Life, of Prosperity and Genesis. Everyone can be Moses on Exodus, what I call Roaring Tribe on Leviticus. I’ll spend more time with that in a second. And the most recent one is Milk, Honey and Uncertainty on the Book of Numbers. And the Book of Deuteronomy, which I’m working on now in Hebrew, doesn’t have a name yet. So Genesis, I’ll start there, takes a look at the stories of the forefathers in the context of, Hey, this is real life. And so, for example, if you look at the story of the Garden of Eden, I view that as a situation of universal basic income. Adam and Eve were fed, you know, Christian doctrine is to look at it as original sin. In Judaism, there’s two schools of thought on that, whether it was a sin or just call it, you know, growing out of adolescence. But, you know, the Bible chooses to tell us the story of somebody in an idyllic society where all his needs are provided for by God and he either sins or grows out of it or definitely does something inappropriate, and then he’s expelled. And as he begins to sweat and work by the sweat of his brow and harvest, he for the first time has children. And I think what it tells us, there aren’t any children in the Garden of Eden. Right. And I think because man and woman, by the way, man doesn’t even talk to woman there. Adam does not talk to Eve. They don’t have a joint project and everything to work on. They have no future look forward to. Everything’s provided for them. They become indolent. And you know, the scholars, the sages say that indolence leads to boredom. And boredom leads to sin. And, you know, I think that happens when we have our basic needs provided for. And man was actually destined to work. I used to joke about a rabbi of mine that he was the first Orthodox Jewish Protestant, you know, Calvinist in that way. And I believe in the value work. And I think the Bible believes in the value of work and in being productive. And so I looked at universal basic income, you know, for something that’s very relevant to today, the story of Noah. You know, if I asked you who was Noah, your obvious answer. That’s the average person on the street, Jew or Christian, by the way. Who is Noah? Well, he built the ark, but we can actually prove through the scripture. Itself. And the rabbis tell us this also that Noah invented the plow. Noah didn’t only invent the plow. Noah invented chemistry because it says he planted a vineyard and grew wine. And when you think about that and you think about our modern challenges of, you know, AI it’s all over the place now in the world. AI is destructive. AI is the best thing that ever happened to man. And yet there is technology, like the invention of the mechanical plow, like the invention of chemistry is a tool. And if we don’t put an Abrahamic ethical framework around it, it’s going to run awry and it’s going to corrupt society. Exactly what happened to Noah and why we had the flood. Exactly what happened to Noah in his tent after he drank too much wine and was castrated or abused by his son. And so every technology is dual use, so to speak. It can be used for good and used for bad. And so I spent most of Genesis working through story after story about what the core values are economically that the Bible is trying to impart to us. And then I spent Exodus and everyone can be Moses looking for the leadership and societal lessons called The Adventures of Moses or the Society as described in the Ten Commandments there and the building at the Tabernacle. Just one example is they went to Michael Dell, who’s the CEO of Dell Computing, and asked him what was the most important trait for a leader in the 21st century? And he said, curiosity. Well, good for him. He learned it from Moses. How do I know? Because we can ask a simple question Why did God choose Moses? And you think about Moses by the ways we don’t appreciate this, but the guy walks into the most powerful ruler in the world and says, Let my people go. So we talk about God sending a message to a lot of people who think that God maybe spoke to them, but they don’t have the […..] to stand up to the most powerful ruler in the world and say something to them. And I think Moses, when he kind of is drifting in the wilderness and he sees the burning bush that will not be consumed, he goes to explore it. And the verse literally says, and God saw that he strayed from his path to observe and behold, the burning bush would not be consume. And God calls out to him, Moses, Moses. And he says, I am here, God. Right. So what God saw was that Moses strayed from his path. Curiously, out of curiosity, to see why this book should not be consumed, even though it was burning. And so Moses teaching as the curiosity is the key trait for a leader who wants to make change. And I think, by the way, that’s been true throughout history. And I spent a fair amount of time, you know, for example, on what is the modern application of do not covet the 10th of the commandments of the Ten Commandments and do not covet like a zero sum thing, right? Do not covet your fellow’s wife. Do not covet is donkey or his farm animal. And the reason is, by the way, those are both the means of production. The farm animals. That’s a factory, right? And his wife is what turns him into someone who protects his home and he can’t be there for be an economic character. But in the digital age, these are not zero sum games. And so empowering people to be successful in the digital age by sharing knowledge is actually economically increasing. It increases GDP, it increases economic output because this kind of interaction between different kinds of knowledge helps us out. I’ll move quickly to Leviticus, which is called the Roaring Tribe. I what I described there, you know, we’re all suffering right now across the world from tribalism. This is great new book by Tim Urban. I don’t know if you’ve read it. I think it’s called What’s Our Story. You know, he describes the increasing tribalism right in blue in America. It’s true everywhere. He has his own prescription. Mine in the book says that Leviticus is about a tribe called the tribe of Levi, which has the priests in it. And an increasing outward spiral where it’s attempting to do is to create a covenant, an economic covenant among the people, to empower others to be successful, to take responsibility for your fellow, for your brother there. But it also creates some bridges to other tribes. You asked before about Christians and Jews. And so if the Jewish people is a covenant, there are other people who have covenant. And our job is and this is why it’s called the roaring tribe, what we’re after in society is what I call respectful tribalism. Sebastian Junger has a great book called Tribe. We all want to be part of a tribe. It could be a religious tribe, it can be a political tribe, etc. That’s great because it gives us safety, security, you know, a capitalist network, etc.. But if we’re not respectful of other tribes, we’re going to end up in where we are right now, which is a disaster. The last book is called Milk and Honey Uncertainty in the Book of Numbers, where I chart through that this 40 year sojourn through the wilderness is basically to teach the Jewish people to deal with uncertainty. How you deal with leadership challenges in uncertainty, how you deal with changing economic circumstances, uncertainty how you deal with shortages, water shortages and food shortages that they encounter and that create uncertainty. And what are the lessons from that, both for investors, for businesspeople and for society at large? And just to finish out the thought, one of the things that I think we get wrong a lot is the difference between risk management and uncertainty. Somebody who manages a hedge fund is a risk manager, is looking for the number of standard deviations from the norm. Guys in the venture capital business like myself are investing into uncertainty and trying to benefit and leverage uncertainty. And that’s a whole different set of skills and. I think tells us a lot about where we are at society today.

