Henry Kaestner: Ladies and gentlemen, welcome back to the Faith Driven Investor podcast. This is an episode that I’ve been looking forward to for a long time. When I think about men and women that have really made an impact in the way that I think about being a Faith Driven Entrepreneur and a Faith Driven investor, there are few, if any, that top Wade Myers. He’s been very thoughtful about how he runs his life in a way that brings glory to God at scale and with success. And he’s got such a great story. So I’m grateful that he’s on. Wade, thank you.

Wade Myersr: Oh, thank you, Henry. It’s great to be on the program.

Henry Kaester: So there’s a ton that we can cover today. And I hope that we going gonna get the most out of it. But before we get to that, I want to hear and our audience wants to hear a little bit more of a background in your personal story. So a couple of facts that I’ve heard about you. Can you tell us if any of this isn’t true? But these are the things that I’ve heard, that you grew up in a house that didn’t have electricity or plumbing. That there are only six people in your school and that you worked from 12-8am through high school. And finally, that you once defended thousands of school children in Denmark from a horde of killer fire ants. Are all those true?

Wade Myers: All but the last one.

Henry Kaestner: So tell us about growing up. You had a very interesting and incredibly formative background.

Wade Myers: It was a lot of fun. So my grandfather was a Mennonite, left a Mennonite colony at the homestead in western North Dakota, not exactly the place you’d want to homestead without, you know, the value of services such as electricity and indoor plumbing. And so my mother grew up as a Mennonite. But outside of the colony. And so my father, who grew up Irish, married my mother, the Mennonite. And so we grew up with this Mennonite background. And the religious influence was the Mennonite magazines that we got. There was trips back to the Mennonite colony to visit cousins that had, you know, horses and buggies and bonnets and so forth. And we were in the middle of nowhere in the badlands of North Dakota.

Wade Myers: So the combination of all of that meant there was just no services available. So my parents built our house with a hammer and a handsaw. They had no electricity. Didn’t even have a miter box. They just basically built this humble little home with a dirt floor. So we raised chickens and pigs in the basement in the early spring is way too cold for baby pigs or chicks to be outside who had kind of raised them up until the weather warmed up and they got a large and healthy enough and put them outside. There’s a very interesting way to grow up. You know, no television, no telephone. And it was really a lot of fun. My parents were wonderful. They modeled a wonderful marriage. My mother was very creative and entrepreneurial. And so my siblings and I just went to work at an early age. I started selling door to door at about nine years old, worked in construction, starting in sixth grade and back then and the rural environment to get a driver’s license.

You could start driving at a very early age. It was like a rural kind of driver’s permit and you get a regular driver’s license at 14 and started working. Right. So that was kind of life growing up. But it was wonderful. You know, we blasted coal out of the side of a creek and burned coal in a furnace and burned wood in a furnace. We had a cookstove in the kitchen and an icebox. You know, we’d bring in ice and all that. And we had a pond that my father put in and we had muddy pond water kind of pipes into the house. And so we had one faucet that, you know, you might get a salamander out of the end of the faucet or mud. That’s kind of how much rainfall we got. But it was a really neat way to grow up.

Henry Kaestner: Wow. So and you worked through high school. I mean, you’d worked nights.

Wade Myers: Yeah. So what’s interesting is I was always trying to find out how to make more money. And so the roofers helper kind of roofers assistant job in the sixth grade was 50 cents an hour. It wasn’t very much. But when I was a freshman in high school or maybe as a sophomore, they put on a big truck stop up on the hill by the interstate. And the interstate had gone through only a few years earlier. And all of a sudden there’s this big truck stop and tons of big fueling stations and 18 wheelers would come through. And so I thought, aha. So some of my friends in school that were older got a job there. And so I got a job there as well. And it was funny because you kind of start off as the newest employee on the dog shift, right. So midnight to eight was the hardest shift for them to start. And usually guys by myself. But it was you know, it wasn’t that busy. So I think we had eight fueling islands, which meant 16 trucks, maximum, you know, one on each side. And, you know, I had to change tires in the back on the big 18 wheelers and change oil as well as, you know, fuel and take care of the trucks. But normally, you only had two or three trucks at a time. And then we had truckers showers and truckers sleeping rooms. And so what I could do is as soon as I got off at eight o’clock in the morning when the manager showed up, I could grab a quick shower in a trucker shower and run over to school, which is only like a quarter mile down the road and make the morning bell. And then but I’d drive home to our little farm and just crash at three thirty or four and a half there. Just exhausted. It was really fun. And then once in a while, I’d pull a double shift and weekends were kind of crazy, but I had a blast. I would have my textbooks laid on the counter and run out to fuel trucks, you know, ring them up. And that was a neat experience. And I really enjoyed the work ethic of helping contribute to the family and helping our family farm survive and all that.

Henry Kaestner: So coming back to this show, this show being about investors, we talked to a lot of entrepreneurs as well. You are both. Tell us about the venture academy.

Wade Myers: Oh, yes. So the Venture Academy was a series of videos just under two hundred videos that I did several years ago. That was kind of a basic training for entrepreneurs. So what happened was whenever I spoke about entrepreneurship, oftentimes people would say, I’d love to be an entrepreneur. I’ve got this idea. But they didn’t really have the skills or training to be an entrepreneur. There there’s just a lot of holes missing. Oftentimes, there may maybe a mid career executive or, you know, had experience and just operations would say, and they weren’t broadly experienced and started up in strategy and, you know, H.R. and service and technology and all the things that you sort of have to manage as an entrepreneur.

Wade Myers: And there’s just really misalignment between kind of, hey, I feel God calling me to be an entrepreneur and have my own business. But they didn’t have the skill set. So I kept spending a lot of time explaining the same things over and over again. I thought, well, I’m going to make that scalable and repeatable. So I put on the event where I had about 75 people in the audience set it up, styled it like a Harvard Business School MBA classroom. Right. And then taught think it was a 13 Harvard Business School case studies and did a bunch of lectures and produced, you know, 200 odd videos that were just kind of basic training. Hey, here’s the basics of sales, the basics of marketing, the basics of how to raise capital, et cetera.

Henry Kaestner: 200 videos is. A lot of videos.

Wade Myers: And many of them are kind of, you know, two to four minutes, maybe 10 minutes, just sort of popping by topic. And we kind of had processes and I had principles like here’s seven key processes about marketing. Here is, you know, six key marketing principles you need to know. And then at the end of those lectures, I think sales and marketing is like 30 lectures, then we had case studies. Here’s a Harvard Business School case study on sales. Here’s one on marketing. And so it’s a wonderful program. We videotaped at all the twelve person film crew. And now that’s being distributed worldwide by right now media as well as by Crown Financial Ministries.

Henry Kaestner: Gotcha. Gotcha. We are huge fans of right now media and Crown. Chuck Bentley, just a super friend. What great distribution partners to have, so that’s some pretty decent scale.

William Norvell: That’s great, Wade. Thanks so much for walking us through that. William here. I’d love to shift a little bit to something. I know you work a lot with business owners and entrepreneurs to think about exit planning, and that’s a topic that invariably comes up. As I often say, every business in the world either gets old or dies. Those are kind of the options eventually. But it’s a topic that people don’t really want to talk about a lot. And specifically in the Christian landscape as well as you set out on holy ambition that you feel like God has led you to to start thinking about what that could look like either if you’re investing in a company or if you’re starting a company can be a little awkward. So I’d love for you maybe to give us a little bit about how you work with both sides of those equations, maybe take the investor first and the entrepreneur second and walk us through how you encourage people to think about exit planning.

Wade Myersl: Sure. So Capital Works is the companies flash technology platform that I built to solve this issue. So what I learned as over the last 25 years, I’ve simultaneously been an entrepreneur and an investor and have just made kind of small angel investments and built up to where I made larger investments and have a seed capital fund I’m part of, and always was spinning up entrepreneurial ventures and always doing a lot of acquisitions of other small business owner operator businesses for those entrepreneurial efforts. So, for example, one company I started here in the Dallas Fort Worth area 16 years ago, we’ve done, you know, 40, 45 acquisitions of small businesses from other small business owners to bulk that company up to where it’s now one of the largest in the industry. So for 25 years, I’ve done all kinds of investments, acquisitions and startups and, you know, own businesses, et cetera. And I kept seeing the same issues from both sides. Right. Investors are looking for high quality investment opportunities that fit a specific investment thesis. And the same with lenders. I’ve also done some high yield lending and, of course, worked with a lot of banks on lending. So it’s the same with lenders that are looking for a specific lending thesis. And in terms of a faith based investor, you’re looking for great companies led by a faith based management team that live by certain principles. Right. But that’s just kind of let’s call it a demographic feature. But in terms of your investment thesis, it might be a private equity firm fund might say I invest in turnarounds or distressed companies. And there’s a lot of that activity going on right now given the current recession. There might be ones just to do it. Minority growth investments take a minority stake and so forth. So they all have a specific investment thesis. Typically, they write that into their LP agreements and investment memos and they create the fund, if it’s a family office, oftentimes are looking for acquisitions that fit the family office structure. Hey, we might be experts at automotive parts. That’s how the family, you know, made their money initially. So they’re looking to acquire automotive parts companies underneath the core family office assets, that kind of thing. So I always would see these very specific, you know, strategies for investing and lending. And I could just call that generally capital providers. So whether it’s a family office or a fund or a bank. Right. And on the other side, the nurses, entrepreneurs that are always looking for some sort of capital to seventy nine point one percent of all middle market companies. And when I say middle market, I kind of think of a million in revenue to a billion in revenue, give or take, you know, not the small roll micro businesses, but kind of called a million to a billion. There’s about a million a half a million, six companies of that size in the U.S., seventy nine point one percent of them have debts, for example. So they’re always trying to get capital, mostly working capital debt. And so any entrepreneur in any room, we just had our big Lion’s Den virtual event this year in Dallas Fort Worth area. You know, entrepreneurs are almost always seeking capital. Right. And so here we have this issue. You got entrepreneurs looking for capital or maybe looking for an exit. In any case, they’re looking for some kind of transaction typically. Right. And then you have investors and lenders and family offices looking for, you know, opportunities to deploy capital. You go with it. Why is it so hard? Why is it that between family offices and private equity funds and, you know, overseas foreign direct investment, that there’s like six or seven trillion of, you know, dry powder looking for deals? Right. Roughly a trillion or so between family offices, corporate acquisitions and private equity funds, plus another three or four trillion of foreign direct investment from Europe and China and so forth looking for U.S. deals. So here we get all this money looking for deals. And on the entrepreneurs side, you get all these companies looking for some sort of cap or transaction. And, you know, it’s just like this is just a mess. And every time I entered into those kind of transactions, it was always kind of like a process that was, you know, typically not done well. Everything is sort of ad hoc. Everything looked different. And so over time, I developed a set of analytics style of analyzing. And it became really apparent that whether I was advising a company, whether I had invested in a company, owned the company, or just advising them whether I sell on a company, buying a company, invest in a company is kind of the same. Core analysis is same or analytics that you used every time. So as Capital Works, we put together all the software in the marketplace to say once we do this. Now, whether the company is trying to get a construction bond to grow their construction firm, whether they’re trying to get a loan, whether they’re trying to get a minority growth investment or trying to exit or form a strategic alliance, whatever it is, that same core set of analytics is really central to any kind of transaction. But the problem then became was every company’s financials and information was different and customized and every company thought they were super different and special and unique. And every investor kind of had their sense of that. So then it’s just a matter of standardization and codifying that to where we built the process. Well, we just kind of. Or in the company’s information, on one side, the outcomes of standardize profile of exactly what the company is looking for. Same exact analytics for every single company, whether it’s healthcares, marketing, services or manufacturing. Doesn’t matter. And now we can match. Now we can match the untapped capital supply with the unmet capital demand and match that along just hundreds and hundreds of dimensions, including demographic dimensions like this is a faith based management team looking for faith based investors or there’s, you know, whatever the social or, you know, might be a veteran owned business or whatever it is, as the demographics are just sort of one of the pieces that provide that match. And so in this way. So this is a faith based investor podcast, right. So investors are just looking for deals that fit well and they want to reduce the amount of diligence and the number of failed deals. As an investor, we all know that there’s tons of deal fatigue. You’re just trying to get the information from the company. And as soon as you get it, it’s usually not as clear as you’d like. And it kind of begs a whole bunch more questions. Right. And so you kind of getting this process of kind of Q&A and the Östberg is sort of worn out and says, when will this ever be over? Right. And meanwhile, as the investors say, wow, now that we see what you gave us, we got some more questions. And so this process usit goes on for about nine or 10 months. I think it’s like nine 1/2 months on average for a typical exit or buyout transaction to take place. You go, wow, that’s just painfully difficult. And many transactions result in failure. About half of loan applications don’t get funded. About three fourths of companies that are trying to get sold never sell. And only about 20 or 25 percent of all letters and the Tander term sheets that funds, you know, sign ever get closed. And so, you know, there’s a myriad issues there. But that’s what we’re trying to achieve, is to say we’re going to bring velocity and efficiency to this process. So it has had an amazing impact so far. So we’re we’re thrilled with that. That’s kind of been some of my lessons learned and what build up to how we’re trying to help this problem of helping out faith based investors and faith based entrepreneurs.

William Norvell: That’s great. Thanks for walking us through that Wade, I really appreciate that. And I feel like what I wantask next is I feel like that’s a great overview of some of the pragmatic business issues that face people as they come around thinking about exit. Could you walk us through you? Seems that you just get to work with a ton of people facing this decision, maybe the emotional side. Could you let our audience into, you know, what an investor would likely see as they approach a business owner and maybe what a business owner would be feeling as they’ve built a business for either two years or 20 years? Right. Or sometimes 40 or 50. How do you walk people through that process? Get them ready for that. Help them think about God’s stewardship of the business to this point. And now what will happen to the business, the employees? All those things as well as, of course, obviously what they can do with the capital and how to balance those things as they approach this kind of big transition.

Wade Myers: Yes, great question. So I’ve got this one diagram I show where emotionally most sellers say no and walk away from the table about three times during the course of a process because of the just the emotional nature of this one is the letter of intent in terms sheet stage, where it’s kind of the first time they’re seeing someone else’s opinion of the value of their business. It’s like, wait a minute. Are you kidding me? And it is kind of like they feel like you called their baby ugly, because most business owners always joke that most of them think their business is worth exactly two times the market value. I mean, this is like handing off your daughter in marriage, right? You gave birth to her. You took care of her. You protected her. And now years later, someone tells you it’s not that special. This is all it’s worth. Right. So that’s usually one inflection point that says I’m just out of here. I’m so disappointed. Another one is the length of the due diligence and the effort, which means so usually it’s a complete distraction. The business starts to head south in terms of they’re not there to do the rainmaking or to keep an eye. Things are so busy in the due diligence process, you know, and kind of along the way, you’ll usually see some really emotional bumps. And then a third one, frankly, is seller’s remorse in many cases, once they sell and if they do right. And it’s over is kind of like now. Now what? I kind of lost my purpose. Right? Like, what do they do now? And so one of the things that we try to do is to tell them there are way more options than just the binary options of, you know. Keep your business or selling. There’s many more options to pursue. And so, first of all, that reduces a lot of the pressure in a lot of the stress and a lot of the emotion if they realize that, oh, I could take on a minority growth investments, still run the company, kind of leverage someone else’s cap or reduce my risk, diversify. There’s all kinds of ways of doing this. But what’s really important for us is on the entrepeneur side. We help walk them through how the process works, kind of education. And, you know, if you’ve heard the Dunning Kruger effect, it’s these two professors within all this analysis on kind of like this, a two by two grid. Right.

Wade Myers: So all of us, when we enter into a new process or a new situation and we’ve never done before. We’re unconsciously incompetent. We don’t know what we don’t know. And over time, you know, we become more aware of what we’re not good at or what we don’t know. And that’s conscious incompetence. And and hopefully we move over into, you know, conscious competence. We’re really good and we’re aware what we’re doing. And then finally, the ultimate is unconscious competence, where you just it just comes second nature. It’s just, you know, you don’t even have to think about it. But for an entrepreneur, every time you grow your company, when you grow from one million to five million or five to 10, you know, huge milestones, you kind of fall back into the unconscious incompetence. It’s like this is way different. This is, you know, once you have multiple branches, like one of my companies I grew, we’ve got now 40 or so branches across the US. I remember trying to deal with like three or four or five branches going, wow, this is way different than a single location. Right.

And so when an entrepreneur is thinking about selling, they’re in that quadrant of unconscious incompetence. You’d expect that they’ve never done this before. Typically, they’ve never been involved in M&A. They don’t know the terminology, the lexicon. Investors tend to speak the language of finance. Entrepreneurs speak the language of operations. Meanwhile, accountants and CPA speak the language of accounting. It’s like they’re all speaking. It’s like the Tower of Babel. And so we try our best to sort of translate and say, OK, if you’re looking for capital to help grow and you want to take some chips off the table and sort of diversify your risk and not just risk your own capital. That’s called of minority growth investment or that’s called growth equity. And this is how the style works. We’re looking for a non control investor, so our platform actually translates. So the company can put in what they’re looking to do. In typical operations language, I want capital to acquire a competitor. I need capital to buy more equipment, whatever that is. And then our platform translates that the capital provider side, because they speak the language of finance and they want to know, well, is this a minority growth investment or is this a control investment or non control? Is it a buyout? Is a distressed right. And so to get the entrepreneur ready for an exit is more than just an exit, sort of. First of all, saying lots of options out there. What are you trying to do? I always want to have our team focus on their goals. And in many cases, what they’ll say is I just want to redeem my time. So one quick story. I a guy that on the roofing company with his brother and he called through a referral and said, hey, I’d like to know how the sale process works. I’m thinking about selling my business and starting a ministry. I said, oh, tell me more about that. Like, what are your overall goals? They said, well, you know, I don’t really know. But I just really I want to be more faithful to God. I just want to figure out how to better serve, you know, the kingdom. And I’m thinking like maybe marriage and family and raising kids kind of ministry. Now, he was only about 40, so he had, you know, a lot of time and energy left to keep running the business or what have you. But he just was kind of thinking that to really serve God well, he had to go do something in ministry. And often, as all of us on the call knows, that’s often kind of a misnomer that people think, well, to do God’s work, I really have to be kind of a person of the cloth and not run the businesses in itself, a ministry. So the first thing I said was, well, OK, so tell me a little bit about your company. And he tells me about the company and the value the company was, I think was like a couple of million dollars, you know, two or three million in terms of equity value. I was very familiar with roofing contractors and what the multiples were in the valuation. So he’s telling me as earnings kind of go on. OK, well, here’s part of the problem. He and his brother were there 50/50 owners. So if you guys take, you know, that call it three million dollars. And after the 30 percent friction costs Sipan, 20 percent capital gains and, you know, lawyers and CPA and investment bankers and so forth, you know, you’re going to end up with like 70 percent. And then if you take that in never touch capital and you took that away safely, maybe three percent, five percent annualized, that’s the last check you’re ever going to see. And now your income is going to be way, way lower than what you’re pulling out of your business right now. Right. So I think I think it was so forgiver was I think with six. Thousand of earnings, right? So times five is three million. So he and his brother split up about three thousand per year. So now imagine if you only took, you know, two and a half million. Put that away at, you know, five percent. A hundred and twenty thousand gross before taxes. Maybe it’s one hundred thousand after tax that you and your brother split. You’re going from three hundred each gross to only, you know, of fifty each gross or sixty thousand each girl. So it’s at the very time that you want to start a ministry, you have way less earnings because now you’re a fixed income are at best. Maybe the market goes down in a recession. You have no returns for that particular year. And so I said, let’s think of it this way. How many employees you have? One hundred employees. OK, they each have four or five family members. You’ve got customers. You’ve got vendors. I said your ministry is, you know, hundreds, if not thousands of people. And I kind of just walked in through that now. I was in the position to help him sell business and make a commission. But I talk them out of it completely. I said, no, no, why don’t you just grow your business? And if you just want more time, bring in just more professional manja team members, you know, just, you know, hire someone to be our CFO, hire someone to do this kind of step back, gain some your time. But now at least you’re not giving up all of your earnings. You’re maintaining the assets. And so capital works. We call that legacy value to say if you think about your business as just your first family office investment or just it’s one of your income producing assets, you don’t need to sell the golden goose. You just want to nurture it. Bring in people who can help you run it and gain whatever you want to gain out of what you thought an exit would get you. He thought an exit would give him a pile of cash that would make life easier the rest of his year of his life and that he would free up enough time to start a ministry when he kind of heard the sobering facts and kind of realized, well, yeah, I’d never want to touch the core amount of principle that I got. That was my last check. And now you’re right. If I just give out to a wealth manager and only live on the returns, there’s no way I can live on fifty or sixty thousand dollars a year. My wife used to me bringing home three hundred grand and growing. Right. Yeah. Yeah. The growth is the key issue. So. So that’s an example of there’s way more options. Let’s talk through them all. But first, tell me what you’re trying to achieve and then we kind of can fill in some blanks and open up those options and then match that with investors who say, yeah, that’s exactly what we’re looking to do.