John Coleman: Now, that’s awesome. Michael and I honestly can’t wait for the translations. I think I knocked out the Tree of Life and Prosperity in about 48 hours, and I think one of the things that I really appreciated for my own faith is just how diligently people like yourself and so many in Judaism reflect on the scriptures, dig deeply into them. I remember coming across your analysis of Noah, which you talked about with all of this great rich scriptural interpretation of the Noah story about him as an innovator and an inventor. I had no idea about the plow, about the vineyards, and it was just shocking how much more depth there was to the scriptures than I had taken from them. And I think a thinker like you who’s not afraid to be counterintuitive, he’s not afraid to to kind of dig deeply into areas that others haven’t interpreted and only enlivens that in the spirit of getting to this idea of faith driven investing. I wanted to dive right in to getting your insights on what faith driven investing looks like in Judaism. You know it sovereign’s capital and faith driven investor. We often talk about this idea that all investing is impact investing, that basically since the dawn of humanity, people have tried to align their financial lives with their most deeply held values. And certainly I think the scriptures, the Jewish scriptures, were one of the first places in which that manifests. As you reflect on what faith driven investing means in the Jewish context. Michael, what are some of the key tenets of that, both historically and that you see manifesting today?

MIchael Eisenberg: So I have been talking about a term more recently which has come out of a lot of the speeches I gave around the book. And after kind of reflecting on this, I think what the Bible advocates is what I call now covenantal capitalism. And it has two points to it. Capitalism says I have private property. Capitalism says that the profit motive is good, much like Adam Smith did in the brewer and the baker. Doing their job should increase all of our welfare and output. What I think people miss, and I think by the way, your podcast, your movement has done a great job of driving home to people is capitalism works. When there is an underlying covenant. There is a great writer. His name is Barbara Allen. She wrote on de Tocqueville, who points out that the Protestant covenant underlies the foundation of capitalism in America. And so what happens when the covenant is frayed is capitalism comes unmoored. But if the community or the covenant, as I prefer to call it, takes care of its members, empowers its members, asks about what are my responsibilities to the other members and not just what are my rights as an individual? Then capitalism thrives. And so the problem you ever saw about the problem of capitalism, there’s nothing wrong with capitalism. The problem is with we, you know, an individualistic society frays the kind of underlying fabric that is needed for capitalism. And that’s what we need to fix. And so I think the notion of scripture, which talks about brother and fellow didn’t think about sisters back then as much, but brother and fellow and the transparency that covenant and community deliver so that they don’t screw or take advantage of my neighbor or my fellow is foundational to the future of capitalism. And so one of the very important elements of the Jewish faith and by the way, this was a challenge between Jews and Christians in the Middle Ages that thankfully we’ve gotten past is lending with interest is a big challenge in Judaism, by the way, in Islam as well, in Shariah law as well. And so why is that? We need to ask, why is that? And the answer is that in the Book of Proverbs, it tells us that the borrower is enslaved to the lender. By the way, if that sounds like a lot of people underwater on their houses right now, it’s not an accident. And when we are in debt, we develop a scarcity mentality. There’s a professor at Princeton. His name is Arnon Shafir, who spends a lot of time talking about what happens when people are in scarcity mentality. They turn on their survival instincts and make terrible decisions about their own finances. And so the Bible is trying to create an air of abundance in the economy, number one, and number two, to make sure that we are not enslaved to the people we borrow money from and hence interest rates, which tend to compound and be