Henry Kaestner: So Wade, I think that’s really important. And you’re getting something there that obviously points to the fact that not all transactions are black and white as just a straight sell and understanding and with any negotiation what each side really wants. There’s a dynamic, of course, you know about with the mass exit of baby boomers from their business, generational transfer businesses that are being sold. And I think that they’ve played a role in some of the illustrations you have, but talk to us a little bit more about the mistakes you see sellers make in looking at that. But then also that buyers make as buyers are interested in a business and are wading into a family business, what are some mistakes both sides make?

Wade Myers: Yeah. Good question. So you have this huge baby boomer thing, right? Two thirds of all business owners, I think it’s about 63 percent are baby boomers, which are probably on average around 65 years old. And so with this massive golf ball working its way through the garden hose and they all should be thinking about an exit or some kind of transition, not necessarily again selling, but just transitioning in some way. So that that’s huge. I estimate that to be about 10 trillion dollars of business wealth that’s going to be sold or transferred or potentially lost. So think of it this way. 50 percent of all transitions by a business owner are unplanned. They’re completely involuntary. And I’m quoting exit planning institute data because of the five D death, disability, disagreement, distress, or divorce. And so it’s an unplanned event. So if an entrepreneur, let’s say, just, you know, is called home and dies at their desk, 50 percent of all entrepreneurs are going to leave their family with a mess because they weren’t ready for an involuntary business transition. They didn’t have their ducks in a row. And I’ve seen some of those where I’ve been called in to try to help you just go. This is just a mess. The family doesn’t know anything. They’ll have the passwords for the operating account, for the business. It was, you know, maybe it was the dad that ran the business. The wife can make it to the office. It’s like, where’s the key to the front door? You know, there’s all kinds of stuff that it’s a real problem. So we do have this huge issue and it’s looming right before us because everyone is at that age to where they need to be really planning this. So the first thing is to get a plan in place, get everything organized, at least for the benefit of your family and your estate. Not have a mess to mop up. And so there is a big issue of just trying to get organized and small business owners are very, very busy. So but they have to. They have to stop kind of do the planning. Get all that lined up and really think through the goals and have family meetings and family discussion and figure this out. Right. On the other side, for investors, there’s oftentimes, you know, in a fund environment, there’s just a pressure to deploy capital. LPs are constantly, you know, trying to understand why aren’t you putting capital to work, you know, or how many deals you’ve done this year? What’s really funny in our analysis is of these 48 hundred odd private equity funds in the US. And that includes from seed capital all the way to buyout, forty eight hundred funds, give or take. They only average point eight deals per year per fund. So, you know, one deal a year now in the early days of a fund, that’s not very interesting. So you got to hurry up and deploy capital. You gonna start charging management fees. And oftentimes manager fees are only charged on what capital’s been deployed. And so what I see the mistake on the investor side, you know, not so much that pressure on a family office, but more on the fund side is there’s so much pressure to deploy capital that you can tend to overpay. Right. So frothy environment. You’re competing for deals and you get deals that don’t fit your thesis where you’ve kind of caved to close, you know, a term that’s common, which says, well, you really were looking for X, Y and Z, you kind of caved and just took X, right. And you kind of gave up on Y and Z didn’t really live out your strategy, your thesis, and you kind of, you know, caved on it. Right. And so they want to hurry up and put capital to work.

Wade Myers: And so mistakes are made on not having a proper pipeline in place, not following, you know, the investment thesis. And because of those pressures on both sides, it means a lot of deals are fairly messy and don’t really live up to their potential and in many cases, disappointment on both sides of not, you know, seeing the outcome that they would hope for.

William Norvell: Wade, as we come to a close, one question I did want to ask was, how do you think about the faith driven aspect of a company during a transition? So obviously, people sell companies to other folks that aren’t as faith driven and just recognize that they’ve built a great company with the great culture. How should an owner think about, you know, look at the thoughts running through my head from common grace to, you know, even still the culture. And it’s going to continue, whether you’re leading it or not, to how there could really be a lot of destruction of value there. And what do we do? Our job while we were running the company, just lots of thoughts could be gone through my head. I feel like our listeners could as well maybe walk us through how you walk through that with owners.

Wade Myers: Sure. So one is the cultural aspect where that honor has built a culture on top of a biblical framework and their style of how they operate is very much imbued with those values. What comes to mind is ServiceMaster, which had a really simple, you know, three point cultural and value statement. Number one, we honor God and all we do. And then they talked about employees and customers. Right. And so the honoring God and all we do thing was the critical point of their culture, which that kind of like set the tone for everything when they sold to a private equity firm. They had a massive Chicago area headquarters. That and this huge lobby with this big statue of Jesus washing the disciples feet. The first thing the private equity buyers did was had a crane come remove the statue and crush it up and throw it away. And you just kind of go that right there, just sort of killed the soul of the company and then they scrub the honor God in all we do from the value statement, and that’s kind of a nightmare of a lot of faith based entrepreneurs, is say none. No. I built this company. I committed it to God. I care for employees and customers and the community in a way that’s different. That’s a huge part of the soul of the company. Now, there’s also a lot of analysis that faith based companies and companies that are trying to do social good and kind of say we care about all constituents, not just shareholder value, that those companies almost always outperform regular companies that are just focused on the bottom line. And again, it makes sense. It’s the biblical economics that who should do the right thing and treat everyone’s respect and golden rule that generally, you know, things will turn out better. So there is an aspect of I had one owner tell me the worst thing I could imagine is I sell the company. I take a whole bunch of money away. I walk away, leave my employees. They’re at the mercy of the buyers. And then I bump into the employees at the grocery store or the park or something. They say, great, you sold us out. So happy for you that you made a pile of cash. Look what we’re stuck with at work, right? And so there is this sense of a lot of faith based entrepreneurs that says, I want to do this right. And I would prefer to sell to a buyer. If I sell to a buyer, that is going to continue. The culture continues of values, continue the ethos of the company, because that’s really critical to what we do and it’s critical to the value that we’ve created and to our outperformance. Because, again, the analysts would say that faith based companies and companies that are focused on kind of social good and are looking at all constituents almost always outperform. So it it does tie together. Right, with the culture and the performance, et cetera. So that’s usually a pretty big deal. Well, there’s other entrepeneurs that would just say, well, I want to maximize the proceeds.

Wade Myers: And then with those proceeds, I have a plan for how I use that for faith based purposes. Right. And in that case, as someone came along and offered a much higher price, that was a not a faith based investor, you know. Now, there’s a decision of am I trying to be a good steward of the potential value in proceeds and how I can use that and how much of the culture and so forth would survive under this acquiring entity. In some cases, that acquiring entity might be so convinced by what’s going on that they’re open to continuing that. And it serves as a testimony to people that otherwise wouldn’t have been testified to. Right. In terms of, wow, there’s really something here. But in general, a faith based entrepreneur is very concerned about what happens to their employees or customers, their values, their culture. And it’s a big deal. And I think to your question, there’s tons of opportunities to do this right to match, you know, the buyers and the sellers together in this ecosystem that says if that’s what’s important to here’s all these opportunities. I think all of us have been involved in some of these, you know, events. And you guys are putting on events. There’s all kinds of events. People are just really kind of waking up to, wow, there’s this all movement of faith based investors and faith based entrepreneurs and trying to bring them together. This is great because it’s more opportunities than most business owners realized to find a great buyer and potentially just matches up the whole thing. And I’d like to keep a stake in a company. But I don’t want to keep a stake in a company with a buyer that’s going to completely change the company. Right. And so there’s all kinds of opportunities now to really be fully aligned on the values dimension, as well as just the financial dimension.

William Norvell: Wade, that’s good. And, you know, we talk to a lot of folks as well. And I think it’s one of the phrases we say a lot. is one size really does fit one. And you just really never know what God’s doing for every kind of tragedy story as the ones you mentioned there. And, you know, some great experiences with private equity firms and other buyers and all kinds of things. I’m sure you do as well. You know, just it really is so good to hear how you think about it and how we can encourage others to think about it as they come up on that, you know, pretty big decision in their life, as you’ve said so well. And as we come to a wrap here on the Faith Driven Investor podcast, I would love to invite you to share with our audience where God has you today in his word and what he may be telling you. It could be today, could be the season, could be something he’s just had on your heart and that you’ve been working through. Would you mind just let us in a little bit into where God has Wade, in his word?

Wade Myers: Yeah, absolutely. So, you know, given the whole Covid impact and the recession, there are so many entrepreneurs that are in trouble, that are anxious, that are being forced to lay off employees, being forced to shut down. And what I’m really grateful for is we have all of our analytics in our platform that we can turn on for free and just say, well, let us help. Let us just help you get through this. And, you know, raising capital for companies that need it, saving jobs. And so one of the things I’m really grateful for right now is just being faithful and being a good steward of what, you know, is right at my disposal and just offering to be a wonderful help to those that need it and to really try to make a difference with that at the same time. I have one of my five children is fairly ill right now and we’re wrestling with that. And so other thing God is telling me is just execute well on all fronts. On the family front, you know, as well as the business front, there’s all these balls that we’re constantly juggling and just trying to do it all well and trying to lead faithfully through good times and bad times and through, you know, good health and bad health and just coming out the other side and knowing that it’s just a growth opportunity. And so as I meet with entrepreneurs right now, they’re struggling and are worried. The nice thing is God has taken me through a lot of experiences where I’ve learned a lot of hard knocks and made a lot of mistakes. So there is a degree of empathy that God is able to use to help them just, you know, understand that you’re not alone. Because most entrepreneurs feel very isolated and lonely and like I’m a failure. Right. It’s like, no, this is a different environment. Let’s help you through it. So I’m really grateful to be in that position. But clearly, God is saying take what you have and offer it. A lot of what you have free right now just to help businesses get through this next, you know, three months, six months, whatever it is, until kind of people can get back on their feet.

Henry Kaestner: Wade, thank you very much for your time. Thank you for your faithfulness and for sharing. And for encouraging our faith driven investor audience. May God bless you and your family and your child that’s going through these difficult times.

Wade Myersr: Thank you very much. I appreciate it.

Henry Kaestner: Welcome back to The Faith Driven Investor podcast. We’ve got a really special edition today. We talk a lot about how to get investors focused on how to honor God in the marketplace and be a part of his kingdom coming on earth as it is in heaven. And if I’m truthful, much of our focus has been on people who are already investors, who’ve been out there for a while and thinking about a new way to invest and maybe to reconfigure the way they think about their assets. Maybe they’ve been investing in fidelity for 20 years or some of the more traditional asset vehicles. But what’s a great way to think about getting investors to think about faith driven investing from the outset? The beginning of their career, their beginning of their investment life. Well, the two folks that are with us today have been thoughtful about that.

And we’ve got Stephen Diedrich from the Baylor Angel Network and then also Dick Blanc from Cedarville to talk to us about how they’re working with young entrepreneurs, young investors, how to help them to understand from an early day about how they can participate in faith driven investing. So Baylor Angel Network has been going on for a while. The idea of investing and putting money to work and training up student investors with real dollars is pretty unique. You guys have been doing it for 13 years and I want to camp out on that a little bit. Just tell us more about how you do what you do. What are the deals you see? How did the students get involved? How do you structure deals and maybe tell us even some success stories that have come out of your time in investing?

Steven Diedrich: Yeah, I’m happy to. So, you know, the basic way we operate is, as you know, I’d say almost any other angel network. We’ve got a pool of members that come in and we invest in promising companies. And although we’re university affiliated, we don’t have any hard restrictions on you’d have to be a Baylor grad to join. Right. Or you don’t have to give to the university to join. And the same with the companies. You know, we look at all sorts of companies, even if they’re founded by non Baylor alumni, the tie into the university is really through the student educational program. And it’s really flavored with even the way we got started. You know, the perspective has always been one of service and giving back. And one way I’ve heard it put it is, listen, I joined the Baylor Angel Network so I can invest. Right. And make some money in my investments as a steward of my you know, what I have. But then I can turn and give to the University of the profits, give up my time and mentoring these students and pouring it into that interaction is it’s really neat relationship where we’ve got students that are learning about investing and analyzing these opportunities. And we’re connecting them not only with investors who do it, but we’re having them do the work where they actually lead our screening, cycling and all the diligence materials that we hand to our investors when a company comes in to pitch was put together by these student analysts who’d been mentored and guided both by our faculty and by our members. And, you know, if we look at some success stories, we had an exit in January that I think is a great one to look at because it touches on all these points of why Baylor supports this. Right. Why do you support a bunch of investors, right. Who invest in these start companies? Well, we had members of the Baylor Angel Network who invested in and oftentimes they’ll take advisory seats, too. But they invested in this company that was actually started by a Baylor grad with this one, you know, in five or six years later, had thirty five times their money returned to them. So hugely profitable investment. That’s kind of what we’re going for in the angel world anyway, right? It’s not the most frequent outcome, but it is a great one. And out of that. Right. The members actually approached Baylor said, by the way, we know this was a great investment for us. We have clearly profited in our investments. We want to give to the university. And so out of that the university received, I think about 10 percent of profits were just given charitably from these members. And so you have this deal in particular touching a Baylor entrepreneur screened by Baylor students, invested in by Baylor alumni who’ve now turned around given money so Baylor can continue to do this program in training up and guiding these students.

Henry Kaestner: So tell us about the other part of that, which is the company that you invested in and are there different types of companies that you look at in terms of stage or industry or geography or whether the leaders are driven by their faith?

Steven Diedrich: Yeah, so our perspective is we want to be good stewards of our investors finances and we look at all sorts of opportunities. It almost has guided more by our investors perspectives on what they want to invest in. And that’s kind of what guides what we look at generally where early stage series. So after first revenue, but not too late. Across all industries. And so, you know, there’s a lot of diversity there. We don’t have any formal requirements that, you know, it be founded by a Christian. We don’t have any formal requirements on a mission there. But our perspective is we want to invest in companies that contribute to kind of the flourishing of mankind. Right. Things that are beneficial to society now. We can also paint a negative light. This is hey, there are things we just we don’t want our money in. But we don’t take a hard perspective on investing in Christians, because I think a lot of our members, they look at this and say, listen, I’m a Christian, you know, and not all of them are. But, you know, oftentimes our members have these projects that you know, I’m a Christian. I want to put my money to work in companies that are doing good. And then I can have an influence. It builds my relationship with this company, with guiding them, with their consumers and as well as with the students. And so I’d say more of our perspective is leaning on, you know, if you are a faith driven investor and you join the Baylor Angel Network, live that out. Right. You may be investing in an entrepreneur that is not a Christian, but what a great opportunity that is for Christians to be living and engaged in with people who don’t know the Lord Christ because it gives opportunity to point to him, to his glory. And why are we doing this? Why is the Baylor Angel Network different in our giving some of our profits in our pouring into students? And so it tends to more flavor who we are in leaning out rather than being a filter that we apply.

Henry Kaestner: Yeah, I think you bring up a super good point there and that it’s not just how unique Baylor Angel Network is, but I think that a lot of the folks that are listening to this podcast are angel investors and help manage a fund that invest in Faith driven entrepreneurs in Southeast Asia, United States. And somebody might infer from that that I think that really true faith driven investing is only investing in Christ followers. And yet you mentioned something dynamic that’s incredibly important. As an entrepreneur is out there regardless of their faith background or their faith intentionality. And they are living it up. They’re feeling the stress. They are going through the crucible, if you will, an angel that’s really involved in an entrepreneur’s life has this incredible opportunity to witness and be with them and be friends with them, whereas share the reason for the hope we have with gentleness and respect. And that comes through a relationship. And an angel has this great opportunity to be in relationship with the founder and then with time and through love, being able to share the reason for the hope they have. And I think that that’s such a key part, lest we otherwise be constrained with faith driven investing only into a holy huddle. Now, to be clear, I’m a member of that, and I think that investing in Faith driven entrepreneurs is a beautiful way to advance God’s kingdom. And yet that’s not the only way. And so you’re speaking to that. Can you maybe even give us an example or have you seen that happen where somebody from the Baylor world has gotten involved in a company and the discipleship or the faith foundation of the founder, the entrepreneur has been influenced in a way that’s been full of life for the founder?

Steven Diedrich: Yeah, no. And without getting too much into into maybe specific scenarios there. I mean, we we see a number of times where a BAN member will get involved as an advisor and help provide some coaching or help your entrepeneur. And, you know, I think one area, maybe one example that specifically shows how being a Christian in this can be a huge benefit is, you know, not all these investments go well and return 35x, like I mentioned earlier. And we have one that there was infighting, a shareholder and not a new thing, not a unique thing. But there was actually one of the BAN members who, you know, is investor in this company. And, you know, I look at and say, you know, because Christians were called to live in a way. Right. That puts us above reproach. I mean, that’s the calling of the Christian. One of our BAN members was asked to come and join into a special committee that was trying to help bring the peace. Right. And you think about what a Christian is called to do. And be peaceful. Right. Be a peacekeeper. And in these relationships. And so that BAN member was able to step into this role, help broker these tense relationships. And, you know, I can only imagine you look at this one on ones and say, what’s your thought on this member here? It’s like, well, you know, what a great option they were to step into a tough situation and show the patience, show the love, show the kind of uprightness of Christ in those relationships, even when things get bad.

Henry Kaestner: Thank you very much for that. I want to switch over to you, Dick. You’ve got a new program that’s starting at Cedarville under your leadership, has been launching a platform and a program for a little bit more than a year. Talk to us about how you are forming your curriculum and your investment strategy, how you’re looking at deals, maybe some of the same type of questions that I just asked Stephen.

Dick Blanc: Happy to. Well, we first looked at launching this program. We got 25 business leaders. Most of them alums from the university together. And we were focused on picking one thing where we could put our expertize and capital behind to advance the cause of Christ aligned with the university’s mission. And in doing that, they ultimately decided that the best and most equitable way and focus. Our collective marketplace energies, our capital, our expertize, our relationship base, our opportunity to mentor students and alumni and others close to both an accelerator on campus, we call the whole program Beyond, the Accelerator and also an angel network, not unlike what Stephen just described at Baylor. Then we also, of course, have an entrepreneurship academic track that cuts across all 16 of the schools at the university. But, you know, one of the things that really informed how we structured this and why we did it and why top down board of trustees, president, cabinet, across the university, everybody is very aligned with the strategic importance of the program. Our belief is that I know everybody on the call here the same belief that under God, the marketplace has tremendous influence on our culture. If there’s any doubt about that, you can see what happened when we shut it down for 20 days. These recent events that still continues has huge impact. The market points to us. It has gone on a culture. We also do it. The great advances for the cause of Christ seem to always begin with an athlete or a leader both Biblicallyin contemporary history. And if you look at how the marketplace looks like, particularly in the US, there’s like a continuous transformation or renewal of the marketplace that goes on every 20, 25 years. There’s cycles for the startup economy feom 20, 25 years ago also becomes a leaders of a marketplace of the future. Those leaders who were part of that whole venture economy 20, 25 years ago then become leaders in heavy influence in the marketplace. The worldview that those leaders ultimately have has enormous influence in the culture, communities, and the way we live. And so we’re playing a long game with a certain Time over Target. I personally think that by launching hundreds of state driven companies with a biblical worldview, for profit model, you know, ultimately rising and scaling to have positions and platforms of influence in the marketplace. We feel that that is a great, positive way to allow our communities to flourish, to advance the cause of Christ. That’s a biblical worldview, helped to shape the culture and really the ambitions and influence with those pillars and also those of us that helped shape and fund and coach and mentor and capitalize and to have that kind of impact. So we want to be a Midwest hub, in effect to what’s going on with faith driven entrepreneurs and faith driven investors. We also want to be part of a global ecosystem where our impact and deal flow and our capital can be multiplied. And you guys have a great impact and making all that happen. And it’s created just a phenomenal ecosystem for which we are now joining. And our angels, our alums and students going through the accelerator, the interactions we’re having with other accelerators for deal flow, the sharing of deal flow across other angel networks around the country. They just have this multiplying impact for God that has really added more impact for the university for God’s kingdom. So that’s what excites us and why we’re happy to have made this strategic move in the past year or so and it continues to scale.