variable, as the case may be today, are a very challenging mechanism for that. But we need to separate that, by the way, from business credit, because business credit’s like an investment. There’s no personal liability if you’ve got a corporate veil. And so you don’t become enslaved to it. But we need to be very, very careful about consumer credit. And so, you know, I backed a company here called Rise Up, which is taking on the consumer credit narrative. I mean, you watch television today, which I try not to do, and all they’re doing is pushing consumer credit at you. It’s a disaster. We are enslaving people to their credit cards and we need to be careful with that.

John Coleman: Yeah Michael. I’d love a couple of the comments you’re making there. You know, one of my mentors in college was actually a Catholic scholar named Peter Lawlor, who was one of the great Tocqueville scholars and wrote a book called Self-interest Rightly Understood, which effectively argued that Tocqueville, in self-interest, the way that the United States was founded, was actually very different than the kind of isolationist, individualistic self-interest that many people consider it today, that it actually was underpinned by a communal instinct, by commitment to community institutions and by faith. And when I was in business school, I had this reiterated I don’t know if you’re familiar with that business scholar named Clay Christiansen. He passed away just a few years ago, a faithful Mormon believer. And he actually has a great video up on the connection between religion and capitalism. And he had had a dialog with a Chinese scholar who had pushed the idea to Clay that capitalism couldn’t work in a society like modern China had been eroded of its religious foundations or of any religious foundations, because capitalism only worked in a society of mutual trust, of values that allowed people to work together constructively, that you effectively couldn’t build the compliance into capitalism to control its worst instincts, that that had to be underpinned by a moral foundation. And what you’re describing, I think, is the way that most religious traditions historically, at least have thought about capitalism and free enterprise is is it’s got enormous power. Societies have been structured around this for some time. However, that power has to be countered by a shared set of values. I love the concept of tribalism that you had a constructive tribalism and that those values have to be moral. They have to be deeply held so that they can guide those instincts of capitalism, which is what I think you’re describing. And I do think that is the underpinning of all types of faith driven investing now.

MIchael Eisenberg: Yeah. So, you know, I think there’s a lot of truth to this notion that in atheists societies it is more difficult. Doesn’t mean it’s impossible, but it’s more difficult to create the level of trust that capitalism requires because it’s impossible to regulate for every scenario, just impossible. And so we need to assume a basic level of trust. There are proxies for it other than faith. But, you know, you use Plato’s rings of guidance. There are certain things that religion causes us to be fearful of, including do not covet things. You just wouldn’t do that other people, in the absence of faith, would think differently about That doesn’t mean all of them. There are plenty of moral and ethical people who are invested in community who aren’t like that. But I think if you have a large society of people where there’s a complete absence of faith, you could end up in a difficult spot for capitalism over time.

John Coleman: Yeah, I think that’s exactly right. Yeah, that’s not to discount that as certain people without religious faith can’t be moral, can’t be great people. Like you said, in a large society, the absence of their shared values I think is quite challenging. You describe this kind of covenantal capitalism, which I love. I love that term honestly, And how that impacts the way that people do business as you look at modern Judaism and the way that faith manifests in investing principles. Do you see a faith driven investing ecosystem now around Judaism and do you see firms that are trying to operate specifically by Jewish faith, either through negative screening or positive screening or different business practices, or what does that ecosystem look like right now in Judaism?