Henry Kaestner: I want to talk to a little bit more about how each of you think about equipping the investors of the future with how they look at investment opportunity. But before I do that Dick, you have this entrepreneurial program that goes across all the different colleges that are part of your university. What are some common tenets what are some common principles that you want to impart on these young faith driven entrepreneurs, that are going to go out there and innovate and create a business?

Dick Blanc: Yeah. Great question. You know, we put some thought into that. Obviously, a biblical worldview is certainly a common principle. Everybody at Cedarville University, regardless of the school that their majors anchored in, whether it’s business or engineering or science, cybersecurity. You’re seeing all those degrees, everyone gets a Bible minor before graduation. So biblical principles are instilled throughout the curriculum in all of the practice areas of the 16 schools of the university. Interestingly, now the entrepreneurship program besides now the Bible minor is one other minor that’s across all 16 in all schools. So I tell you what, we see our partnership in all the tenets of the grit and tenacity in going all in that we know an entrepreneur does to attack then uncaptured opportunity or a problem that God cares about in a for profit model. We want to encourage more of our students, more of our alums, and of course, many of our investors who have an affinity with the university to help scale the addressing and solving of problems. So we see entrepreneurship in principle as a great way to influence the world, but also to solve the unsolved problems that I talked about two minutes ago in isaiah 58.

Henry Kaestner: So riff on that a little bit more, because you’ve got an opportunity, of course, to teach great entrepreneurial curriculum, you can do lean startup, you can do traction a whole bunch of different things. You can do Yoaz. And then, of course, you’ve been well versed in how to train kids on the Bible. Are there aspects of being an entrepreneur that you think a Christ follower really needs to lean into? Or are there different things that you think of Christ following entreprenuer that wants to have a career in entrepreneurship needs to be aware of or wary of?

Dick Blanc: Yeah, yeah, good question. I mean, one of the things that probably would be unique, I think, to an entrepreneur who’s a Christian, certainly one would be how they think about their role as a founder, as a CEO, as a leader of their enterprise. More from a stewardship standpoint than from an owner standpoint. That’s really one key principle that certainly drives home pretty hard.

I think another key principle is just the whole idea of, certainly the companies need to be wildly successful economically, financially, to scale, to attract investors, to attract customers, to operate, just like some of the great companies that are out there today, the Chick-fil-a’s the Home Depots and others. They need to be financially strong and sound at scale. Great profits, great revenue growth, but we also encourage our entrepreneurs to be principled in the impact that they make. So, you know, having more than one bottom line is something that we feel strongly about. And we see out there in the marketplace as something that’s honoring God. We have just some great mentors are role models that are participating in our program who do that with their businesses. And boy, it really resonates when a student sees that type of principled mindset in the leaders of today as they see leaders of tomorrow.

One thing I’m encouraged about, about the students today and I know, Steven, I’ve talked about this a little bit as well at Baylor, is the things that took me a while. And I’m an alum of the University, but the things it took me a while to learn in the marketplace. It seems students already have learned just the things that are important. They’re More principled. They’re more focused on having a purpose. They’ve got a mission. And I don’t know that when we were all grads was quite as prominent. You know, certainly we talked about it, but I see that passion that heart. Most of the students that I interact with have a strong heart for mission and purpose of God, but also a strong ambition to be excellent and successful in the marketplace. And they seem to have a great balance to that. And I hope that continues as they enter the marketplace.

Henry Kaestner: Steven, I want to switch back to your Baylor Angel Network. You’ve been thinking about investing for at least 13 years. And undoubtedly you’ve got a curriculum and a framework to teach investors, young investors about faith driven investments. What’s that curriculum look like if you’re going to encourage another university that wants to be serious about developing a curriculum on faith driven investing? What are those core pieces?

Steven Diedrich: So we kind of look at this from two perspectives. You know, first and foremost, as a university, you know, our focus is really making sure how are we doing a good job educating these students. And so not just training them. We’re not a trade school. Right. We’re not teaching them to just do this kind of classroom involved, but really encouraging the students to think through and be innovators and be leaders in this space and within the business. I think this is especially important then to take that extra step and put them and to get these hand experiences and let them lead right. With these companies, because with the CEOs engaging with the investors. And that’s one thing that’s kind of helped shape what our curriculum looks like. And the basic framework from the students perspective is, you know, they come in and they are not only being trained in, you know, understanding the basic tenets of how do you negotiate, how you evaluate an opportunity, what’s important, what terms or get you how do you model some of these financials? You know, that’s kind of the one part. Right. And that’s building on the broader curriculum that Baylor has in both finance and entrepreneurship and in a number of other backgrounds that our students come from. But beyond that, what I’d say sets the Baylor Angel Network apart is, you know, we have just an awesome opportunity to take, you know, these top students in this area and connect them with alumni and connect them directly with these entrepreneurs. Not only can they do it, but then they can see, you know, what’s a moderate who someone I can emulate. You know, one of the feedbacks we get at the end of the year, I often ask these students, like, what have you appreciated most about your time in the Baylor Angel Network? And I’ll tell you all, it’s good for these students. Like when you look at job placement, for example. Right. It’s good that they know how to do some pretty heavy financial modeling. They they’re creative in the way they think about opportunities and threats and. None of it mentioned just that piece, right? They don’t say, hey, it set me up for a great job. Oftentimes the feedback we get is, man, the members, the mentors I have. Right. The way I can now look at a Christian businessmen. Right. And learn to emulate that. The way that they walk in humble service. Right. Honoring God and what they do and now being a model for my life as I’m leaving college. Because, you know, oftentimes these students that I’ve had them ask me this several times already, as they say, you know, I’m Christian and I’m a finance major or I’m an entrepreneurship or I’m an engineering major. Right. And I do that. And, you know, should I take this job in investment banking or should I go into ministry? And I feel like there’s this kind of tension and just the opportunity, you know, beyond me. Right. But, you know, for each of our members. Right. To be able to give their input and really guide these students to understand that, you know, your faith. That should influence what you say. Yeah. You know, the answer is yes, Minister, through your life as an investment banker, minister through your life if you go into consulting or venture capital or, you know, a number of careers that our students go into. And so it’s that extra little piece that I see us having the opportunity and a platform to deliver through the Baylor Angel Network that I say sets this apart from other opportunities where they’re either just getting educated or just getting experience.

Henry Kaestner: So there’s a lot of conversation happening right now about the fall. And by the fall, I’m not talking about what happened in the garden. I’m talking about the season. Autumn, there’s uncertainty in what the fall schedule is going to look like for many schools. And as a result, I think that a lot of people are looking at the higher price tags of higher education. How important are programs like this, these real world experiences to the value of the college experience? And do you think that this crisis is going to slow, that our accelerate that, how are you processing all that?

Steven Diedrich: That’s a great question. I’ve actually had the same conversation with some of our analysts. Right. They’re looking at what if we go online in the fall? Should I take an internship, take a gap year gap semester? I mean, how does this impact just me personally? And, you know, one of the perspectives I have on this is higher education serves a great purpose. Right? A university model. It has a great purpose. And I maybe won’t get into the price of that because I think that’s a whole nother can of worms. But when you talk about the value that someone’s putting into coming off to university, it’s not just for the experience of being off at college or just for that diploma. Right. It’s kind of a signaling tool to get a job. Right. You jump down that labor economics degree. But really, you know, what the university should be striving to do is encouraging these students. Right. To be thoughtful leaders. Right. It’s contributing to that academic curiosity. And so a program like Ban, I think fits in perfectly and just enhances that experience because it’s not just I go to a classroom and I’m learning and they’re encouraging me to be creative and curious. But, you know, it kind of stops here. It’s this kind of flavor that we call the BAN practicum. So as the students come in, there’s the curriculum that they go through to. And in that it’s not just a class like you would normally have where you show up, you do your readings, you have some assignments. So it’s we’re digging deep. Right. And we’re encouraging the students to be curious and to ask questions. And then we’ve also got this awesome, you know, almost an internship through the Baylor Angel Network. And we hold these things side by side. And I can sit down and look at one of our analysts and say, you know, so tell me about this. You’ve got one company that you’ve been on a call with the CEO. You’ve talked about terms. Right. Why is it important? How are you applying what you’re learning today and tomorrow? And just that interplay between, you know, really pouring into and building up these students from an academic side, from an experienced side, from connecting them with alumni and engaging them that way side. I think just creates a student who’s so well equipped to not just go into the workforce, but to thrive and to succeed and be a leader in the workforce. And as we look at our years of graduates who’ve come through the Baylor Angel Network. As an analyst and looking at where they are now, it’s amazing and it’s humbling because they often leave with this perspective of how do I turn around and help the next person? How do I approach this with a humble stewardship? And that’s just such a blessing to see the way that just a short time we have I mean, it’s only 18 months of their college career, but through the Baylor Angel Network that we can help instill that and tie them in. And, you know, they can turn around and and help the class after them the next generation.

Henry Kaestner: Dick, want to throw in on that, too?

Dick Blanc: Yeah, yeah, happy too. You know, we had a record enrollment of 10 percent above the prior year in 2019, which was just phenomenal. And unheard of in the university settings. And even in the covid environment here our deposits are pretty well aligned with a similar performance. And so that’s been great. We’re going to open up on campus a couple weeks early. We want to send the students home for Thanksgiving break. And that’ll be the end of the semester. That’s how we’re going to manage that. But it will be on campus instruction. Even before the crisis came along, there was already a strong trend towards students wanting meaningful and real experiences that were real world and immersive. And programs like what Stephen is describing a Baylor, what we’re doing at Cedarville. Very much that way. They’re very real-world, very immersive. The interaction with top business leaders, Angels, venture capital, private equity, strong operators, and strong entrepreneurs. The students are getting immersed experience, paid on campus internships in venture finance, fund management, entrepreneurship. And it’s really created a draw for more of that kind of experience at the university. So we feel like programs like this could be a trend. So across Christian universities at least, that could make great impact, both outcomes as well as the on campus experience.

Henry Kaestner: I’ll ask you guys one last question before our final question that we always ask each of our guests, and that is if I’m listening to this as an investor or as a established entrepreneur. Are there opportunities for me to get involved as an investor or as a volunteer in either of your organizations? And if so, how do I go about it?

Steven Diedrich: Absolutely. You know, I shoot me an email now. So, you know, we’re always looking to bring in more members, more investors. And, you know, we always distill down to the four main reasons that people join the Baylor Angel Network. You know, one is to make investments or make profitable investments. The other is portion of the students piece, you know, kind of the service. And this comes in times in waves as members are able. But there’s great opportunity to contribute not just to the students as a mentor, but even more informally or with some of the other acts of service that we have. The other reasons we look at are just the opportunity to network with other investors. Right. Who share these values or, you know, kind of the final one is to learn about investing in these entrepreneurial ventures. And that’s the kind of the investing piece, right? Yeah. The deal flow that comes. You know one of the unique things as we talk about just the investing. I mean, these things get to be highly vetted by the time our members see them. You know, I will take 30 companies that apply in a cycle. Our analysts will do deep dives and 15 of them raise to get to the top four. And this is a five week process that results in, you know, 10 pages of research that our analysts do.

And so, I mean, there’s a high vetting of the deal flow, too. And so, you know, I’d say if someone of to join we’ve got ways to engage. If you’re close enough to drive into Waco, we’ve got ways to engage if you’re not right. We have out of state members that join us virtually. And so much of you know, when we hit this covid crisis, it didn’t really throw too big of a wrench in what we’re doing because most of our members live, you know, hour and half to three hours away. You know, most are about that far. And so a lot of our cycle is virtual, is enabled by Zoom or conference calls in other things. And so, you know, the presentation meetings online, too. Not ideal, but easily doable. And so, you know, I think you’ve got my contact information and, you know, let’s have a conversation.

Henry Kaestner: We’ll put it up in the show notes. Dick, how about your?

Dick Blanc: I would say the same thing. You can put my contact in the show notes. You also have the cedarville.edu/beyon. And if you go to those landing pages, there’s opportunities as entrepreneur in residence. There’s opportunities as an angel member to participate and mentor the students, as well as to invest in a curated set of deal flow and our next virtual investor event where we’re looking at deals is June 12th. So you can go to the Web site I just described and register. So that you can be a guest speaker, you can sponsor internships. So all that’ll be really clear if you go to cedarville.edu/beyond I’d love to have more listening in here, participate in the growth and become angel members. That’s the best way to plug in.

Henry Kaestner: Okay. Thank you. Thank you. With each of our properties Faith Driven Entrepreneur Faith Driven Investor and the new faith driven athlete, we ask our guests one final question. It’s always the same. What are you hearing from God’s word? Maybe this morning, maybe this week, maybe last week, that you really feel that he’s speaking to you about. Steven, we’ll start with you.

Steven Diedrich: That sounds great. So I’ve been reading through with my two boys first and second Samuel and we’re into Kings now. And, you know, as we’ve been doing that kind of just Bible study with, you know, a four and a five year old, one of the things that I’ve been just really taken from and resting in is God’s sovereignty. And I think even just in the face of COVID, that’s something that I’ve been able to communicate to as the spirit’s been teaching me. It’s this reminder that our security is not in our health, or our security is not in our finances or in our, you know, the income we have. You know, that’s not it. And so even if all that’s taken away. Right, God is sovereign. And that’s just an amazing thing to be able to read. Right. To talk to my little kids about. But also then to turn to our analysts and kind of point them to in this time of uncertainty. God is sovereign.

Henry Kaestner: Amen, Dick.

Dick Blanc: I’m thankful for Bobby Gruenewald, who I think you guys have interviewed on this podcast before, talking about the Bible app. And my discipline is to essentially go through that every year.

I love just how easy it is and the availability of it. And so I’m at this point in the year where I get to read about king after king in Israel in a quick summary of their life and their impact as leaders of God’s people, the Israelites. The contrast is so stark when you go through and read each of those chapters. It just basically starts out. And so and so was either a good king following in the steps of David or was not.

So where God challenges me every year in that particular area is just who will I be as a leader and who will I mentor others to be as a leader? And what, if there was a chapter in God’s word that summarized the impact of my life, what would it say? Would it say I was courageous and bold enough to address the things that God dislikes in the ways he wants? Would it say that I trusted him in his sovereignty and in his wisdom versus aligning and partnering with perhaps another acquaintance or company or partner who has some strength to help me in a difficult situation? Would I look to God and say God, like David, do I go to battle or do something else? And that certainly was a test for all the kings. Could it be said that in the scope of the things that I have the opportunity to lead and steward that I left him better than when I was given the role in terms of, you know, being aligned in God’s mission, in the impact that God wants to make in the marketplace. And that’s what resonates with me. And reminds me every day it wakes me up every day to think how we’re making an impact today.

Henry Kaestner: I love the fact that you brought up Second Chronicles there. I think I’m on a different reading plan, doing it actually as a three year plan with a bunch of buddies going through a chapter a day and in this time going through the Bible. The thing that really impacted me was Second Chronicles and maybe because of where it follows, maybe because you just went through eight or nine chapters that just had genealogy after genealogy, which are kind of tough to get through. But then I listen, you run into the bad kings of Judah and the good kings of Judah. And the thing that left such a lasting impression was that the good kings were good thereafter to their father’s heart. They’re after David’s heart. And yet every one of them made a critical mistake along the way and didn’t seek God before making a major decision. And it didn’t go well for him. For one, it was a trade deal. For one, it was going to battle. There six good kings, all six of them made a big mistake. And that’s such an admonition for me. And really interesting to hear that they made an impact on you as well. We’ve come to the end of our time. I’m grateful for both of you. Super excited about the way that you’ve been thoughtful and having teenagers through early 20s, being very thoughtful by Faith Driven Entrepreneurship and Faith Driven investment. It makes me incredibly hopeful for the world. And thank you for the fact that there are things that both of you guys could have been doing. One of the things that we share in common is that we’re both formed a little bit in St. Charles, Illinois, through our time with Arthur Andersen, Accenture Family Group but God has us each in different places. And you could have been in different places on Wall Street. And for you to be so serious about your faith and investing in this next generation, to have taken leadership in both these schools. It’s a big deal, makes me hopeful. Thank you for your faithful obedience in that direction. Thank you for us listeners. And until next time, God bless you.

Henry Kaestner: So welcome back to the Faith Driven Investor podcast. We’ve got a special guest with us today. We have Malcolm with us online, Malcolm Johnston from Northern Ireland. I was going to ask you why you talk with that funny accent. But now we all know and Malcolm, I’ve gotten to know you over the course of the last year or so and just been so impressed by the way that you process what God has put in front of you. You’ve got a great story and some really interesting places. So I’m really grateful for you to be able to be on our podcast with us to share some of those. Welcome.

Malcolm Johnston: Thank think it’s great to be here. And I hope that you can get my accent. I didn’t realize I had an accent until somebody told me. I hope you can get what I say.

Henry Kaestner: Yes. No, I think it’s phenomenal. It’s an awesome accent. I think it may be one of the best ones, maybe probably the best one we’ve ever had on the FDI podcast. And yet there’s a great story behind it, too. It’s more than an accent. It represents a culture and a great country and a society that had really been in the news when you and I were growing up. You were living it.

I was in the United States growing up in the 70s and always hearing about Northern Ireland and the troubles. And you’re in the midst of that. You now, as part of what you do, you go to places where there are troubles and you bring in light and you bring in investment and you bring in training for entrepreneurs. But you grew up at a time in a place where there were some troubles. Tell us about that. What was it like growing up in Northern Ireland in the 70s and 80s?

Malcolm Johnston: I think probably it was more influential than probably we thought at the time. It’s your normal that you kind of learn to live with it. But yeah, I was born in 1962 and the Troubles kicked off in 69. So it was very much part of my life. And the restrictions that we had and school and going into the city, a constant news flow that was pretty depressing, but effectively just tribal conflict and then a very small country. And yeah, it definitely shaped. And I find ways, I guess. Bit by bit to find out how to be salt and light in the middle of that trouble. And so apart from, you know, going into business fairly early on in life, the business I went down to was a family business. I joined my father and it was a wealth management and financial planning business. So we were advising wealthy people about their money, building their investment portfolios, helping turn a wealthy and successful people to try to think through some kind of purpose and objectives for themselves. But the thing was, probably more shipping was getting involved in inner city Belfast and very socially deprived communities politically of young people, and in many ways were the castoff ghettos that grew in the city because of the troubles.

Henry Kaestner: And let’s take just a quick step back, because I realize that you and I were born in the 60s. And I understand you say, by the way, that the troubles began in 1969 and I happen to be born in 1969. I like to think that you’re talking about two different things. But many people, listeners may not understand what were the troubles. I want you to tell us what was it all about, the IRA, etc..

Malcolm Johnston: Well, it’s complicated. I guess, that you’d find this when you go around the world that the conflicts in most places are not straightforward and very often they’re the consequence of depending whether you look back 10 years or 50 years or 200 years, and Ireland’s very much like that.