MIchael Eisenberg: I think the first thing is, is that there are a lot of communities and the Jewish community writ large. We’re helping other people get started in business. And patronizing those businesses helps people get their businesses started. And so I think that’s kind of the first level of it. I think there are a number of people who practice what I talked about before, which is providing interest free loans. There is this amazing for profit almost organization in Israel called Ogen, which provides interest free loans to people. How is for profit? I spent in a different time when I have time for that that enables people to get their small businesses started. And so that’s a real implementation of this, what I call a biblical setup that says be someone’s partner and not their creditor. And I think, by the way, the whole biblical system I cover this in the book Roaring Tribe is set up so that we should become partners and not creditors. And that’s why the system has prohibitions on taking interest, and that’s why the system has mechanisms for dealing with price gouging of your fellow or your brother. There are less what I would call kind of investment funds that specifically talk about this. But I think there are a lot of what I would call a Jewish values based investing principles that manifest himself and many Israeli companies I’ve talked about this in the context of, you know, a company called Empathy that we’re invested in, which is helping next of kin after a loved one passes away. And they’re kind of a very empathetic and empowering way that helping them interact with their life insurance companies rise up, which is a company I mentioned earlier, which is getting people out of debt and making them investors and has kind of issued this kind of conspicuous consumption or credit card consumption approach to life so people don’t fall into debt. And we’ve made a bunch of investments around these themes. And it’s not only religious in nature. I think there’s something about community and DNA. DNA. I don’t mean genes, by the way. I mean a cultural DNA that causes one to do this. And by the way, if you go to a synagogue or a church that becomes your social network and going back to de Tocqueville, I think that’s what he saw in many Christian communities around the United States, is the church was your support community, your business community. People could lean on. And that was incredibly valuable financially and economically for these communities and for capitalism.

John Coleman: Yeah. And that concept of self-interest, rightly understood is the individual centered in community rather than the individual as as a pure entity or as it is a solely individualistic entity.

MIchael Eisenberg: Yeah. By the way, you know, we only get to impact investing because we have individualism. If the system works based on community, you can make as much money as you want because ultimately you were supporting your community. I don’t mean charitable, by the way, but enabling other people to become wealthy as well as successful. And so I’d argue impact investing is a response to, you know, individualism, which is kind of capitalism unmoored rather than a return to the roots of let’s create the community first and then capitalism will be just fine if we kind of reinvest in covenant and empowering our businesses, our local businesses, our communities, the people we connect with and be empathetic towards them and empowering, we don’t need to get to impact investing. We should all make as much money as we can.

John Coleman: Yeah, and what’s been shown very clearly, I think, over the last 30 or 40 years is that capitalism is the greatest enemy of poverty. And stagnation in history, right? I mean, it’s been a tool that’s lifted billions and billions of people out of poverty, out of destitution, out of hunger. It’s unleashed this remarkable human potential. Right. And it is I think there are distinctively, at least in our faith tradition, Christian elements to that. Right. I wouldn’t argue that capitalism and Christianity are exactly the same thing. And I think there are some errors to correct for in unbridled capitalism, but it’s actually the foundation of capitalism and free enterprise that allows individuals to flourish with all the creativity that they possess. So I couldn’t agree more about its power to really empower a community and to do good for people. And it’s done more arguably for people than charitable enterprises have over the last 40 or 50 years in a lot of respects. Digging into the way that you run Aleph. Michael, you’ve talked about this a little bit. It seems like you’re investing in companies that also have a deep missional impact, or at least that’s my reflection on some of those that you’re describing. How does your faith influence the way that you run Aleph as a venture capital firm?