It’s been a place of amazing richness, but also a place where a lot of conflict and ultimately the conflict, I would say, was racial and tribal. It just happened to be called Protestant and Catholic, but it was basically two tribes of people whose background was a bit different, whose allegiance was a bit different to sense of national identity, was a bit different. And it happened to be called Protestant, Catholic, but it really wasn’t a religious difference. It was more about allegiance and flags. And it very much created a black and white divide in Northern Ireland, which erupted. It went way back that the conflict between Palestinian Catholic communities went way back. And then it erupted at the end of the 60s due to a series of events that just brought to a head and exploded and the IRA became weaponized to fight a war or a battle. And then the communities just polarized. It was pretty much a civil war that was called Protestant and Catholic, and it shaped everything. Everybody knew where they stood in that conflict and that defined community set defined borders and boundaries and parts of the city. And it was very much a coming to the head of years and years of history that went way back. And where you stood, everybody stood somewhere or not, depending on how far you look back in history.

Henry Kaestner: OK, good. So I want to come back to that in a little bit, but less than talking about the history, but talking about that as a platform that makes you uniquely equipped to do the amazing work that you’re doing right now. But I interrupted you during your biographical sketch. You’re talking about work in the family business, working with your dad, working and wealth management. So bring us through to the point in time where you really felt that God had really called you out of that. But what’s that process?.

Malcolm Johnston: Yes, I got involved in business, got married. Married now for Thirty three years this year. Two girls. Who are I? I can’t believe I’m saying this, but they’re twenty seven and twenty five. So I think God wired me to go to difficult places that started in Belfast going and to inner city ghettos with very high unemployment and starting to work with kids and young people. And the business gave me a great platform to grow the business, to be as successful as it could, to be as profitable as we could grow it completely and absolutely with the purpose of seeking the kingdom in the business. So we were never scared of trying to make it as successful as possible. And we saw our business very much as a platform to be salt and light to the people we were dealing with on our staff and all of that to very much Kingdom in the business building profitability so that we could do really cool stuff with the overflow of the profits, but then also using the business as a platform to build freedom of time to go and be involved in other things. Being on the business that allowed me to work in inner city Belfast for many years doing community development work in an inner city ghetto. And it also allowed me some time after that to go pioneering mission, pioneering and Eastern Europe, just after the fall of communism so early 90s, starting to go into Eastern Europe building mission.

Henry Kaestner: So what is that like? So Wall comes down. Lots of us remember just what it looked like on TV and in pictures. And you’re one of the first guys in with some others going in. Walk us through that experience that this time in history.

Malcolm Johnston: It was. Actually, over time, a number of business guys. People who were connected, strategic thinkers, entrepreneurial, not scared to jump into a challenge, but jumping into these places where they had been completely controlled through communism. The church had been underground. There was new enterprise system at all. Everything was centrally controlled. And then almost in a flash, it disintegrated and there was absolute mayhem. It was just chaotic. And me and some other business guys went down as practically mission and entrepreneurs, as volunteers with Youth for Christ and Youth for Christ basically said we’ve never been able to do anything in Eastern Europe. Now it’s open. Do you want to go and have a go at it, see what you can do and see if you need to build a team, build a team, if you need to raise money or, you know, find it. But it was kind of like a blank sheet. Go and see what you can do. It was harrowing in many ways. What we find as the churches started to come up from being underground, the poverty was absolutely terrible. We just had to respond to what we saw, especially starting to support pastors and learning to be beside people. And I kind of lived in this strange double life where at home I ran a business that worked with the wealthy and help them build their portfolios and think through what their purpose wasn’t and all that stuff. And then this other part of my life, I was working in abject poverty, trying to be beside people that were trying to get on their feet. And I made an agreement with my wife that I would travel short and often rather than go for long periods of time. The kids were young. I couldn’t be away for weeks at a time. So we kind of came to an agreement. I would go for maybe five or six days, just flat out doing stuff and then come back into this other world. And I had so many experiences of coming back absolutely broken hearted from what I’d seen on just trying to decompress and just sitting in the office I cried my eyes out with the suffering that we had been thrown into the middle of and trying to figure out how do we be beside these Christian communities and help them to get on their feet. And how do we reach young people and kids in that situation? So it was harrowing and it absolutely broke my heart and I never recovered from it. I start to tell you that talking about things that happened, it will still make me cry. So it was God threw us into a big challenge, first in Ukraine and then in the years that followed that we established a Youth for Christ program. There was great local leaders finding the right people. God brought us to the right people who had a passion for their own country. And we just learned to mentor them. And so we went from Ukraine to Moldova. Right, Russia, Belarus, Armenia, Georgia, setting up stuff.

Henry Kaestner: So tell us about the business and the economic environment at the time. And just to put some framing around our time together, you’re just really uniquely equipped to talk to us about faith driven investments, investing in Europe. You do investments in other places you and I met in Africa. But you are uniquely equipped to talk about. What does it look like to come into different economies and invest, whether it’s an economy like Northern Ireland, which at one point in time, I think had something like 65, did you say 65 percent unemployment?

Malcolm Johnston: Yeah. And that and the inner city ghetto where you work with young people. That was their reality. 65 percent unemployment.

Henry Kaestner: And then fast forward to, you know, behind the Iron Curtain as people are emerging in the state controls so many of the jobs. What does it look like when you’re ministering to people that don’t have hope? They don’t see commerce as a way out. They don’t see investments as a real thing. They see a class divide between rich and those they exploit. Just walk us through. What does that look like in your business? Because you’ve come from wealth management and you understand investments and how it drives economic gain. What’s it look like? So maybe we’ll go back to Northern Ireland later. But let’s focus right now in Eastern Europe. Walls come down you’re in with Youth for Christ. You’re going around to these different economies, you know, business. You know, Jesus. What did it looked like when you start putting your business and investment skills to work?

Malcolm Johnston: That’s a great question. And initially, we were very much we were a charity. You know, we were raising money in the rich world to bring it out into the poor world. We worked a lot with the churches. Even when they were small, they were beginning to get on their feet. And we reckoned that the best thing we can do is work with the churches to help them to do what they want to do in their communities. And we started to do a lot of work with street kids, helping churches to set up projects for the children that were living on the streets in their communities. I absolutely loved that. And I could live lots of lives. I would just keep doing that, getting to know those kids, letting them know that they were loved. And so we set up kind of typical rescue programs for kids that were charity based. The kids were generally coming from absolute squalor. Remember, they lived on the streets literally, or they just find somewhere to sleep in a friends house.

But they just lived in squalor around this kind of typical charity project of, you know, day centers feeding, somewhere warm to stay, hearing about Jesus. You know, it was a safe place for three hours a day and we helped the kids then go to school. And as I watched this program, I realized that when we closed the doors at night and I remember one particular situation, I went to visit one of these day centers in a little village. I had a destitute rural Moldova. And I watched the kids coming in, smiling, laughing. But you could see the pain in their eyes at the end of the program, five o’clock at night. It was getting cold. It was dark. And this little girl that I’d watched in the program, beautiful little eight year old and. When we were leaving, driving away back to the city, this little girl was sitting on the footpath outside the program where we had met in the little church building, and I asked one of the folks explains why she not going home. She said she’s no home to go to. And that absolutely broke me. And it was part of God’s call, which was these kids do just need projects. They need parents with a job. You know, this is huge sticking plaster. It’s typical charity stuff, but it’s sticking plasters. Little girls like that need parents with a job.

Malcolm Johnston: It’s in the United States equivalent. There is going on a mission trip and painting the church. So you’re using sticking plaster is the term that you use in Europe.

Malcolm Johnston: Yeah, yeah. And that was God’s challenge to me because, you know, to build the charity programs, the street kids was very, very difficult, you know, to find the right leaders and build the funding. That was all tough. But to start to think through, what did it mean for parents to have jobs? Well, it was about business and what needed to happen to establish business and see businesses growing and these kind of very difficult circumstances. And that was God’s challenge to me. I remember clearly it was God’s challenge to me was Malcolm, if not you, who? You know, you understand business, you understand investment, and you love these kids dearly. If not you, who?

Henry Kaestner: So, where do you get started? That’s quite a challenge.

Malcolm Johnston: It was it actually turned out to be mission impossible before too long. I changed the dial tone in my phone to the Mission Impossible theme tune.

Henry Kaestner: Oh, that’s so cool,.

Malcolm Johnston: Because it literally was mission impossible. I mean, it was just excruciatingly difficult to find how to make that work. And this was like twelve, thirteen years ago when the whole idea of impact, investing, social enterprise, enterprise and development, faith driven investors. None of that existed. You know, twelve, thirteen years ago, it was literally a blank sheet of paper. How would we possibly go about this? It was God’s call, Henry and Bob and the feel. There are things that showed me that God was absolutely calling us to start to think about this. What the job creation, three billion business to the glory of God look like, and really tough places where the church was tiny business hardly existed, but it needed to happen and it was God’s call. But I think it showed me actually in hindsight that God has an amazing sense of humor. You know, it was brutally difficult. I look back and I couldn’t look back and paint an amazing picture of success. I think that we were pioneering and I think rather than building success, I think we find every possible way of getting things wrong and things not working.

Henry Kaestner: Tell us about some of those early stories. I love the Mission Impossible phone ring. By the way, I may or may not adopt that or may or may not give you credit once I do. But tell us about some of the early stories. Tell us about some of the mistakes and maybe even some of the victories. Definitely some many victories.

Malcolm Johnston: We formed Angello to gather together people who were thinking the same way, new faith driven people who were thinking the same way, who were looking beyond charity and business people who could see that these places needed business to grow. So we formed Angello without actually really any clue about what was going to be the right approach. And we decided and then at the beginning that we would try to build a small investment fund to invest in small businesses in Moldova. And at that time, we had to build everything from front to back. We had to try to find entrepreneurs, bearing in mind that the country wasn’t long gone of communism. So the entrepreneurial culture was very, very early stages and certainly faith driven entrepreneurs hardly existed, you know, in a country where the Christian population is less than one percent. So to find entrepreneurs who are decent business ideas was challenging. And then to find investors who would be willing to invest in small businesses in a place that they’d never heard of. Generally, you know, just a bit everything about it and building a structure. You know, the legal and tax structure that could accept people’s money and then deploy up and the small businesses in a place that had never, ever had any inward investment of any kind.

Other than a few, you know, big infrastructure projects through European Bank for Reconstruction Development or something. But this has never been done before. So every piece of it was difficult. And actually people agreed to invest because they knew that I wasn’t crazy. You know, they knew that I probably was well intentioned and it was like I probably was well intentioned. We have no clue what you’re talking about, but it sounds like this is the kind of thing that should happen. So we’ll make a small investment in your fund to getting people convinced to be investors rather than just philanthropists. They understood philanthropy, but the idea of building Kingdom through building business was not something that people really understood much about at the time.

Henry Kaestner: I’d imagine some of that dynamics is because and we see this in United States, so presumably you see some amount of it in Northern Ireland. The concept of building the kingdom through business is a novel concept even here, let alone Moldova. Right. Yeah. And so you’ve got some vision casting to be done that actually God cares about the marketplace. He actually cares better. Investment dollars. I want to do it in Moldova, but that was had some ripple effect back in as you’re building this consensus and building this fund. It must had some ripple effect back in Northern Ireland to right?

Malcolm Johnston: Honestly, Henry, most of the outcome from that was there were very, very few people who understood it. Very few people who, you know, would say we should go to crazy places like that. But I think that generally people did not really get what we were talking about. A few people were willing to invest. They were willing to come with us. But I think that we were probably way ahead of our time. Now, there are more people that have heard of impact investing and, you know, there’s few more stories about it. But actually, back then, we were probably ahead of our time. It was desperately lonely, actually, to persevere in what we knew. God had called us, too. And so it was tough.

You know, I didn’t bring a huge groundswell of change in people’s attitudes to invest in philanthropy. And it didn’t. It was lonely. And we had to go to London and into Europe to find people who got it, actually. And most people didn’t. They were still in a different paradigm.

Henry Kaestner: Yeah. I can empathize with that when we’re starting Sovereign’s capital. We went and talked to maybe 700, 750 different people and a very, very distinct minority, said, oh, that makes sense. You know, you can actually put investment capital and work with entrepreneurs driven by their faith for some sort of financial return and social impact. And I found myself at times feeling frustrated by that. You must really felt that.

Malcolm Johnston: Yeah. Very much so. It was absolutely mission impossible. And it was really tough, really tough.

Henry Kaestner: Because at least with us, we had some investment ideas lined up. You’ve got to build a market and demand on the investment side. And you also had to build a market in demand on the entrepreneur side. Right. So how do you do that? How do you take people who’ve been living under communism for so long? Bring the gospel to bear and help them understand there’s a God who love them, but then also that they were created in this image of a God who worked and who was entrepreneurial, who is creative. Tell us generally how you do it. But then give us an example of a company or two in Eastern Europe where you came alongside an entrepreneur and helped them to live that out.

Malcolm Johnston: Lots of things we tried. Didn’t work. One of the guys that was involved with us on the team back in the early days, even before Angello got going, he was a tech entrepreneur and he had gone to Moldova with a student ministry to volunteer the student ministry for a short time. And he could see that part of the legacy of communism was a pretty rigorous education system. So students were coming through university.

They were a lot of kids were coming through and learning IT, but there was no work for anybody. They came out of university with qualifications and ended up in the streets. And, you know, there was no work for anybody. And this guy decided that he’d set up a tech company with his own investment and start to hire these I.T. graduates and teach them modern day programing. So they basically built software in Moldova and sell it into first world markets. And so he started this company in the early we had been about 98, 99 at the same time as I went first to Moldova. When they started to recruit graduates from the universities and build a software development company, which was the first of its kind in the city, and began to employ people, pay them decent wages and pay tax. They became the biggest taxpayer in the country and the company grew like wildfire. Actually, they began to recruit more people. They were winning contracts outside the country. Fast forward a few years, a lot of difficulty, a lot of efforts to close the company through corruption and so forth. And actually, I give these guys credit for it. They have just floated that company in the New York Stock Exchange. hat is completely out in the left field compared to anything else that they have seen. But they went the right sector. They spawned an I.T. sector in the country. That’s nine, 10 to 15 percent GDP. And it was a raging success. But the challenge with any of those countries is to find entrepreneurs who have got the skill and the experience to grow and scale their companies.

And we made the mistake about 10 years ago of going investment first, make sure we just a small fund and then we needed to find companies to invest into. And on hindsight, we took the wrong approach. We shouldn’t have been trying to invest. We should have been doing what we talk a lot more now about had me is building the enterprise ecosystem. And hoping that after a period of time quality companies would come through that process, that were ready for investment. And in hindsight, that’s what we should have done.

Henry Kaestner: Yeah. And so the work that you and I are now doing in Africa, you know, brought to the Fairview Hotel, we got together in February with an eye towards doing faith driven investments. Where are the great entrepreneurs? Let’s invest in them. And I really came away from that trip. Really just encouraged by the opportunity. But then also understand that if we wanted this to really be a thriving marketplace in five or 10 years, we had spent a lot of time thinking about building capacity.

Malcolm Johnston: That’s exactly right. That’s exactly right. And I think that’s a big lot of our experience is where to start building that capacity and knowing that it’s just going to take time. Hard yards building relationships is one of the things that I learned and I’m deeply convinced and convicted about is that in these developing markets, guys with ideas and vision and all of that, how we behave when we turn up is incredibly important. We can really get that badly wrong with our enthusiasm to be agents of change. And I realize that so much of what we’ve got to do is to empower locally and not Short-Circuit, that by bringing in smart people from outside who can get from A to B faster.

Henry Kaestner: That’s pretty tempting, though, isn’t it? When you see how it will work in Northern Ireland or the West and then saying, we’ll do this, do that, and you can get pretty prescriptive pretty quickly, at least I feel like I can.

Malcolm Johnston: Yeah. We made all those mistakes, and I’m honestly we a lot of it for good reasons. You know, we cared about the poor. We wanted to see community change. And there’s times where we just drove too fast. And a lot of what we built that wasn’t based on local empowerment fell apart and we had to go back and start again.

Henry Kaestner: So tell us about, again, what brought us together is this group that got together in Kenya focusing on faith driven investments in East Africa. And then as a result of that, taking a step back and saying, gosh, what does it look like to you? Yes. Do some of that, but tread slowly, but also build out the Faith Driven Entrepreneur ecosystem. What are some of the things that they are starting to happen and have happened in Eastern Europe, as you’ve looked at some of the mistakes that you made and said, gosh, we need to focus on capacity building where some of the initiatives that you have been involved in.

Malcolm Johnston: Yeah. One of the best examples of that is a group of people we’re working with right now in Uzbekistan. And that’s a little part of the world, Central Asia. That was always fascinating to me, even when we were very much involved in Eastern Europe. We helped to start mission stuff in Kyrgyzstan because they were blessed a lot by having common language and Russian. So it’s a fascinating little cluster of countries East Pakistan, Kyrgyzstan, Kazakhstan, Tajikistan, Turkmenistan, very, very close. Islam is rampant, growing, and we find a cluster of Faith driven entrepreneurs who desperately wanted to have partners from outside. And we very readily agreed to this journey, this together, because I could see that they had good local leadership. They were smart. They had a vision for this themselves, not the vision that we had to try to sell to them. And so we came alongside this little group of faith driven entrepreneurs in Uzbekistan. And right now, we’re taking these steps with them to build that ecosystem. And they want to have programs in there, like the ones, for example, we saw in East Africa. They want the programing. But right now, what we’re doing is standing beside those guys to provide some very small level of loans and to faith driven entrepreneurs almost as a sign of partnership. We’re with you. We’re gonna do what we can to help you..

And I think that the conditions really exist there in Uzbekistan to build out this ecosystem. And they want to be an example out. ofUzbekistan for the Central Asian region. And that excites me. So that’s an example. And a little place like Uzbekistan that just desperately wants faith driven people whose faith puts me to shame. You know, it’s just such a privilege to be with, not to try to teach or push, just to be beside. It’s such a privilege and honor to be with these guys with friendship, actually, and just a commitment to journey. These are the kind of guys that can really make a difference in their country. And they’re so excited that there’s a movement happening. So as I tell them about the movement that’s happening with, for example, faith driven investors and Faith driven entrepreneurs and that kind of stuff that’s growing in East Africa. They are thrilled to bits that there’s a movement that they could be part of. That’s a great example of it.

Henry Kaestner: Tell me about this dynamic of going in and starting off with some low interest loans with these entrepreneurs. Just really, really impressive by their faithfulness in a really challenging spot. How do you balance coming alongside them and the discovery and the diligence that you would do as an investor if you’re looking in opportunity in Belfast or New York? Presumably they don’t have data rooms. They don’t have audited financials sometimes. How do you come alongside them in a way that’s not judgmental or prescriptive, but at the same time leads them towards a world in which they will be ready for more of a buttoned up presentation, maybe more accountability? How do you navigate through that whole dynamic with patience and wisdom?

Malcolm Johnston: Actually, it takes a lot of wisdom to let them come at their speed with appropriate support and. I think one of the things that I’ve seen most, Henry, is that if we build from where our investors willing to go with what they have with their current perceived wisdom. All right. What is impact investing look like if we go from that point of view of. Existing impact investment capital and an existing impact investment structures investment will never go to Uzbekistan. It’s just the demands of the money. The kind of due diligence that’s required currently. These frontier markets, the difficult places for the church is small, but for business, that’s definitely necessary to see that kingdom built then existing money and how it thinks would never go to these places. Now there’s a massive missing segment that is going to continue to be missed.

Malcolm Johnston: I guess I find that a bit depressing as I’ve watched the sector evolve, as I stay close to people in these difficult places determined that they should find the support that they need. It’s a bit depressing to watch the capital with its intentions. Being far away from where these guys are going to be for a long time. And so what I desperately want for these kind of guys who we need to support them with, with rigorous programing incubators and accelerators and mentoring and all that stuff, the good stuff, that there are no great programs available. We’ve got to push them to really develop their standards and so forth. But there needs to emerge, in my opinion, type of capital that see, that’s role as kingdom building, not as a new cool place to find an impact investment, because if the money wants a new cool place to invest, it’s never going to go to Uzbekistan or Moldova. Those countries will stay, still, on the frontier because they don’t have thriving enterprise ecosystems of faith driven people, because the church is tiny and it’s persecuted and they need commitment from people like us to go the journey with them over a number of years, and willing to see capital brought to it that’s appropriate to where they are and they can get to us their next step, not holding out capital that says we’re with you if you can make it to the fifth base.

But capital that is willing to come to the second base to serve what’s happening, what God’s doing in that country. So that’s one of the things that I see emerging. I think it’s exciting what we see emerging with the journey towards building ecosystems. The stuff that we’ve been talking about is super exciting and it can be done. I’ve been around it long enough to know that what we’re talking about can work on the kind of faith driven people that are building these ecosystems is exciting. The missing piece is the kind of capital that’s willing to come. So the faith driven investors, in my view, are going to need to apply their capital to serve in some of these difficult places. Just the way, you know, people like the guys that have followed with me and the difficult places where we’ve kind of gone with our time and our lives to serve, to see future in these places, capital is going to need to do the same to come to these difficult places and still with rigor and still with proper thought, not just throwing money at stuff that doesn’t make sense, but that’s what I desire for these kind of guys that will find ways of plugging the gaps with capital that will come to serve them because they are truly kingdom builders.

Henry Kaestner: I want to bring it back to Northern Ireland before we close out. Fast forward to present day in the ghettos. The slums now. Are things better? Over the last 20 years.

Malcolm Johnston: Yeah, they’re definitely better, and that gives me hope, you know, as I go into other frontier markets and see difficulty. I see a change comes, mindsets change. Innovation starts to happen. People start to have confidence to build something that isn’t going to be wiped out by the next terrorist attack or economic slump. So, yeah, there’s been massive change. People have hope now. And people stay to a greater degree when there’s a sense of hope. This is a place I can build a future than people choose to stay. And, you know, when I was growing up in Ireland. Ireland was a place that students come out of University and then left to go and build a future somewhere else. Now to a greater degree. People will stay and start businesses and that’s exciting to me as I see. Eastern Europe, Central Asia, one of their biggest problems is immigration. Bright people leave and the experience of Northern Ireland is that. when the steps are taken and she and starts to happen, then people even start coming back and bring their skills back with them that they learned elsewhere. I’m going to build a future here. And so, yeah, we see a huge change here in Northern Ireland. There’s a much greater understanding between people who are in the past diametrically opposed, that there’s a much greater sense of space has got potential.

Henry Kaestner: So, as you said, it’s a message of hope for some of the other places that you’re investing and that maybe 20, 25 years behind. And I’m very, very grateful for this conversation. I think that a big lesson that I’m taking away from it is making sure that we have a mind of service, that we’re not prescriptive or judgmental that would come alongside the entrepreneurs. We work with the right pace to bring them to a place that may take decades to where they are equipped to have the pro forma financials and cap tables and ability to talk about proff stacks and convert’s and those types of things. But we need to come along at a pace that is driven by a heart of service and driven by the Holy Spirit. And so I’m grateful for your perspective and your long obedience in same direction and in difficult places in emerging markets. Malcolm, one of the things that we’d like to ask people that are on any of our podcasts is something that they’re hearing from God through his word recently that they see really working in their life. And it could be through your Bible time this morning. Maybe it’s last week, maybe last month. But what’s one thing that you feel that God is speaking to you about now?

Malcolm Johnston: Yeah, I think it’s a great question. What God called us into and through in some difficult places. It took me a long time. I’m probably like you. I want to change the world where there’s brokenness. And Isaiah 61 is the call of God in my life when there’s brokenness and lack of hope and opportunity. I want to change the world. God brought me through a lot of tough stuff of realizing that, Malcolm, all I’m calling you to do is be faithful to what I called you to. You don’t need to have a big success story to shout about. Your success is that you were faithful to what I called you. And what God has taught me a lot about in the last while is from man Psalm 27 where David who was a go getter and he was a fighter. He was a king and all that stuff. And he got to the point of saying, in Psalm 27. He said one thing I ask of the Lord this is that I seek and I may dwell in the house of the Lord all the days in my life to gaze upon the beauty of the Lord and to seek him in this temple. And that was a go getter who got to that point of saying, this is the one thing I do. And I’m glad to say that God had to break me down from wanting to constantly be getting things done, to be able to say this is the one thing I value above everything else, to learn to gaze upon the beauty of the Lord and to learn what that means. To actually just gaze on the beauty of the Lord to spend time in his presence in silence, learning to appreciate his beauty, that these nations that I care about, wanting to see them being restored and transformed. God says these are my nations. I’m working. Even before you turned up, I’m working because I’m the God of all the earth. You learn to gaze on all my beauty and realize how big a God that I am. And you just be faithful to what I’ve called you to today. And don’t worry, if you don’t see it happen in your lifetime, you just be faithful and learn to gaze on all my beauty and enjoy walking with me. And so Psalm 27, I would say, is the big thing that has meant so much when seeking to learn to walk faithfully, whether there seem to be results or not.

Always is beautiful. I needed to hear that. I have a feeling that a lot of our audience needed to hear that. I’m grateful for your time. I’m grateful for your friendship and your encouragement. And I’m so much looking forward to doing work with you under God’s power, not ours, for his glory. And then my sense is that together we’ll have an opportunity to gaze upon the beauty of the Lord through the work he’s doing in Central Asia and Eastern Europe, in Africa and other places. I’m grateful for the message you had about the mindset that we have in investing in emerging markets. The history, the context. And again, grateful for your friendship. Malcolm, thank you very much.

Malcolm Johnston: My pleasure. Thank you. God bless.

Henry Kaestner: Welcome back to The Faith Driven Investor podcast. Today is a special edition because we’ve got a special guest that I’ve known for a while. Looking forward for her to share her story with you. And then also William Norvell, my co-hosts on The Faith Driven Investor podcast, is driving cross-country in an RV with his wife and two very young children. We’ve been joined here by Rusty, our co-host on the Faith Driven Entrepreneur podcast Rusty. I imagine William right now rolling in with the Winnebago into Walley World. John Candy is about to come out and give him some bad news.

Rusty Rueff: Yeah. I mean, can you imagine what that Winnebago is going to look like after versus before? The damage costs (laughter)

Henry Kaestner: Oh my goodness, yes. I kind of want to welcome him when it gets back to California and then I kind of don’t want to. Right. So it’s great to have Rusty here. And so as a result of that, we’re going to have an episode that is going to be for both our faith driven investor audience and then also our Faith Driven Entrepreneur audience. And as you might know by now, we have three different properties Faith Driven Entrepreneur our Faith Driven Investor and Faith Driven Athlete. And I do know Alfa reasonably well, but not well enough to know whether she was a competitive athlete or not. And so I don’t know if we can have crossover to the FDA podcast, but we most surely have something for FDE and FDI. So, Alfa, thank you very much for joining us.

Alfa Demmellash: Thank you for having me. And I can say safely that I am not a competitive athlete, so we’ll stay in two lanes.

Henry Kaestner: And I’m not either. All right, good. So we found ourselves on the right podcast with FDE and FDI. Alfa we’re grateful that you joined us on the show today. And I’m so excited to pick your brain and hear your perspective. But we like to capture some of the background of each of our guests. And you’ve got a really, really interesting background. And you grew up in an amazing country. My father, who was a spice buyer, has traveled more than 150 countries and he says that the country that impressed him the most was Ethiopia. That’s a country you’re from. Tell us about Ethiopia and how it formed you as a person.

Alfa Demmellash: Sure. I’m so delighted to hear that your father holds Ethiopian high regard. I do as well. I was born and raised there until about age 12. Unfortunately, during the time period when I was growing up, Ethiopia was having its bout with communism and dictatorship. And so we had a really unfortunate time period of what is known historically as a period of red terror. And this was a time that was hugely disruptive to my family and resulted in my mother needing to flee the country as a refugee when I was two. And so, you know, I had a pretty amazing in many ways and grace filled household with a grandmother who practiced our faith. We have brought in anybody and everybody who is hungry and hurt. And so I got to kind of spend most of my time running around with her. My aunt, who was sixteen at the time, had taken over kind of the day to day caretaking of me. So I had this fairly independent kind of childhood. One thing that my mom did right before she left was as a condition of living, she made my grandparents and my aunt promise that they would send me to Montessori school. So that was also a huge privilege, given that there wasn’t a lot of early childhood education there at that point.

And I think this was probably the only Montessori school. And so it took, you know, basically a village to get me to that Montessori school and back. And so I also had kind of that special opportunity that I think has shaped a lot of how I view my life now.

Henry Kaestner: So a lot of people don’t know that Ethiopia is really a Christian country. Some of the earliest Christ followers are from Ethiopia. The Coptic Christian tradition is very alive and well. Talk to us about what’s unique about Ethiopia. My father, for instance, suggested that he thinks it’s because Ethiopia was really never colonized. I think the Italians were there for a couple of months or something like that. But generally, it’s a very unique culture. What is it about the Ethiopian culture that you think is unique? And then to what extent does that really influence who you are right now?

Alfa Demmellash: Sure. So I think, you know, Ethiopia, like a lot of Africa, there is a lot of internal diversity. So you have, you know, about 80 languages, 200 dialects. It’s also, you know, right on the equator. But it has mountainous regions, huge farmlands. Right now, it’s about 100 million people. So pretty populated. The thing that has been amazing and I’ve had a chance to travel quite a bit since immigrating. But, you know, the cultural diversity, it’s clothing. Food. Yeah. It’s just very, very unique. And I would say that having been in other countries in Africa, the fact that the colonial influence of the Italians was prescribed only to cafes and really delicious desserts and pizza, some of the best. Other than that, culturally, I think there was a lot that has remained intact. And the other thing is that it’s also been over 3000 year old empire. So there is this continuity, I think, that has also influenced kind of the sophistication of its cultural background.

Rusty Rueff: So take us through rising tide capital. I mean, we know you co-founded it in 2004. Give us some of the impetus behind that. But also just take us on the entrepreneurial journey from co-founding it to where you are today.

Alfa Demmellash: Yeah. So, you know, the cofounding of Rising Tide was incurred in something that actually was grounded in Rwanda. And I had been studying in college conflict resolution and just international periods where the darkest really in human history, the Holocaust then and genocides and such. And how do we actually fulfill on our promise of never again really understanding kind of the sacredness of human life. And so when I heard about and learned about Rwanda, I was really, really moved deeply, in part because some of what happened during that genocide also involved the killing of people and throwing them into reverse, saying, you know, go back to Ethiopia because there is this hermetic myth that the Tutsi came down from Ethiopia into Rwanda. And that really shook me at my core. And so I ended up in Rwanda studying both the genocide, but also some of the processes for healing and restoration that were underway, in particular, traditional mechanism of conflict resolution. So I went to Rwanda. Right. As that process was unfolding and it was a deeply transformative experience and part kind of seeing what it looks like when you have a society, a culture that is thrown into the darkest of the dark. And they have to rebuild everything from scratch. And so how do you do that was a question. And I wasn’t at all interested in economic development at that point. I thought I was most likely going to go to law school and study law. But as I sat on a hilltop and it was a genocide memorial as well, watching all of those thousands of skulls of children and yet such a beautiful country, I was really moved to understand. And then you will also see all these women who are carrying unbelievable loads up and down these hills and like, really having the thought.

There is so much about resources, the competition for resources, scarcity, perceptions of scarcity that shape how people respond and the kinds of kind of seeds that are planted around the value of human life. And so that began my kind of question and curiosity about economics and how do we build an economy that actually values human life and values the stewardship responsibilities that we have from that kind of faith perspective and puts that at the center. And that was kind of the impetus for Rising Tide capital and saying, you know, the role of economic development in the ways I understood it is really to ground people’s interactions with the market as a place of exchanging culture, building values together, shared values. And so that brought me back into the US. And I started looking at what it looks like to build that kind of economy from the ground up and places like where I am and Jersey City and the neighborhood we’re in Newark, Trenton. These communities in one of the wealthiest states in the union, New Jersey, was kind of a call to action to say even though these worlds couldn’t be more different, you know, Rwanda and deep inner city communities in the US, there were certain similarities that really resonated with me and kind of called me to pursue this entrepreneurial or social entrepreneurial path. The whole thing started was a whole bunch of questions and listening to community leaders and members in private sector, public sector, the churches and trying to understand what the conditions that created this multigenerational disinvestment and, you know, economic failure in these communities where it came from and what it would look like to address it by recognizing people’s innate entrepreneurial talents and building community around them and making sure that they have access to the kinds of capital and markets that would help them build thriving businesses. And so in the beginning, we thought, you know, a lot of the emphasis at raising paid capital was to say, look, you know, there is a microfinance world and access to capital is crucial. And so we really we named it Rising Tide Capital with an emphasis on financial capital. And then we learned pretty quickly within a couple of years of piloting a fund that what was really needed was a lot of the social capital, the education business management knowhow. Those were not things that could be easily gotten in many ways. I mean, capital, financial capital is hard to get. But these other things felt like there wasn’t a lot of. Representation or entrepreneurial action going on there, so we decided to shut the fund and focus exclusively on building this kind of community and connecting people to sources of capital through partnerships and relationships. So that was kind of the big aha for us. So we launched a community business academy. It provides full scholarships to entrepreneurs who are trying to start and grow businesses. Then when they graduate that it’s a 12 week program, it’s an intensive look at what it takes to take an idea and bring it to market and build out, you know, a lot of the infrastructure and that product, et cetera. But then ongoing coaching and support, which is where a lot of the transformation happens, which is that long term support.

I always joke and say I’ve never met an entrepreneur that has grown something in six months or, you know, the average length is 10 years. You know, when I talk to people they are like it took us 10 years before we knew we were actually going to make it. And so being able to provide that kind of long term sustaining partnership and grounded in relationship has been where we’ve seen this transformative capacity. Now we have over 3000 entrepreneurs in New Jersey and we’ve actually, over the past few years started partnering with other community based organizations. Right now, we’re in three other states and Illinois, South Carolina and North Carolina, where we have active replication efforts going on. So they’re supporting hundreds of entrepreneurs in their communities. We work with about a thousand entrepreneurs in six New Jersey cities, in Spanish and in English. So it’s a remarkable story that I get to be a witness of.

Rusty Rueff: It’s fascinating, the stats that I think probably most of us know. If not, we sort of intuitively know that, you know, nearly 97 percent of private equity and venture capital goes to white entrepreneurs. And, you know, you’re the perfect guest to speak into that missed opportunity from what you’re doing. So we’d love to hear your perspective on that.

Alfa Demmellash: Absolutely. I think, you know, for a variety of reasons, it makes so much sense to invest in the kind of talent that’s going to keep our families grounded and fed. And I think especially during this time of a pandemic, the missed opportunities are highlighted in brighter colors. I mean, looking at the role that a lot of small businesses, especially those that are owned by people of color, play and providing essential services, you know, it’s immense. And it’s where a lot of people find employment opportunities. Over 50 percent of all jobs in the US are created by businesses like this. These are the kinds of entrepreneurs who keep communities and small towns and large urban centers knit together.

And they’ve done it with minimal, if any, capital and investment from the venture capital world, certainly. But really overall investment at every level. And so this is where I think we now have an opportunity to reset and to really say what kind of a country do we want to live in? And we’re facing the kind of small business failure rates and the fact that, you know, it’s possible.

I was looking at a McKinsey report that 60 percent or more of small businesses may not come back and the vast majority of those are owned by women and people of color. And I think that there is an opportunity to say this is the challenge of our generation. This is the thing that we have to unlock. And it affects all of us. It doesn’t know borders. Economics is very much interdependent. And so I think there is a huge missed opportunity for us to ambush their creative talents and problem-solving capacities of people in many communities which we need now.

Rusty Rueff: You know, you mentioned the Community Business Academy. Tell us more about that, because it sounds like that’s your teaching model.

Alfa Demmellash: Yes. So we’ve learned that, you know, our average entrepreneur is 41 years old, a parent with two children. Usually when they come to us, they’re actually working someplace, underemployed or trying to exit and build something, an idea that they’ve believed in or they’ve been in a sector and they think there is an opportunity to do something different. And so they come with experience, but very minimal and financial capital and social capital. And so the teaching model is really pure based, experiential. They’re doing things. We’ve also used simulation games and we’ve looked at basically best practices in adult learning methodologies. And especially when you’re talking about entrepreneurs with an average age of 41, they are coming. Preloaded was a lot of assumptions. And they’re entrepreneurs because they want to go and do things in a new way, in their own way to begin with. So rather than trying to confront that differently. Kind of create the conditions in a peer to peer way in a community based way, so they’re not having to, you know, go get into like a big building because there’s lots and lots of intimidation. Fifty percent of our entrepreneurs don’t have any kind of a college experience. So they’re not necessarily familiar or comfortable in being in the kinds of learning environments that your typical MBA would have no problems with. So our goal is to make this business education as accessible as possible. So it actually takes place on weekends and nights because many people are working while they’re building their businesses. And there is a lot of hands on building. We require anybody who joins us to actually have one focused idea, even though they usually end up from the learning experience, pivoting and shifting the model. It’s very much focused on helping them bring an idea into fruition in a way that takes into account their experiences.

Henry Kaestner: Alfa, take us back to 2004 when you’re getting started with this and walk us through what rising tide does through the eyes of an entrepreneur or pick one of the people that you work with early. What was their story? What did you help them with? And then maybe also pick a story of an iceberg that you’re working with now, because presumably some amount of what you do and equipment and entrepeneurs change over the years. But walk us through the relationships you have with those two very different entrepreneurs.

Alfa Demmellash: Sure. So in 2004, an entrepreneur who is coming to raising paid capital typically has heard about us because my co-founder Alex and I had basically papered the town with notices to say, come and explore your dream with us. And we’d built a number of community based relationships with nonprofits, particularly those who are working with the formerly incarcerated end groups that didn’t feel like entrepreneurship or business ownership as far as they would see it in their mainstream was for them. So we would have that entrepreneur come into an orientation session that usually lasts about four hours. So we’d have about 100 people in a church basement and they’re going through and actually getting asked the kinds of questions that they never had. And that was also a big aha for us. So, you know, being asked, what do you want to do when you grow up essentially as an adult was a question that had not been asked of them. And so what we were seeing from those entrepreneurs is like a real surprise by the level of upfront investment of time and energy.

And we didn’t try to sell them on just our idea. We actually showed them the ecosystem of other support services that exist. So they really had to choose us if they wanted to be on the journey because it was going to be intensive. And so they would go through an orientation process and then they had to apply.

We also learned some early lessons on like free and programs for all entrepreneurs and only the grandmother and the eleven year old showed up that first orientation when we said everything was free. And so we shifted our tactics and said, you know, you have to apply. You have to be accepted into it. And so there was a process for that. And then once people were accepted, we would notify them. And so this entrepreneur would get a phone call from us. And those early days were amazing because people would like the hour, dropped the phone and screamed that they’d gotten accepted into something that was as rigorous as what we are proposing. So that early entrepreneur, usually service-based, you had, you know, people who are coming and trying to start everything from pest control to even some very early tech, whether it’s installing, you know, computer Ethernet connections, et cetera, for like very, very basic technology for schools, et cetera. And so those were the kinds of entrepreneurs we were working with. And fast forward to today a lot of those processes and so far as the orientations and the rigor and the application process is still the same.

Definitely. You know, it’s been 15 years. And so the use of social media and a lot of other platforms to connect with people. I mean, when we have a Facebook alumni group of nearly a thousand entrepreneurs that are selling with each other and connecting with one another. And so we have a lot more visibility into the activities of our entrepreneurs today than we did in the past. And so we’ve been able to shift and pivot things, particularly in what we do with people once they graduate.