MIchael Eisenberg: You know, it’s important for me to point out that my partners are not necessarily people of faith. I love them dearly. They’re my brothers and we have a wonderful partnership, marriage. And so, you know, we run Aleph as an equal partnership and we each have equal say. I have a view that businesses that do good by their customers rather than abuse them, end up being just better businesses. And so like I often use Lemonade, which is an insurance company as an example, where, you know, if you think about a traditional insurance company, State Farm, Allstate, whoever it is, their business model is they make money by making you miserable. What does that mean? They make more profit when they deny your claim, You know, lemonade or I’m an investor, a public company now, you know, set up its business so it’s not conflicted with its customers. They take a flat fee to run the pool. That in my view, and by the way, they give the leftover premiums to charity of the consumer’s choice. I think that’s a much more aligned business model that wants to make a lot of money to do that. And that’s a reflection of what you call values. I think just good investing right now. I think this is exactly what people want. We are all longing for a time where we are aligned, where we have a covenant and a community. I told the story in the article I wrote for Fortune on Covenantal Capitalism about speaking to a group of Harvard students. There was a young woman there was from New Zealand, and I asked her if she had a local bakery and she said yes. She said, What happened during COVID? She said it went out of business. I said, Why is it what people didn’t patronize in the supply chain and this, that and the other? I said, You miss? And she said, Yes. I said, Well, in our community in Jerusalem, we had a similar problem. The difference is that the people in the community got together, advanced their money, meaning they bought things on account for, you know, a year forward so that they would have enough cash flow to get through COVID. And now we’re so happy because the people in our community, we had a so unbelievable bakery. They’re a staple in the community. And now, by the way, they turn up at our family events and they’re part of the community. And I think that’s kind of a hallmark of covenantal capitalism. They’re making good money now. They’re doing good, but, you know, get people through tough times so that they can be economically empowered. And I think that kind of alignment and covenant matters a lot.

John Coleman: You know, we talk a lot about love of neighbor and the Christian tradition and that love of neighbor that you’re talking about, just how effortless that is and the ability to lean into others and support one another. And you’re right, still using the profit motive. Hopefully everybody ends up doing well for themselves, but it just shows a real empathy and care for others.

MIchael Eisenberg: I’ll say, show me controversial. Can I say some controversial?

John Coleman: Yes.

MIchael Eisenberg: I think we can sometimes fool ourselves and say love, our neighbor is actually love. But the question is, what are you willing to sacrifice for it? And I think, you know, when you part with money, not just in a charitable way, but, you know, you may even hurt for the short term, that shows on some level an even deeper love or covenant that drives that love. And I think that’s important to force people out of their comfort zone to feel a little bit of sacrifice, you know, to show that love.

John Coleman: Yeah. You’re a father of eight. I’m a father of four. I think we both know that love always involves sacrifice. What a great point. But, you know, that does involve giving something real of yourself. And I think what you’re describing is exactly that. You live in this world of venture capital. Now you’ve got a view of investing broadly. Compare and contrast, if you would, kind of the dominant ESG approach to investing or social responsibility that you see out there right now with what you’re describing, because obviously I don’t know how it is in Israel at the moment in the United States, ESG has exploded, but recently it’s also become a bit controversial in terms of some of the ideas that it’s forwarding. And so we often get the question, you know, what’s the difference between faith driven investing and ESG? And in this case, you know, this covenantal capitalism that you’re describing, What are the differences and similarities with ESG as you see it?

MIchael Eisenberg: Oh, man, I think ESG is a grift. And it was a way for asset managers to aggregate asset and deliver subpar returns and not be criticized for it.

John Coleman: Tell us. How you really feel, Michael.

MIchael Eisenberg: Yeah, I think I argue this in the book. I can’t remember in which one of them. I think the first one, the one you have to life and prosperity. So, you know, these are all sorts of big words, ESG, everyone measures them differently. It’s not clear how they either impact the bottom line or actually impact society or create a better society. I laughed. You know, lemonade, which I think is not a pretty aligned business model, was rated lower than I think like Exxon. I’m a fan. Exxon do not missunderstand me and it’s like it’s a very poorly defined, even more poorly measured investment principle with no teeth other than making people feel good and no real underlying values other than kind of the new new thing of whatever somebody’s dreamed up is called environmental or social or governance. And I think we’d all agree that we all have different views of many of these social values. And so, you know, I’m personally a big fan of transparency rather than any of these other things. tell me, what you really think? Yeah, I’ll say something complex. You know, Ben Jerry’s I think it’s a very good ESG rating. I think they’ve been terribly anti-Semitic. I was happy to find that out so I don’t have to buy their products. And, you know, Unilever got hurt by it and they obviously somehow the s got okay there, even there. I thought they were terribly anti-Semitic know. I know it’s run by two Jewish guys. And so I don’t know what to make of ESG. I really think it’s just an unbelievable way for asset managers to collect assets and deliver subpar returns. Great marketing, by the way. Amazing. Brilliant marketing. There’s no covenants in it, though. In a covenant, they would have made sure that their investors made a lot more money, not less.