Rusty Rueff: I think all the things you’re talking about, our listeners might kind of look at it and go alright lots of statistics. And we know our urban entrepreneurs have a lot of activities going on out there. But take us right down into the entrepreneur themselves. You know, tell us a story or multiple stories, if you’d like, just about the entrepreneurs that you’re working with and how this is coming to life for them.

Alfa Demmellash: Absolutely. So, you know, one of our entrepreneurs who is amazing. Her name is Angela McKnight. She actually came to us because she had her grandmother, who was in a senior housing and she was working with her grandmother to help with administrative needs. You know, mail would come in, things will pile up and there is just overwhelm and in handling those administrative responsibilities. And she realized that this was not a problem just for her grandmother, but also for a number of other seniors were living in that complex. And so she had started doing this for them of as a support from helping them think through their benefits and just like open the mail and respond and communicate. And so she heard about the Community Business Academy and came to figure out how to set up a business. She called it Care About You and started the service exclusively focused on elders. As time went by, she actually realized that a lot of the seniors were eager to have her services and perhaps the administrative services alone were not actually the reasons why they were so eager. They were often isolated and lonely. And so she stresses she wants to figure out how to put this into the business model, more like it looks like more of a social enterprise or a nonprofit. And so she created a side nonprofit, Angela Cares, that actually supports seniors with isolation. And one of the key projects that she’s been running for many years now is connecting high school seniors with seniors and housing complexes and throwing them senior problems, actually. And having this kind of multigenerational exchange of stories. And then fast forward a few years later, I got a call from her saying, hey, you know, I’m thinking that I might run for office. And I said, wow, you know, you’re running the business. You’re running the nonprofit. You’re going to add, you know, legislative potential leadership into this. And she said, I really see some of the long standing policy related issues here. And so she ran for office and got elected as a sitting assembly woman for New Jersey. And she’s gotten reelected since then. And she is one of the most active legislators you can possibly imagine. And then she’s also teaching classes in the evenings. So she teaches one class in the evening alongside many of our other instructors. Today, 90 percent of all of our instructors are returning entrepreneurs. We’re giving back. And so that’s just one example. And I will also tell you that a number of our senior leaders within the organization now are raising graduates. And so we have our program innovation person, our chief of staff. In fact, our executive director for New Jersey, who we just hired, had come to us to start a food cooperative and that had translated into actually interest than public policy and economic development. And so now she’s in the nonprofit sector right alongside us. But that entrepreneurial energy and, you know, we have schools that have been created by our entrepreneurs and pest control companies, construction companies, you name it, they’re active.

Rusty Rueff: You know, man did CNN get it right when they named you a hero. I mean, I just think that the way you think about serving others and helping them to get capital to grow their businesses. I mean, it’s a phenomenal story. It really is. And I know you care about the future, too. We were together at the Praxis event. There was a lot of talk about the future tide and what’s that mean for the urban entrepreneur. So why don’t you take us through future tide?

Alfa Demmellash: Happy to you know, future tide has in many ways become now tide. Present tide. So Future Tide Partners was a concept that we started developing a couple of years ago when we started seeing the trends in exponential technologies and automation and really started thinking about, whoa, you know, how weird, let’s say take one of our entrepreneurs who owns an auto repair shop and really thinking about the kinds of investments she was thinking while making, you know, opening a second auto body shop and maybe taking out whatever savings she had for retirement included to invest than that. And we were saying, should she do it? Should she not? I mean, because we know we’re in conversations where we’re talking about self-driving vehicles and, you know, what does it look like for the hundreds of thousands of auto repair shops across the country and the local business owners who own them to think about the next seven to 10 years when there is this rapid acceleration and the adoption of exponential technologies that could make their business models obsolete. And so we really felt like the conversations around that issue were being hard at varying levels of government, but with very little connection to the day to day realities of what this would mean for the millions of small businesses that employ the majority of Americans. So that concern was what brought us to the future type discussion. And in many ways, with this pandemic, what’s happened? So our concern with future tide was to say how do we raise appropriate levels of awareness and education without creating crisis and pandemonium about the loss of jobs and generating more fear, but rather looking at a lot of the opportunities that are also inherent in so many of these technologies. And so in many ways, I think what we had anticipated we would need to do over the next five to seven years to educate cross-sector leaders and investors to take the long view with us and help us think through how we can invest in a future of entrepreneurship and job creation that addresses what we were seeing as being a significant impact on employment. And now here we are in this corporate world, and the reality that we can work from home remotely is facilitated by and large by many of these exponential technologies. At the same time, simultaneously, we know we’re facing this massive challenge of huge unemployment figure. So that 20, 30 million Americans who filed for unemployment. These are numbers that approach Great Depression levels. And those were the concerns we had literally, you know, in the weeks beforehand to this pandemic. And so on the one hand, the positive thing is that we don’t have to spend five to seven years raising awareness so we can check off that box. I think now what’s been accelerated is the need to really problem solve. So this is why we’re really excited to have conversations around what investment needs to look like and really wanting to have more conversations with our fellow entrepreneurs in the tech space to say, hey, help us think through this, because this is about all of us. This is about our children’s flourishing and their ability to put their God given talents to work at some enterprise or another. So this is a big, big conversation and I’m seeing it come to actually quicker fruition than I imagined. So we’re taking people through frameworks. We’re having cross-sector conversations, and especially in the philanthropic space, including kind of this fund for the pandemic relief that I’m working on. I’m really using the future tidelands to help guide our team and our volunteers and, you know, the state’s leaders at every level to say, you know, what we’re solving for is not just the problem of what’s happening today or 30 to 60 days from now, but really kind of the longer term trends that have been in play for a while but now had been accelerated on a massive scale offer.

Henry Kaestner: I know that your faith influences much of what you do and why you got this started. Can you talk about what it looks like for your faith to manifest itself and how you talk about faith with young entrepreneurs that are coming through your program?

Alfa Demmellash: Yeah. You know, we’ve been very fortunate given the communities we focus on. They already come to raising tide with, you know, deep, deep, deep faith backgrounds. So we are grateful that their expression. Of their gifting. What they’re trying to achieve and the lens through which they see their journey as an entrepreneur, as being one that is guided by their faith. And so that has enabled us to be, you know, was our being a faith based organization to nourish practices that can bring people together in a way that really allows us to confront doubts that are endemic to the entrepreneurial journey. But even more now where there is so much uncertainty that people who are of faith in many ways have the practices and the mindset of being able to confront this deep doubt and uncertainty from a place of faith, that the very definition of what faith means is to walk on water, to walk on deep uncertainty.

So that has been our approach. And myself personally, I have been guided by my faith alongside of my co-founder from, you know, our earliest. This is what brought us together as friends and what enabled us to even think that we could start something like rising tide, which was to really pray and listen for and recognize that we are really not in charge, that this is so much bigger than us. All of this is so much bigger than us. And so the practices of being able to pray. And we’ve brought even in this time of crisis right now, we have twice a day. Neutral. But meditation sessions that we’re inviting people into deeper reflection. So we’ve been doing that since week one of the pandemic. And it’s enabled us, I think, to create the space for reflection and for greater connection to, you know, to the larger master of what’s going on. You know, the strategist, the master strategist here.

Henry Kaestner: So speaking to the master strategist, is there anything that you found in the Bible, anything that you found recently in your devotions, maybe today, maybe this week, maybe recently, that you really feel that God is speaking to you?

Alfa Demmellash: For me, I’ve been meditating a lot on Paul and meditating on what it means to see in the right ways and to be the light in these times. I also read Oswald Chambers. I don’t know if you read My Utmost for His Highest. Yeah. So that’s the daily dose of being brought into humility, you know, in these times, because it’s very much the case that when you’re an entrepreneur or a social entrepreneur, as you know, to get very quickly into fix it mode and think that you can actually, you know, do things with your own powers. But it’s that reminder on The Daily that this is about God first and then following.

Henry Kaestner: Yeah, well, we have of course, this is an audio podcast, but we have a video interview going on right now. And I just showed Alfa that, in fact, I have a new copy of my utmost for his highest, the daily version, which is really something that I think that another interviewee had recommended. And I went out, bought it, and I’ve been really blessed by it. So thank you for sharing that, Alfa. Thank you for sharing your story with us. Please tell Alex that we say hi. Congratulations on the new headquarters move. Congratulations on the work that God has done through you in serving so many entrepreneurs in our cities and just grateful that you spend time with us.

Alfa Demmellash: Thank you for having me and thank you for what you all do, each of you and you, Henry, for continuing to raise the flag for the faith driven entrepreneurs among us and showing hopefully that

Henry Kaestner: Welcome back to the Faith Driven investor podcast. We’ve got a special guest with us today, Sid Mofya. Sid, am I anywhere close to the pronunciation of your last name?

Sid Mofya: You’re as good as it gets.

Henry Kaestner: Which means not exactly. Didn’t completely get it. But I met Sid through a friend, maybe nine or 10 months ago and connected with him. And if I’m honest, I didn’t know much about the country that he hails from Zambia. I surely had never heard of the Zambian kwacha, which is their unit of currency. But it seems that since I met Sid everybody I meet and that’s an exaggeration, of course, has something to do with Zambia. And so we’re actually getting ready to make our first of investment out of our family to Zambia. I’ve been meeting people in ministry in Zambia and now I can point it out on a map, and I’m very proud of myself for that. But Sid one of the things we’re trying to do in getting the background of every one of our guests is to understand where they hail from, what formed them. And we’ve got a unique opportunity with you before we get into what you’re doing at Draper to understand this country of Zambia. What’s unique about it?

Sid Mofya: Great question. It’s great to be here. Thank you so much. So I was born in Zambia in the late 70s. And I say the time because it’s about 20 years after Zambia had been independent from the British and after the British had been basically ruling Zambia for, I guess, close to hundred years, depending where you come from. So I was growing up in effectively post-colonial Zambia. So I grew up in a small town, which was a mining town. We mined copper and that’s the main product that comes out of Zambia and that’s the mainstay of the Zambian economy. My parents both worked for the mining company there. I went to the mine school and my whole schooling in Zambia was through the schools that were put on by the mines to train more Zambians to come and work for the mines. So that, for me, meant I got a better education than the regular person who went to a government school because that those schools were well resourced. So I grew up speaking both English and my local language, and I think in both languages. I’m one of four children. I’m the oldest of four. And all my brothers and sisters also went through that whole school system in terms of how we grew up. I guess our parents were, I would say, middle class. So they had decent jobs. They lived in a decent neighborhood. But Zambia is a poor country. It’s at least in living memory has always been a poor country. Lots of infrastructure gaps that need to be filled.

And when I was a kid, I felt that because there was I think when I was about 10 and I didn’t know this is what was happening, but the government had defaulted on some big debt. No, you don’t do that. And there was a time when everybody around us. My friend’s parents were losing their jobs. And my biggest fear was that my parents would lose their jobs and then we would have to move from our house and go live somewhere else. It didn’t happen, thankfully, but I remember that time being a very difficult time for just getting the basics like sugar and salt and so on and having to line up the big, long lines to try to get those basics. And then we kind of got out of that. And since then, it’s been a period of growth for the country. There’s still a lot of gaps to fill, but there has been a tremendous amount of growth in the last thirty years. And if you go to Zambia now, it looks a different place to what you’d have seen in, say, the 80s.

So that’s kind of where I grew up up until college age and then I left Zambia and went to the UK again. I was privileged to have a scholarship from the mining company to go and study in the UK, went and studied chemical engineering. And the goal was for me to come back and work for the mining company. But while I was in the UK, the mining company was actually sold to a different owner. And the new owners did not want anything to do with the people that they are paid for to study. So I got a free pass to then go to a lot of different things, which I’ve been doing since.

Henry Kaestner: So you could’ve been working in the mines now?

Sid Mofya: Absolutely. Yeah, that was my destiny.

Henry Kaestner: More proof that God loves you. I know. Presumably there are lots of great careers in the mines, but the mines losses clearly are…I want to get back to Africa here in a bit because that’s been much of what you and I have talked about in the past. But fast forward, if you will. What do you do right now? Tell us about the Draper venture network, because actually that doesn’t have a lot to do with Africa necessarily. But once you explain what you do right now for your day job and then let’s let’s talk more about that and let’s talk more about Africa.

Sid Mofya: So I work for an organization called the Draper Venture Network. It’s a pretty unique organization in the venture capital ecosystem, because what we are is an alliance of different firms around the world that are all investing in early stage technology companies. So we have currently I think it’s 20 for now. We brought on some new funds, funds that are investing all the way from seed stage through late stage venture capital. They all have their own investment thesis.

They invest independently, but they are part of an alliance that looks, I guess, similar to the airline alliances where, you know, sensitive times we talk about airlines, but, you know, the airline alliances, those shared codes, they’ll share assets, but they are still independent companies. They have their own key now and we’re similar. So I work for the team that’s based in Silicon Valley that basically coordinates collaboration between all these different funds.

Henry Kaestner: And so there are advantages of some of these small firms getting together and some of medium size. But in terms of technical expertize or relationships or deal flow, it tell us more about what it advantage is when you’re part of that larger network.

Sid Mofya: Yeah. So the big reason that smaller funds, for example, would join is because the bigger funds and the whole network as a whole provides them a stronger connectivity to the centers that they want to be connected to. So, for example, as part of my job, I spend quite a bit of time in Silicon Valley talking to large corporations that either are native to Silicon Valley or have set up operations in Silicon Valley with the goal of working closer with the technology ecosystem. So they have people whose job it is to go find companies to invest in or do pilots with so they can learn more about where are the next threats coming from. So I build relationships with these folks and then these relationships become our network relationships. So a small fund in, say, Chile doesn’t need to do that because the network has those relationships and because the network has a big critical mass of relationships we had where attractive to the corporations for wanting to work with us, because when they’re looking for solutions, they can come to an organization like us that has thousands of companies that we’re invested in globally.

Henry Kaestner: So you’re working with, say, a venture fund that’s in Chile. And they’ve found brilliant young entrepreneur who’s invest in storage devices. But because they’re in Chile and while there’s a lot of great commerce going on in Santiago, it’s not Silicon Valley. They call you and say, we’ve got this new investment and they could benefit from getting some counsel. They could benefit from having maybe some supplier relationships. And then you go to work for them.

Sid Mofya: Yes, absolutely. So we would plug the entrepreneur into our portal, which has all the information that we have access to. So it shows them all the people that we know that we can connect them to. It shows them resources that we negotiated on behalf of our entrepreneurs for them to be able to get no preferential prices on some of the things that they need for their business. And it gives them a way to connect with other entrepreneurs in our network. And the fund or the company can call us at any time and say, hey, I’m looking for a connection at company X. Do you know anybody? Can you help to connect us? And we do that.

Henry Kaestner: Got it. Do you ever share deal flow? You know, when I think about running a venture fund, the most important thing for somebody running to fund isn’t fund raising, is not negotiating the deal. It’s not LP. All those things are important. The most important thing is really getting deal flow. If you can get great deal flow, all the other things seem to happen. Do you ever have some of your member funds who say, gosh, I got this interesting article or came across this and it’s not really in our space, but maybe somebody else in the network has some expertize here?

Sid Mofya: Yeah, absolutely. We do that quite a lot actually, and we do syndications among the network members. So there are two types of sharing deal flow. This is not a fit for me, but it could be a good fit for somebody else to share that deal. Or this is a fit for me. But I really want to bring on other network funds to invest with. And we do both of those with the kind of co investing. Sometimes it’s limited by geography because our funds, each of our funds, has a geographic footprint. And so it depends on the company. And, you know, whether, you know, if it’s a Singapore company, which you may or may not be interested unless that companies may be doing business in Chile. So there’s all these combinations and sometimes, you know, lightning strikes and we get more funds investing together.

Henry Kaestner: OK. So I want to go back to Africa. But before I do that, I know you well enough to know that you’re really motivated by your Christian faith. And clearly that has applications in some of the things that we’ve talked about in Africa. But how do you see your faith manifests itself in the work that you do right now at Draper?

Sid Mofya: Good question. I think for me, it’s. More how I do my work. My approach to my work.

Henry Kaestner: Tell me more about that. What does that mean?

Sid Mofya: I think for me it means I wanted to do well by people. So the people that I work with, I’ll make promises that I keep. Yeah, I will try to do my best. Yeah. Basically trying to be a good person. And I’m not sure I don’t do it all the time, but that’s my goal. I really kind of go into relationships with trust. Trusting the other person to hold their end of the bargain. And sometimes that doesn’t pay off. But I think I’m naive like that.

Henry Kaestner: So you’re in a space you’re in Silicon Valley where I characterize this particular geography as having a God complex. There’s this famous scene, by the way, for our listeners from the movie Malice, where Alec Baldwin talks about this God complex, your back on vid clips or YouTube, and you’ll find out. But when firms out here are working on things like Khalikov, the initiative to end longevity or we’re talking about sending people to Mars or we’re talking about hyper loops or all these different things, or quantum computing, you know, just amazing the strides that are being made in technology, those that are in it can almost get a God complex, especially entering longevity. This last final frontier between us in immortality. Do you get that feeling that Silicon Valley is a godless economy or do you get a sense that God is at work and are you hopeful? Tell me about your experiences, as a Christ-follower and investor in this kind of larger ecosystem?

Sid Mofya: I think God’s at work, even in people that do not profess God. You know, anybody who sets out to try and find an all time cure for cancer, in my mind is doing God’s work. Whether they say I am doing this because God told me to do it or I am doing it because I want people to be healed of cancer or even if they say I’m doing it because I want to make a lot of money. I believe God is at work in all of that because I think God is so brilliant and works in all those situations.

Henry Kaestner: I spent a lot of time thinking about it and I found another guy that’s living out here and trying to process it. You know, I think that’s actually a really interesting take. I go on runs in the morning and increasingly I’ve been listening to books on audible, on articles and things like that. But right now I’m reading or listening to the book. The Future Is Faster Than You Think. By Peter Diamandis. And he’s got a coauthor whose name I can’t think of right now. But he also wrote Bold in Abundance. And Reading and Listen to these things gives me the sense of just the amazing work that is being done. And a lot of times people aren’t giving credit to the author of all these things and seeing how God is at work in this technology. And I get a lot of sense of that in Peter, his work in particularly as we talked about how he spends a lot of time talking about Chalco. One of the things that I was really interested in that got me on a run yesterday was talking about in 1844 when Samuel Morse invented the Telegraph. And the first words that were broadcast over the telegraph wire were, what hath God wrought?

Which does speak to this concept that you’re talking about, of course, which is God using us to accomplish his work for his aims. And as you have this broader sense of where he’s working and what is the meaning of all these things, I think that the scientists out here are increasingly saying, you know, everything can’t be explained by science. Actually, the more complex things get, they actually speak to something greater than just a finished. Kind of like walking out of the ocean. There’s something more at play here. And what is it about the human brain that is uniquely human? And how did it happen? So I’m getting my sense when I’m talking to folks that they’re starting, even though they’re actually answering all these questions and kind of confronting these final frontiers. They’re also, at the same time, more open to faith. And there have been and that’s why you see these emergence of faith driven employee resource groups, which, by and large, if from Apple, didn’t really exist out here until two or three years ago. But now you’re going to Google. You got them a Facebook, you got them a salesforce and Intuit. I understand that they’re doing praise and worship music in the Dropbox lunchrooms on Fridays. So I’m hopeful, as you are at seeing God work through all of these things. And I think that more and more people are trying to understand how is he working and investigating the faith in it, maybe for the first time in a long time. People in Silicon Valley, as they’re inventing or understand, they’re really co creating and are open to what does it all mean? So, okay, let’s get back to Africa. You and I connected over Africa with this heart towards faith driven investing. What does it look like when we as investors might understand we can participate in the work that God is doing in the world, bringing about his kingdom on earth as it is in heaven? Some of those things that we’re seeing maybe in so many technologies. But how does that work in a continent that is going to count for more job creation and growth than any other place in the world, more than India and China combined over the next 20 years? My hope is that as the listeners podcast will say, gosh, you know, Africa seems like it’s very far away. It is. And yet there’s so much hope and so much potential and our sense that I got from some of conversations before that. You also have a hopeful expectancy of what is it look like to invest in a ecosystem and entrepreneurial ecosystem providing capital, but also hope through a hope in jesus. Talk to me a little bit about that. And how much of you is still in Africa and how much of your hope and your spirit is still there and what are your hopes for the continent?

Sid Mofya: Well, what a big question. A lot of me is still in Africa and I still do quite a bit of work with folks that are working in Africa, mostly from a distance that I work with an organization called Lions Africa, whose main task is to bring exposure to ways to give investors exposure to African entrepreneurs for them to see what’s happening. So they host an Africa wide competition which results in 30 finalists, and then a big conference to have those finalists present and then choose five winners and then bring those five winners to Silicon Valley to basically go tour everything. Google, Dropbox, they come to our Draper offices and they get exposure to how entrepreneurs in Silicon Valley are working and those entrepreneurs get mentorship. So that’s kind of one way of connecting the ecosystems.

I also work with a venture fund called CRC Venture Capital. So I’m an investor and an advisor to the fund. And CRT in venture capital is one of the leading lights as far as early stage investing in Africa goes. So they invest very early stage seed stage and series A companies and some of the tech successes to come out of Africa. Companies like Andela, you might have heard about who are training young great Africans to be developers for large Fortune 500 conglomerates, but still based in Africa and every, you know, a lot of money. And I think they’ve given the Proofpoint that there’s potential for building companies in Africa that can compete at a global level by tapping into the African human capacity. Another company that Sciarra invested in is a company called CPS in South Africa who are similar to Thumbtack, but specifically for domestic work. So it’s connecting homes to domestic workforce and they’ve created 15000 jobs with that company. So, you know, things like that give me hope that, you know, entrepreneurs who apply themselves and work with others, they can do pretty remarkable things. I also work with a fund in Zambia called the Kaleena Education. And this one is a play on microfinance. So the question is, can we use microfinance to fund education and have like an insurance kind of a product which helps families manage their cash flow so that typically in Zambia and many other African countries, school fees are paid on a three monthly or semiannual basis. And typically, for most households, they’re living hand to mouth.

But they. So even when they have enough cash overall to pay for the school fees, the cash doesn’t flow at the right time. And this creates an insurance like product so they can manage their cash flow and pay for the school fees for their children without having to worry about it. So that’s an experiment to see if something like this could work. And I know the entrepreneur is doing that, actually went to school with him and is a brilliant entrepreneur. So I have a lot of hope. I guess the flip side of that is I have hope in the human capital that’s available in Africa. And you alluded to that this is where most of the jobs in the world are going to come from. The flip side of it is that the infrastructure lags everything from, you know, just roads and health care, infrastructure, financial infrastructure, even, you know, to support all these businesses.

That’s lagging. And that’s where I think connecting capital that can help develop that is really key. And I think for investors that are thinking about Africa, I think that’s an interesting place to be investing in. I would say if you’re looking at investing in the continent as a small to medium size investor, move towards infrastructure, you know, build factories. Because when you build a factory, factory means roads. Factory means power systems. Factory means the water systems being built around that. And that builds an ecosystem around them. But not only that, it also builds the capacity for value creation to remain in the country instead of going outside. You know, typically for the African countries that are creating raw materials that they export. We capture, I think, 10 percent as generous of the value generated by that industry. You know, for example, the chocolate industry is 100 billion.

And I think the African countries that export cocoa don’t make five billion from the exports. So there’s a ton of value that’s simply being exported. But an investor who brings that value creation and keeps it in the country. That’s huge things for the economies. I think I kind of went on a wondering.

Henry Kaestner: Well, not at all. And I have no idea what question I ask, but I really like where you’re going. Because when we think about when you get to experience with this, of course, by being associate with the mining industry in a country where mining has been a big deal. Mines have traditionally been thought of as exploitative. And with this new wave of investment, it is interesting to think about, well, what is a redemptive lens for the guys from Praxis that I’m such a big fans of? Talk about a redemptive lens to investing. What’s a redemptive lens toward putting an investment capital to work? And your suggestion here is that something as basic as factories. So a lot of us in Africa that are thinking about being serious about investments, think about this whole concept of leapfrogging, leapfrogging over the traditional telecom infrastructure into mobile and thinking about how Safaricom got started in mobile payments and things like that. And yet you’re suggesting something that I don’t think a lot of us have thought about, which is, yes, there’s probably opportunity jump for 100 years and think about software as a service and how the digitization of the economy is going to matter in places like Africa. But let’s not lose sight of the fact that we need to have roads and electricity in a way to think through redemptive investing is something as basic as a factory that spins out chocolate bars that are fully wrapped and branded and put in a case and then delivered right to the market in London or New Yorker or San Francisco. And so I hadn’t thought a lot about that. I think that that’s super interesting.

Sid Mofya: Yeah. And the other thing that that does for an economy is bring control in the economy. So right now, a lot of the African countries, you know, they go where the wind goes and there’s very little control in determining. So what do we do with our resources? So what tends to speak is the money. So the money says, oh, you should just keep digging and keep digging. But if we have agency, then we would say, no, we’re not going to dig some more. We need to preserve this for our children. But right now, there’s not a lot of agency, but something like that brings a lot of agency, which in turn, you know, circles back to governance and all that, all those good things that. We weren’t on the continent.

Henry Kaestner: So a lot of people, when they think about investing in Africa, they think about South Africa or they think about some places in maybe North Africa. My heart’s been drawn to East Africa and South East Africa or Zambia’s. And I love for you to comment just a bit about what that region looks like. I see each of those different countries having its own type of economy, own type of system. There seem to be some things that have worked well in Kenya. I wouldn’t say it’s the be all and end all. And yet some things seem to work there and other things don’t work in other places. In Rwanda, of course, they had a genocide and yet there seems to be some stability coming out of that. Was it that makes different countries work or not work in Africa? And if we’re thinking about the larger geopolitical context, what needs to happen in order for there to be joint progress?

Sid Mofya: I guess there’s several things that immediately come to mind. And I just mentioned them now so that I remember to come back to them. One is leadership. One is geographical integration. And the third is probably education from a leadership point of view. It’s pretty clear that countries that have had strong leadership towards growing economically and Rwanda is a good example. Kenya is actually a good example as well. They have grown leaps and bounds because they’ve strengthened governance. Then when the government is strengthened, I think the human capacity is amazing. Amazingly resilient entrepreneurs, they work hard after they’ve been living in the UK and they returned to Africa. We were living in Tanzania. I would go to the big open air market and I would just go speak with people because I just wanted to know, you know, what’s the entrepreneur locally about? What do they think about what are they concerned about? And I’d go to the open air market at this point. I’d learned enough Swahili that I could pass as a local person and I’d go speak, just ask questions. What do you do? How long have you been doing it? And it quickly became apparent I had gone with that initially with a little bit of a savior complex. You know, I’ve learned lots of things that I’m going to come and work with entrepreneurs and teach them.

And I quickly learned. There is very little teaching you can do with somebody who actually understands the lay of the land that are playing in very, very well. And I quickly learned, well, I don’t have a lot to teach. There may be some things that, you know, I could help with, but not a lot. You’re smart, you’re driven and you work so hard.

There’s really no big difference between you and an entrepreneur elsewhere that I’ve seen in other places that I’ve lived, except you’re working with different cards that you’ve been dealt. And part of that is governance, which allows the entrepreneur to then be able to raise capital and know that, you know, they’ll be able to pay that capital back. And the financial infrastructure allows them to basically operate a business. But that is lacking. And in countries where that has been built, Rwanda has done a lot. And, you know, you can argue about whether or not Kaigama style is good or bad. I think net net, it’s good because basically it drives the economy to a goal. He has a goal and he drives great grades towards it and he unites previously fighting parties towards that goal.

So that’s governance. The second thing was geographical integration. And so each of the African countries are generally small countries, small economies. So Zambia. Twelve million people. Zimbabwe, about the same. Tanzania is bigger, 45 million people. Kenya, I think, is about 30 million. So they are reasonably small economies. So, you know, GDP per capita across the sub-Saharan subcontinent is about fifteen hundred dollars a year. So there are small, small economies. And what tends to happen is. There’s a lot of trade happening within the country, but not a lot of cross-border trade, even between Zambian, say, Tanzania, which has no good road connection.

There is some, but not a lot, you know, compared to other economies like Europe, at least before Brexit, but probably still even now. But, you know, I think it’s something like 70 percent of GDP that comes from cross country trade. In Europe vs. 10 percent, I’m not sure of the number, but it’s really, really low in sub-Saharan Africa. So there’s a big opportunity there with just the countries working together or folks creating companies that are geography agnostic and can work across different borders. An example of a company like that is one that CRC actually invested in called Floods Away and Fuddle Wave is an integrator.

So they’re a glue. So if you’re a developer in Kenya, you can have somebody in Kazakhstan paid by connecting their payment system to your payment system in Kenya. So they basically pull up all these different payment systems and create a glue which allows all that all those transactions to happen. So the more we can see companies like that and the more we can have the geographical integration between the countries to allow freer movement of goods and services across the borders. And that’s going to be huge.

Henry Kaestner: So you mentioned something there that I want to campaign on a little is the savior complex. Many of our listeners are familiar with a book that Brian Fikkert wrote. That’s called When Helping Hurts. I think a corollary to that might be when investing hurts. You’re an investor in Africa. And Dallah, you’ve come across a lot of folks in America that would like to invest in Africa, too. What are some of the mistakes that are made there? And what counsel would you give to a faith driven investor that might be listeners podcast who wants to get involved in Africa?

Sid Mofya: I think some of the mistakes are thinking that Africa, or at least the economics in Africa are the same as the economics they understand so well in the economy that they work in.

Henry Kaestner: Give me some examples of that. Like somebody comes in from America and just assumes that it must work like this, but in Africa actually works different. Can you think of any examples?

Sid Mofya: So say you have, let’s say, a factory that’s not performing well. And you have 4000 employees at that factory. And efficiency is not that high. You know, in the 40 percent efficiency, capital efficiency or operational efficiency. And you can see as an investor that just cutting the workforce in half will. Improve efficiency to the point where the company will be solvent.

And that might work elsewhere. I mean, I think it’s tough even in Western economies to do that. But it’s tougher, even more so in Africa, especially if you factor in the fact that most people in Africa are not formally employed. Most people are running their own businesses. So if you have a factory that employs 4000 people, you’re probably accounting for eight to ten thousand entrepreneurs that are working with that factory, their suppliers to that family, their contractors and so on. And each of those employees that you have is accounting for another 10 people in their household. So the decision is a bit more complex than just saying will improve efficiency by reducing our workforce by two thousand or by half or whatever. So I think trying to get to the root of the complexity of the decision making would be helpful. And that takes time and spending time with local people to really, really understand what is going on. The other confounding factor with those kinds of decisions is as Africans and I’m speaking as an African, we have incredible resilience and incredible flexibility.

And I also have to say, quite honestly, a lot of the times we don’t feel we have agency in a decision that is being made. And so if the investor says, well, this is what we have to do, they may not get the feedback. If they don’t dig deep enough, that tells them you’ve missed some major factor for your decision and I think your decision is wrong. So decision making, I would say, you know, have a good number of Africans and a good number of Africans that are willing to tell you the truth. And part of that is with time and training and with communication, they become comfortable doing that because sometimes the risk of telling the truth is so high that it’s like, OK, now that’s the decision.

Henry Kaestner: So I’ve seen that I went to a seminar that we did on Faith Driven Entrepreneur ship and future of universities. Two days in the Fairview Hotel in Nairobi is awesome if you ever do a conference, by the way. And we had a number of Africans that were there, but we also had a number of folks from America and Europe. And for maybe the first day or so, the conversation was erroneously focused on the Westerners who had different ideas trying to figure out how to deploy capital. And it wasn’t embarrassingly until the beginning part of the second day, we said, hey, let’s actually check in here. We’ve been involving Africans in the conversations, but we had thought that some of their silence on different things meant that they thought the ideas were good. And it wasn’t till I said, listen, before we go any further, let’s make absolutely sure. And then we were also present. He said, actually, there’s three other ideas that you may have thought we thought were good are actually terrible and horrible, and here’s why. But we had to really work on extracting that. Whereas a Westerner might otherwise, you know, just take by the fact that people are nodding their heads as they must. And so I’ve experienced that. So I want to ask you about this other dynamic that you talk about and just wonder if there’s an inherent conflict in that which is so you have a factory that’s not performing well in the West. We might go ahead and say, how do we think about streamlining this? How do we get more efficiency? How do we work in more automation in that the end result of if that implementation is done well is more efficient. Deployment of capital mean more innovation, more creativity, maybe more market validation in the economic divide which goes on. If in Africa. So much of the informal economy is there’s more than just the two thousand players in the factory. There’s all these other people. How does a factory owner in then in this type of conversation with investor? How does an investor in their factory acknowledge the informal work force and engage them, enfranchise them more earlier on? Because maybe there is a special thing there to harness that maybe make an advantage, because otherwise, if you say, well, you can’t lay off some people, you can’t find efficiencies in their factory, then theoretically then African factories won’t compete on the world stage because they’re never made more efficient. So you must have to you know, can you do a jujitsu move with that whole thing that you think would be this elephant on your back of all this informal workforce? Can you turn that into an asset?

Sid Mofya: That’s a great question. And I think one that companies are trying to grapple with. I think that’s the way forward. I don’t know the answer. And I’m certainly not saying we cannot look for efficiencies and find efficiencies. I think we have to. I think what I’m saying is the answer might be different, too. Hey, I’ve seen the numbers for the workforce efficiency, so let’s go there.

Henry Kaestner: OK, so I want to stop here in light of the most recent conversation and say I’ve been asking a lot of the questions so far. Hopefully you’ve gotten to know me well enough to know that I really actually do have a desire that I think that guy is put in to be involved in the African continent. But there’s a very good question, just like at the Fairview Hotel, that I’m asking the wrong questions. Where I’m thinking about the wrong way. So let me stop. What are the right questions. How should we be thinking about it? What might I have missed? What might our listeners have missed?

Sid Mofya: Yeah, I think. Your willingness to engage with some of the difficult, intractable questions that we haven’t found answers with. That’s probably what we need more investors to be doing. Just an ability to just slow down and say, well, is there more that I’m not seeing here? You know, as you’re making your investments in Africa, I think that’s a great approach. Is there more that I’m not seeing? Because it tends to be more that we’re not seeing.

Henry Kaestner: Thank you. OK. What in your quiet time or your devotions? Time reading God’s word. What are you feeling that God is speaking to you about now? And it could be in a Bible. So you’ve done recently. Maybe it’s in your time with the Bible this morning and maybe last week. What are you getting a sense that God is talking to you about right now?

Sid Mofya: Now, I think for me, the biggest thing right now is. Time and the battling of time. So our daughter was born a month ago. And that brings a very sharp focus on time and attention. One of my focus in my time on I tend to be the kind of person that wants to do everything.

And I can’t I focus on the very few important things and for a time, you know, I just finished my paternity leave and that month just went by so quickly and could easily have been six months on paternity leave. But really just valuing those moments and that time with her and with my family, there’s nothing more important.

Henry Kaestner: Hmm. Thank you Sid it’s been great being with you. Thank you for your time. Thank you for your investment in our relationship. As we try to wade into that awesome content. Thank you for introducing me to the country of Zambia. And God bless you and looking for your next conversation.

Sid Mofya: Thank you for having me. Great to chat with you.

Henry Kaestner: Welcome back to the Faith Driven Investor podcast. Special time today focusing on multifamily real estate. We’ve got two great leaders in the space, David Snyder and Steve Vecchitto. And when we think about expanding faith driven investing beyond private equity and some of you have been listening show for a while might know that my own personal background is in venture capital, private equity. But with time, we came to realize it is cause we think the private equity of venture capital might be to be able to express our faith in what we do and how we invest. There surely are other ways to do it as well across different asset classes. And maybe the best example that I go to first when I talk to somebody is multifamily real estate. So many of us are accustomed to real estate investing. We understand it. We understand how cash flows. We’ve come to understand what cap rates are. And it’s just such a great place to be able to minister to people who are in need because there’s a part of the investment we’re making. We’re investing in homes and in communities. And of course, where there’s communities, there’s great relationships. And it’s a great opportunity to love on people in a way that points to a God who loves them. And we’ve talked a little bit about multifamily real say in the past. We’ve had guests like P. Kelly on before, but today we’re going to get much deeper into multifamily real estate. I’m going to talk about that when we talk about the two leaders who really understand the space, who’ve invested in it successfully. And David and Steve, thank you very much, both of you, for joining us.

Steve Vecchitto: Thanks for having us on.

Henry Kaestner: So love to start the show by giving each of you a chance to give a brief overview of your background. We’re going to start with David. Want to start by giving us quick fly over about Continental Realty Group and the work that you are doing. And then, Steve, we’ll get right into what the work that you’re doing at Avanir Word Fundamental Realty Group.

David Snyder: We started this company in 1982. We’ve been doing it for a while. And all we’ve done for 37 years now is multifamily real estate. We don’t do any other type of real estate. One of the things I like to tell people is that we get a chance to make money by meeting people’s needs. And we specialize in their housing needs, where students and observers of people’s demographics and their needs that they have for housing. During the last 10 years, we’ve done about one point eight billion transactions, 1000 units, certified properties during a time. Over the last two years, we’ve sold off a lot of our portfolio that we bought about 10 years ago, and we’re down to around 4000 units now and expanding back up from there. So we’re involved in about 10 markets across the country and somewhat similar to Steve’s company, unexcusable, bigger than we are. We have similar amount of markets and it gives us a chance to walk alongside of people. We’re just not landlords. We’re walking more on side of people in their daily life and there’s spiritual responsibilities that come with that.

Henry Kaestner: Thank you for that, David. Steve, take us through Advenir and just a flavor of what you’re doing there. Then, I want to get back into talking about both of you and your faith journey and how you see it manifest itself through your different company.

Steve Vecchitto: David is a little more experienced than I am. We’ve only been in the business for 25 years instead of 37. Wow. We own currently about 14000 units in six states. That’s about 42 properties with a market value of around two point three billion of that, 800 million of it’s in equity and under management. We, like David, only do multi-family properties. We don’t do any other product type. We do also have our own management company. We believe that it’s essential for us to be able to operate and execute business plans to own our own management company and really be hands on. I think David’s formula works really well because you’re hands on and he’s found third party management companies that can operate in his system. So, you know, I think he’s unique to using third party management and it’s worked for both of us. You know, we think there’s a long future in multi-family properties and investments.

Henry Kaestner: Tell us about your faith journey. That’s one of the things, of course, that brought you onto the program. And you’ve been thoughtful about how your personal faith impacts the work that you guys do down in South Florida and as other five states. Tell us about how you came to know God.

Steve Vecchitto: Sure. I’ve got a storied past. I grew up in Connecticut. Roman Catholic really was a lukewarm Christian. I came down to Miami in 1996, pretty much a sinner and a heathen. And I did start at Viniar. Point in time and had a good friend who was in a church. He was drumming for Jesus and he became a special friend of mine and a brother, and we talked about faith. Then when we started our company, I decided that I really wanted to create a culture that was meaningful to our employees, our residents and our vendors and created four pillars. And the four pillars were really true fairness, love and kindness. And at that time, I was not a believer. And I have come to know the Lord over last 12 years, really, from my wife’s pushing and some other friends and I got through the Bible, you know, I started in Bible study 12 years ago and that changed my life. And since that point in time, everything has blossomed in my life from my business to my marriage, to my relationship with my kids, to my focus on what’s important and what’s not important. I’ve really left what is valuable to the world and are looking at it with a different lens. And what is it that Lord, what is it Jesus wants me to be doing in my life? And it’s turned me from being a greedy person to being a steward of what God has given me and for investors money. So it’s really changed my lenses in view of the world.

Henry Kaestner: Can I talk more about this space that you both are in? David, talk to us about the multi-family sector. I don’t think that a lot of people that are listeners appreciate how big it is in our country at least. I didn’t as an investor how big it’s in our country. The world. And just also how much it’s changing. So give us a flyover. Tell us about this industry that you guys both are experts in.