John Coleman: And I think, look, I saw a ton of elements of what you’re describing in my time in asset management where, you know, I think there are people who went into it on a mission. Some of those people I would disagree with the mission that they were on, but went into it with a mission and they’re still the true believers. But so much of this has turned into a commercial activity [….], as you described it, in the sense that once it became better to have the rating than not, once it became kind of a part of doing business to get the rating, people began to manipulate the ratings. The whole system kind of grew up to manipulate it. There was a great tweet by the ever controversial Elon Musk, like a year ago, a year or two ago, where he pointed out the same thing you did with eliminate, where Tesla was rated lower than some of the big oil and gas companies on the E part of ESG. And he said, you know, what kind of rating system could possibly come up with this if it were legitimately about what’s transforming the environment? And that was true, right? I love the oil and gas companies. I think oil and gas has a bright future. I think it’s been incredibly important for unleashing human potential. But hard to argue, you know, that Exxon would be better environmentally than Lemonade or Tesla, for example. I want to switch to what we call lightning Round in a moment, just to get to a few quick questions with you, Michael. But one thing I wanted to end on was also just to ask you a broad question. As you study the Hebrew Bible and you’ve got many close associates who are Christians, what are parts of the Hebrew Bible that you think Christians don’t dig deeply into and not for what’s a part of the Hebrew Bible that you would encourage all Christians to study more carefully.

MIchael Eisenberg: I want to make a meta comment first, if I can, which is and as I told you, I maybe I’ll give you a surprise. I have this idea that I think we need to do like a covenantal conference in Jerusalem about the future of capitalism. And yes, it should involve Jews and Christians and Muslims to think about, you know, what are the covenant of the future that will undergird our economic growth as peoples for the future. And I think the kind of meta comment is there is a lot of work to be done right now across different faith backgrounds, people of different faith backgrounds, to kind of reinvest in this covenant so that capitalism can kind of keep growing and as you said before, be the greatest engine of prosperity and of human advance that we know. And I think there’s a benefit to diversity of different religious experiences in creating that, you know, foundation for the future. And so the first thing I would actually say to what you call a Christian audience is that both the old and the New Testament, by the way, which I’ve read, I don’t study nearly as much as I do the Hebrew Bible, but I have read it. And you need to invest in Scripture to the extent we really believe that these are foundational principles, they should be read and reread and internalized over time. That’s kind of point 1 in the Hebrew Bible. I think one of the core elements that we need to kind of dig into is this notion of empowering our brothers and sisters through the economy. And I think that’s more present in the Hebrew Bible. Than it is in the New Testament, particularly in the Book of Leviticus and the Book of Deuteronomy, and then in some levels in the book of Jeremiah and Isaiah. And so I think that’s super important and I would dig into that. The last piece is we need to ask ourselves is people of faith in a modern world. Where are the areas that we think there are changes and where are the areas that we need to be steadfast? And I think one of the interesting things about the Hebrew biblical experience, which I believe is different from the Christian biblical experience, is the way the rabbis interpreted and reinterpreted. We have this notion of oral law, of essentially an evolving set of laws and applications for how we apply scripture through the generations as they become more modern and they change. And I think that’s actually something, although it’s not in the Hebrew Bible, it’s more in the Talmudic realm that is valuable for a Christian audience as well.

John Coleman: Well, Michael, this has been an extraordinarily helpful discussion. I love this idea of a covenantal conference, and so I hope you’ll count us in as partners on that if if you’re serious about it and if we want it.

MIchael Eisenberg: I’m very serious about it. I’m talking to someone. We both know about it. We’ll see if we get there.

John Coleman: Yeah. I would love to dig into this more with you offline before we close out today and maybe a more personal question, we ask everyone at the end of the Faith driven Ambassador podcast what God is teaching them right now through Scripture. So just kind of in your personal studies of Scripture, is there something that God’s teaching you right now in any realm that you’d want to share with others?

MIchael Eisenberg: So I have. Don’t take this the wrong way. I’m never sure what God is telling me or teaching me. What I can say is that the Bible and the thousands of years it’s been around teaches us to have a long term view. And I think in the social media era, most people have a, you know, 24 hour or ten second view. And I think the perspective given by biblical scripture tells us processes take time and we need to take a longer view of what’s going on in the world right now than what’s maybe under our nose are disappearing in a tweet from 10 minutes ago.

John Coleman: I love that. Michael Eisenberg, we’re very excited to see your new books coming out. We’re very excited about the investing that you’re doing through Aleph, which I’ve been mispronouncing for most of the podcast. I apologize.