David Snyder: Well, the multifamily sector, I feel, is a very oftentimes misunderstood sector for the average investor or many investors think that the minute you talk about multifamily, you’re talking about low income housing. There are people of all demographics in the United States who choose to live in multifamily. We have very, very high end rentals. We have workforce housing. We have low income housing, affordable housing. And also just to keep pace with the housing demand, the US has to add 300000 housing units per year in the multi-family sector. And when the downturn of 2008 hit, we went through almost four years in the US where there was virtually no new housing built at that time.

So we dug a hole where we were essentially a billion two in units below what was needed. Since that time, we’ve been building and trying to equalize out that that deficit. And we’ve only in recent years gotten back up to the three hundred thousand level. There still is a high degree of intensity for demand for multifamily housing. The occupancy rate on a nationwide basis is almost 96 percent. And that’s no nationwide figure. It’s not just Boston and Denver and Dallas. That’s nationwide. So Podunk, Arkansas, you have wherever Des Moines, Iowa, everywhere is. Therefore, there are full and there’s a tremendous backlog of demand. We still have 30 percent of millennials living with their parents. We have more boomers than ever living in multi-family housing. Our current boomer generation is the healthiest that we’ve had in decades. And the healthier the boomer, the more mobile they are. And one of these people don’t want to go live in single family homes and take care of the lawn and paint the house. They’re living in multifamily and being very mobile. So we have increased occupancy there. And then, of course, the millennials, which is right now the biggest generation, is a very mobile generation and they’re creating demand for millennials. The thing that I think that many people don’t realize is the impending tidal wave of people coming after the millennials, the gen Zs right now, or within two hundred and forty thousand the size of the millennials and their demographic won’t be cut off for another two years by the time we end up with the next two years. The Jameses will actually be bigger than the millennials, and they’re only the age of about twenty two right now. So they’re just starting to enter into the multifamily stage. And we have this tidal wave of demand that is coming from a demographic basis.

Henry Kaestner: Steve, tell us more about that. Tell us about some of the personalities that are going into multi-family. So it’s it’s not just the person is just getting started. Not just transitional. I’m 50 so I’m dating myself a little bit. But when I grew up, the American dream was I own a home, and that was everybody knew this was everybody’s goal wasn’t even up for discussion. That’s all changed now. Right. Who are you seeing in your properties?

Steve Vecchitto: Yeah. Look, I think that dream got crushed in the 08 09 recession. You know, you asked what is the size of this renter base? It’s 60 million households. So we are leasing to providing housing for 60 million households and a household. There’s two point three persons on average. So apartments are essential. Right. Everybody needs a home. And we see those that are getting out of college or from blue collar workers that are mechanics to plumbers to electricians all the way through tax base. And as David mentioned, the boomers are selling their houses and saying, I don’t want the responsibility, I don’t want the upkeep cost. And I’m moving, too. We see it here in Florida. They’re moving to the coast. And large apartment communities and they’re paying anywhere from Florida, literally twenty thousand dollars a month for rents and would rather have that than have the home. So I think you have whatever our nation looks like is what the rents are based looks like.

David Snyder: It’s making our job as landlords more complex because 30 years ago, all we had to do was worry about young people. There was a there’s just transitionary housing. I’m sure Steve will agree in today’s world. He’s got boomers sitting on the same property that he has millennials and they’ve got some gen X’s. And somehow you have to figure how to meet these people’s needs, even though you’ve got all these different demographics in place and not just meet their needs, but learn how to minister to them where they’re at, whether they’re very wealthy or older or whether they’re millennials or students at the same time.

Steve Vecchitto: Yeah, I agree. We have really two categories. It’s a renter by necessity, where they have no other alternative. They can’t go live with mom, they can’t afford a house. And you have renter by choice. And I think both categories are growing just as fast. So the renter by choice says, I don’t want to own the home. I’d rather live in rental property. It’s my lifestyle that I’m renting for. The rent, by necessity, has no other choice in that demographic. Certainly are different. The renter, by necessity, probably never will buy a home. The renter by choice may never go back to a single family home.

Henry Kaestner: So which space you find yourself saying so rener by necessity, I think I get. Renter by choice. I think 75 percent of millennials now would rather rent than own a home. So the whole idea whether they’re impacted by the financial crisis or not, just they have a preference to whether it’s mobility, flexibility, just value things differently. Seventy five percent would rather rent than own before gone. Where do you find each of yourselves? Is it evenly mixed based on the properties you have, or do you focus on renters by necessity, more in Class B and C spaces or more class? How does that break after each of you?

Steve Vecchitto: Well, for Advenir, we’re probably 75 percent rents are by necessity. So we call it workforce housing and families that are making between thirty five thousand and one hundred twenty five percent of our renter base. Probably makes more than one hundred thousand dollars a year is that rents or by choice.

Henry Kaestner: David, how about you? How’s that mix work out for you?

David Snyder: Well, the challenge and the opportunity that multi-family gives us as landlords is we have the ability to walk alongside of people in their lives, to walk alongside of the wealthy. Rohner, the lifestyle runner, to walk alongside of the runner by necessity. The ones that are going through budget problems and, you know, work problems and and that we’re in a very unique position as landlords. Landlords in the 80s used to be disguised, collected rent. If you didn’t pay me, you’re gone, you know, and that’s it. There’s landlords today. We have the opportunity to be candelas to encourage successful living in the residents of our community. And not just capitalists, but we’re stewards. I mean, we’ve been given these relationships of hundreds and hundreds of people living within our community. We’ve been given those relationships. We’re going to be held accountable for what those people receive from the relationships that they have with us. And so the landlord today is a very catalytic person that is after the the economic benefit of their tenants, the spiritual benefit, the social benefit of their tenants and. At the same time, we’re driving financial value from those people that live in our communities also.

Henry Kaestner: How about you, Steve? Talked about the ministry opportunity that you see as you’ve got these people that are living in your communities. And how do you see it being different? What does it look like to live on somebody in one of your properties where it’s workforce housing? And was it looked like in another one of your properties, the love on somebody that’s maybe a millennial? And when I say millennial makes it sound like they’re like some sort of kind of like alien or something like that, although sometimes I think we experience them that way. But we’re talking about this next generation that’s really starting to lead in the workplace that would rather just not own. But that’s a different demographic. It’s a different need. How do you love them both?

Steve Vecchitto: So, you know, I love the term millennial. I have two millennial daughters and they are pure millennial. It’s all I love them to death. You know, I think it comes from a different two different standpoints. One is the culture that we’ve created in our company and the management team side. We have seven core values that we continue to train our employees in, in some of the key words that are included in those seven core values, our teamwork, customer service, innovation, integrity, humility, balance.

And if we’re training our team members how to operate in their communities. It goes it goes downstream. So they’re able to pass that on to the residents. They’re able to pass that on to the demanders that we’re working with, you know, from a spiritual side. And I know you’ll probably talk about this later, but we use apartment, life and apartment. Life has just been a wonderful bolt on addition to what we do on the management level to connect with each one of our residents.

Henry Kaestner: Tell me about their model and how you how you all employ it.

Steve Vecchitto: So their model is pretty interesting. They do recruit team members, so there’s a family or couple that will come to our community and live in our community, become a part of that community. And the cost is relatively inexpensive to us as owners. And I think the benefits are just huge. The benefit to us is higher retention, building of community social activities that they create reputation management in our business, the reputation of our community and online leasing is so important and they’re able to raise that reputation.

Henry Kaestner: So presumably also makes your online ratings go up in some of those other things, too, and I know that there are different models. I know that David has had a different approach. He’s got mission that I don’t want to talk about that here and saying. But, Steve, before I let you go, comment on what you’ve seen in your properties over the course the last two or three months, just to timestamped this a bit, we’re talking about this in May of 2020. COVID 19, has shut things down and a lot of the country is going through really a loneliness problem. And pre-covid 19, we’re headed off the charts as a country in terms of depression, loneliness, etc., and that’s only got worse. Now, of course, what are you feeling from your communities and what role do you see? Apartment life. And then I want to ask David about the same, because the way that he dresses the same situation with loneliness.

Steve Vecchitto: So I think loneliness goes to fear and a large extent and the fear is how am I going to exist with no money or how am I going to exist? I just lost my job. I’m collecting unemployment. And in some states, it’s been hard to get those benefits because the unemployment system registration has not been functioning well. So we’ve actually been reaching out to every one of our residents, helping them through the process of payment, their rent and finding out. Are there issues? Are they having problems with health? Are they having problems with transportation? Do they have an elderly in the unit that needs special care? Our teams have gone out and raised money to bring food in so that the residents can come in into the leasing center and grab whatever they need for the night. And it’s interesting because we’re now seeing residents bring in food to the leasing center as part of the community as you drive through the properties which enjoy it. What’s interesting is the parking lots are packed. Everybody is at home, right? We’re all in lockdown. And apartment life has helped with virtual social events. They’ve done video nights where they’re streaming from Netflix or some other source. And as a community, everybody’s watching the same movie the same night in our apartment, life teams have really helped. So we don’t have them on every property. And you could tell the difference of the ones we do have apartment life teams on versus the ones we do. And I’ll say the reason we don’t have apartment life teams and some of our properties is we’re still searching for that right team that’s been provided through the church system.

Henry Kaestner: David talk to us about other models, other ways for people to love on the way that you love on people in your facilities.

David Snyder: You know, we also make use of apartment life in our communities and, you know, apartment life and groups like that, they give owners the ability to pay attention to the function of what they do, which is the business side of everything. And then they have people that they provide to us that help with our purpose of why we do it and taking care of people and taking care of their social and spiritual needs and that type of thing. And an apartment life is one of the groups that helps us do that. We’ve added on more employees during this time rather than fewer. We’ve hired more part metalized staff to do nothing but just be on the phone and talking to our people on a daily basis and doing needs assessments and then that type of thing. So they’ve been an instrumental part, but we also make use of other groups and we expand also apartment life’s mission on some of our properties in that we use some of our apartment life teams as a liaison or a coordinator to bring in the local church in the area to try to adopt some of our communities and to provide different services and activities to the residents of our communities through the local church. And it’s been a very rewarding option for us because it gives a lot of people in the local churches the ability to have an outlet for ministry and multi-family housing. I mean, we’ve got some properties that there’s mechanics from the church that go out twice a month and they’re maintaining the cars of all the single moms on our properties and stuff like that. And it actually is raising the spiritual self-esteem of some of these people in the church because it gives them an outlet.

We provide Mother’s Day out programs and other things through the church and then some of our apartment life people coordinate that. They’re also coordinators for social services where we have some local social services available. They’re not necessarily faith based and they act as coordinators for that. In addition, we also have other groups that we believe in very much. And one is Crown Financial, who is involved in teaching stewardship on some of our communities and that type of thing in dealing with people and providing studies on how to budget their time, budget, their finances, et cetera. Friends First dot org is a mentoring program that is designed to help teens and young people on the properties. And then finally, Mission Ninety Eight is a group that really is somewhat similar to apartment life that they specialize in just bringing in the local church and to a point where they can serve people in the multifamily community. And, you know, a lot of people run by apartment communities without giving them a second look. And 37 percent of Americans live in apartment communities saying multifamily housing. And it’s a big part of our population that the church has a responsibility to reach out to and to include in their community also.

Henry Kaestner: Talk to me a little bit about the difference between these two different models. One is an organization like an apartment life where somebody will go and live in a community. And then on the other hand, you might have a local church that might adopt an apartment complex. When I used to go to the Church of the Good Shepherd in Durham, North Carolina, for instance, we had a apartment complex that we as a community adopted and that seemed to be able to last through any type of a turnover of key personnel as it was the church that adopted them and offered up English as a second language type of classes and things like that. David, you’ve had experience with both. Talk about the pros and cons about each of those models.

David Snyder: I think the pros about apartment life is they’re often more proactive. They’re more national. So we can have them many other states, you know, as opposed to when we deal with the church adoption concept for lack of a better term. We’re having to reinvent the wheel in each location, you know. And so a partner in life has a model that can be mobilized and news nationwide. The downside or some of the negatives of apartment life that they know, too, and I’ve discussed with them, is that local time as a ministry teams that they put on the properties are there for a two year period. And so you get all these relationships made and everything, and then all the sudden the team is gone. And it may be four or five months or six months to a new team, maybe put in their place or whatever.

But that turnover affects the model bit. That’s one reason why we’ve married our apartment life teams with the activity by the local church, because we understand that sometimes teams, you know, graduate move on to other things. But the local church provides a consistency of the effort on the properties themselves. And so even though you may have a partner or wife team that comes in and out of churches there. The church hasn’t gone away. Some of the personnel may change, but the church is there and it provides a consistent ministry provision for the people on those properties.

Henry Kaestner: OK, so this is going to be a little bit of leading question. Obviously, you believe that this is something that works or you won’t be spending money on it, but maybe I shouldn’t be so presumptuous, somebody listening to this. They’re not the family real estate property, the money that you put into these programs. How much of it do you think that you get back? How much of it do you think accrues to the benefit of the limited partners and the investors you have? And or how much of it is something that goes above and beyond that that you actually think may not add to the investment returns but is instead something that you would otherwise allocate towards ministry spend and how you do discipleship or evangelism?

Steve Vecchitto: I think I’d answer in two ways. So there is the financial benefit to the property, which ignores to the benefit the investor, and that is higher retention. So I’ve got more people staying longer. Part of the reason is the social activity that’s been created and the neighborhood that’s been generated. And so I’ve now I’ve got friends there that I don’t want to leave. Right. So I get a higher retention rate that saves money for my investors. And I think the other part is the reputation. We’re building up our online reputation for the community. So as that builds, that creates a strong community itself. That’s a financial benefit that we realize.

Henry Kaestner: So if you spend 50000 thousand dollars on an issue like that for a property, do you think you get all 50 of that back or do you say, well, that 50? I think probably 35 or 40 that back, but because I’m motivated by my Christian faith and here’s an opportunity for me to love on people. I mean, I get all 50 back, but I’m happy having 10, 15 or 20 of that be kind of like my ministry spend. Do you ever think that way?

Steve Vecchitto: No. So I don’t think it’s cost us 50. What it cost is an apartment and our monthly fee. I always have a vacant unit. So to me, that’s a zero cost. I think my return is four to five bucks and that’s pretty high on any investment you can make.

Henry Kaestner: So you may give up the free apartment, but you still have to pay them. You still pay apartment, life, apartment. Life may be a ministry, but they charge a fee. And that’s what you’re talking about, getting the four to five extra turn on.

Steve Vecchitto: That’s correct.

Henry Kaestner: Yeah. David, how would you answer that?

David Snyder: Well, you know, I think that we have a spiritual benefit, obviously, from our extra effort with our residents. And we have a good financial benefit. And the financial benefits far outweigh the costs of the programs that we put in place. The typical turnover, and I’m sure some words in Steve’s mouth, but I’m sure he’s experiencing the same thing here. The average turnover in our industry is 75 percent a year. So if you have a 400 year. Apartment community, you’re turning over 300 of those a year, year in and year out. And over the last 10 years, that’s been the American average. With our history, once we’ve been in charge of an apartment community for a year and have our apartment life programs involved in some of our other management programs and ball are turnover down. The same property turned out to be somewhere between 47 and 49 percent. So we’re literally saving 25 percent turnover san in real dollars out of 400 unit community. If you’ve shaved 25 percent off of your turnover, that’s one hundred less units per year. That’s that’s turning over. And each of those units cost you an average of about 2000 or so to turn. There’s a term cost, says 200000. The bottom line and you keep that in your expenses. I would challenge Shane. I have tried. Many of my investors are not Christians. Many are of other faiths or no faith. And they oftentimes talk about the voodoo that we do on the property. And I think we’ll keep doing it because it makes us money. So I’m very high on this type of ministry and on those type of effort by apartment life and others in this space. But at the same time, I’m very transparent, very open that it actually makes us money to be good neighbors. To be good landlords is to love people. It is financially rewarding for us.

Henry Kaestner: Okay, that’s helpful. So we’ve made the case for multi-family and because of demographic shifts, this is going to be a sector that’s going to continue for a very, very long time. And as an investor, as a space you should be looking at also made the case that investing in ministry moves the needle in terms of loneliness and depression and community and sharing the gospel and discipleship without it necessarily costing. Why do you think the concept of faith driven investing in real estate? Why do you think there’s not more of a thing? It seems to be something that people are talking about very, very recently. And yet you’ve been implemented for a long time. Why do you think that faith driven investors, people who have a Christian faith who would like to see people in the workplace minister to. Why do you think that this idea hasn’t really caught on so much so that people are saying, I want to find a real estate manager that employs these things? If I’m going to deploy capital, whether I’m an institution, whether I’m a retail investor, I want it to go to those people. Why do you think that’s not a thing?

Steve Vecchitto: I think it’s not promoted. We do it because we want to. We do it because we believe in it. We think it’s right. It’s our faith, my investors, for the most part, trusting in what we do. As David said, the voodoo that he does on his properties, they get great returns and that’s why they’re in this. And they let us operate autonomously without really knowing what’s in the engine other than they know the performance. I can open a hood of a car and not really understand the engine, but I like the car. I like the way he drives. And I think that’s been the philosophy. We’ve sort of done this silently and maybe it’s our fault. But look, at the end of the day, our faith is driving, how we operate, what our morals are. We’re trying to expand the Lord’s kingdom. Then we’re doing that through the ministry that we’re able to provide while providing housing while we’re providing returns. It just becomes a win win win.

Henry Kaestner: We’d like to close out every one of the podcast episodes we do by asking our guests what they’re hearing from God and his word and see if you tell him that have gone through the Bible again recently. And David, want to hear from you about what you’re hearing, too. And so we’ll start there. Dave, what are you hearing from God in his word? Maybe it’s something that you heard this morning, maybe yesterday, May last week for some way that you feel that God is speaking to you.

David Snyder: I mentioned this to some of the guys on the podcast, the Steve and Justin before. For some reason, God has just brought the word sanctuary to my mind. And I probably haven’t thought about that word for forever. I don’t know why, but in the last few weeks, I’ve been studying how God gave sanctuary to Moses, who gave sanctuary, you know, to Jonah, to the King David J. Gave, say, a time of sanctuary and protected him. And I just feel I’m very at peace with one of the things I have been called to do in life is provide sanctuary for our residents and where it’s a peaceful place for them to grow, for them to grow socially, hopefully. Build or grow spiritually, and you try to take steps along the line. But this is very simplistic, open droid sanctuary myself during this time of. Because I’m up here in my mountain cabin. And I’m in sanctuary. And I think that’s maybe where this came from and that I’m just so excited. And so that piece about being able to provide sanctuary or residence.

Henry Kaestner: That’s a great word. Steve?

Steve Vecchitto: And if I may actually have two that are meaningful my life today. And the first is Galatians 522, which is the fruit of the spirit is love, joy, peace, forbearance, kindness, goodness, faithfulness, gentleness and self-control. I just love that if I live my life through those words and have a wonderful life. And, you know, in the season we’re in with this Kofod, I have really been dwelling on Matthew six thirty, which says, Do not be anxious about tomorrow for tomorrow, we’ll be anxious for itself. Sufficient for the day is its own troubles. And I think the Lord gives us plenty and mercy today and provides for all we need today in with the Kofod and wondering what the economy is going to look like in our business is going to run. I could quickly run to tomorrow and be anxious about that, you know, so I go to this passage that just gives me peace that I worry about tomorrow. Tomorrow, though, and worries tomorrow. And he’ll give me mercy tomorrow.

Henry Kaestner: May that be the case for you and for me and our listeners. Great. And thank you both for your time. Thank you for your faithfulness in the market and sharing your stories with us and disinterested to see how this expands over the course next 10 years. I’ve really compelled by the ministry opportunity, and it’s just amazing to see that this ministry opportunity ministry investment on this is actually something that accrues to the benefit of investors. So much so that investors that don’t share fears like I want more of that. So super compelling. Thank you both.