MIchael Eisenberg: That’s okay.

John Coleman: We’re very excited to see the follow up on this covenantal conference and the development of this idea of covenant capitalism, and just so grateful to you for your willingness to share with us and for the positive difference you’re making in the world through your work in writing. So thank you so much for being on the Faith Driven Investor podcast today.

MIchael Eisenberg: Thank you, John. I want to commend you. I think it’s not obvious that you’ve reached out to people of other faiths, and I value our friendship and our meeting. And I hope, like I said, I’ll see you, your wife and your kids again in Israel soon or in the U.S. And I think, you know, the work you’re doing is special and important, and I commend you for it. It’s not trivial. So thank you. Thank you for the hard work you’re doing.

John Coleman: Thank you, Michael. And see you soon.

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Jesus preached that his gospel message was good news to the poor. Yet investing seems to be mostly good news for the rich. In this talk from the 2022 Faith Driven Investor Conference, Dr. Kuruvilla proposes that investing, when done strategically, can partly fulfill the call to serve the global poor, using real-life case studies to highlight the redemptive potential of money that is deployed collaboratively and biblically. 

Episode Transcript

Finny Kuruvilla: How do we connect the huge problem of global poverty with the practice of investing? A lot of people cynically believe that investing is simply about helping the rich build bigger barns. But Faith Driven Investor have a higher calling. We believe that we should responsibly and biblically manage our money by, yes, wisely allocating our resources. But by doing that in a way where we’re promoting human flourishing, including perhaps especially championing the interests of the poor, the widow and the orphan. I’m going to give you four points today about how to practically connect our our world to the problem of global poverty.

Finny Kuruvilla: Number one, we need to respond to poverty with a Christian worldview. Jesus’s first sermon that he gave in Nazareth, he opened with this line, The spirit of the Lord is upon me because He is anointed me to preach the gospel to the poor. He sent me to heal the brokenhearted, to proclaim liberty to the captives, recovery of sight to the blind, and to set at liberty those who are oppressed. Now, when we hear Jesus talking about the Gospel being good news for the poor, some people react and think, Wait a minute, what about dependency and handouts? And how does all this work? The Bible is a very wise document. And to illustrate this in first Timothy five, it talks about how younger widows, those who are less than 60 years old, aren’t supposed to be financially supported by the church. And Paul tells us why. He says that those very women would become idle and given over to gossip. And so this is a great example of where we are told not to simply commit mindless giving, but to think holistically about the person’s welfare. This should give us some kind of idea that, in fact, the Bible is more sophisticated and how it thinks about poverty. This kind of sophistication is badly needed in the world today, where we have changing and tragic dynamics about global poverty. Consider this today obesity has far overtaken starvation as a cause of death in the world. Addiction of all sorts food, alcohol, drugs, sex, technology, those kinds of addictions are more bound up with poverty than ever before. And you compound that with violence in the community in many parts of Latin America. Homicide is on the rise, particularly ending the lives tragically of many young men. All of this leads to vastly different outcomes. For example, men in Iceland live on average to 80 years old. But in Haiti, men live to 33. What a tragedy. How do we deal with this? Your beliefs about poverty are going to determine your approach. So if you believe the cause of poverty is a lack of material resources, well, then your approach is going to be to give money. If you believe the cause of poverty is a lack of knowledge, then you’re going to try to educate the poor. If you believe the cause of poverty is oppression by powerful people, then you will try to work for social justice. Instead, I’m going to call us to move past exclusively secular models of poverty, of poverty. Brian Myers has said it so well. He says the secular approaches share a common perspective, which is the modern worldview. All are materialistic, often technocratic, and reflect a firm belief in human reason, technology and money as the keys to solving the problem of poverty. Their biggest common gap lies in the absence of religion and things spiritual, in their explanation of why people are poor and what can be done to help them. So how do we think about this from a Christian perspective? Myers and others have made the case that poverty is primarily at its root cause about disordered and sin damaged relationships. We all live in a web of relationships. We’re relating to our communities. We’re relating to the environment. We’re relating to God. We’re relating to ourselves. And when those relationships become damaged by sin, it makes us vulnerable to poverty. Think, for example, about the person who wants to start a business but has to go to the local loan shark who might charge two, 300, 400% interest on that loan. Think about someone who is wanting to appease a God and has to give away precious resources in the form of an animal to sacrifice. Or communities where theft and lying are commonplace. Or someone who doesn’t believe that they have dominion over creation and the creative capacities to start new, productive and flourishing businesses. All of these kinds of problems abound in the world of poverty. So what do we do? Healing these kinds of sin, damage, relationships and defective worldviews. This is very challenging work. This is not glamorous. It’s long and it’s slow. But this is where the role of the church is essential to heal relationships and worldviews requires people not just writing check. This calls forth the necessity of visitation. I am so struck by the verse, a very famous verse, James 1:27 that says religion that is pure and undefiled before God, the Father is this to visit orphans and widows in their affliction, not to write a check to orphans and widows in their affliction, but to visit orphans and widows and their affliction, and to keep oneself unstained from the world.

Finny Kuruvilla: Number two live simply give generously and intelligently. Now we all know this, but we still don’t do very well at it. When John the Baptist begins his ministry, he says that we’re to bear fruits in keeping with repentance. And he says whoever has two tunics is to share with him who has none. We need to go to our closets and ask how many tunics do we have? And to repent of of hoarding and not putting into practice the basics of what love your neighbor is. Jesus tells us in Luke 12 to sell our possessions and give to the needy and to thus procure for ourselves money bags that don’t grow old that that will be enduring. I love the quote from Mahatma Gandhi who says live simply that others may simply live. He also says, the world has enough for everyone’s need, but not for everyone’s greed.

Finny Kuruvilla: Number three, we should avoid investments that snare the poor into addiction and slavery. I mentioned earlier that addiction is so bound up with poverty, and I think most of us know this at a head level, but I want us to know it at a heart level. The power of business to snare and to propagate poverty, whether it be through alcohol addiction, through gambling, through through cigarets, through pornography. And the whole realm of sex trafficking. Through a lot of the idleness and addictions that have happened with with our phones and social media, etc.. It is it is absolutely extraordinary how our dollars expressed in business can affect the world for good or for bad. We have described in the past an example that is particularly poignant for me. Many of the cigaret companies have figured out, well, in the united states you can’t sell to minors. There’s pretty strict laws against that. But abroad there’s there’s much less restriction and much less control over that. In Indonesia, as an example, the average age to begin smoking has fallen from 19 to 7 years old. And we did some research where the largest beneficiaries, the largest shareholders of these very companies are college 5 to 9 savings plans, meaning American mothers and fathers who are saving for their children are in fact doing that by benefiting from putting into addiction minors on the other side of the globe. How tragic that is. We should obviously avoid these kinds of behaviors as faith driven investors, as Christians who want to be faithful.

Finny Kuruvilla: Number four, we should embrace investments that lift the vulnerable out of poverty. I want us to think for a moment about the biblical principle of gleaning. What is gleaning? Gleaning is where if you’re a farmer and you have a field, you’re supposed to leave the edges of your field unharvested so that the poor can come and glean on their own and thus provide food for their households. This is a very important principle. I want us to think about gleaning in the context of who the stakeholders are of a business today. We have talked about at Eventide how there are six stakeholders, customers, employees, the supply chain, host communities, the environment, and then broader society embedded within society and in host communities are the poor, whether they’re locally or globally present. What does it mean for a business and what does it mean for us as investors to follow this principle of gleaning today in our world? We at Eventide have made the decision to pursue what we call the 1% initiative. It’s just taking 1% of our capital, a modest percentage of our capital, and say we’re going to devote this to this problem of alleviating global poverty. How do we do this? We do this by primarily by harnessing the positive power of business, by taking that 1% of the capital and giving it to businesses that are in the developing world that are employing the global poor to pull them out of poverty with dignity. Last year, we announced a partnership with World Vision and its affiliate, the Vision Fund, which we think is one of the best, if not the best example of a company that’s out there in the developing world employing the global poor. And here, this $37 million is capital that we get back. It’s a modest return on our investment. But we, again, think this is so important to follow this biblical principle of gleaning. So I want to leave you with a challenge here. Will you commit 1% of your investment capital for gleaning by the global poor?

Finny Kuruvilla: In conclusion, I’ve given you four ways that we can address this problem of global poverty. Number one, respond to poverty with a Christian worldview. Number two, live simply, give generously and intelligently. Number three, avoid investments that sneer the poor into addiction and slavery. And number four, embrace investments that lift the vulnerable out of poverty. Let’s honor our Lord. Let’s honor Jesus by making the gospel. Good news again for the poor.