Home > Stories & Testimonies > Professional Advisors > Kendrick, Mike
Lessons Learned When the Bubble Burst: Good-Times Giver or Generous Giver?
By Mike Kendrick
Mike Kendrick is vice president of Equiplace Securities LLC in Roswell, Ga. He
shared this testimony at the annual Generous Giving Conference in
Pasadena, Calif., on February 28-March 2, 2003.
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In 1994 a partner of mine by the name of Eric Swartz started an investment banking
firm with me. I was in money management at the time, and he had been in investment
banking. We started our firm with the premise that this was going to be God’s business.
We wanted to tithe our business proceeds, and we decided to tithe our revenue, not our
profits. We would tithe 10 percent as revenue came in, and then as we would take
money out of the company in the future as God blessed. We would then tithe that
personally as God directed.
We came up with a security called a variable rate convertible preferred security,
designed to allow private equity funds (large institutions) to put money in small public
companies. Typically, they invested in much larger, less risky securities, but this variable
rate convertible allowed them to manage some of the risks involved. We really didn’t
know what we had; we were just trying to make a buck and make a payroll for four
people. We did a small $2 million deal for a company and got our commission, typically
6-7 percent, so that gave us a little payroll money to continue the business. We were
excited going into the new year. Little did we know what God was going to do in the next
two years.
In 1995 we signed a deal with a company called Network Imaging. It was a
small document imaging company and we signed a $5 million deal and that was a big
deal for us. We figured maybe we will get lucky and we will do $2 or $3 million with this
deal and make payroll for another three or four months. We started marketing the deal
and sure enough, $2 or $3 million of orders came in and then we said, this is great,
let’s see what more we can do here before our time runs out on the marketing phase of
the deal, so we continued to market it. And it got up to $5 million. So we called the
Network Imaging management and said, "Would you guys take more money if we could
raise you more?" And they said, "Sure, no problem." So we raised the deal amount to
$10 million. Well, the orders kept coming in and we hit $10 million. Of course, we made
the phone call and the answer was the same, "Sure, we will take more money." $15
million, then up to $20 million before that deal was done. And we could not believe it. I
mean, we couldn’t believe what God was allowing to happen for our business. And at the
end of that deal, we received a $1.25 million commission for two guys and two
assistants in our firm and that just blew us away.
God unbelievably blessed our business for the next two years. We did
something like 45 deals over the next two years and raised $400 million and received
over $20 million in commissions. All I can tell you it wasn’t anything we did; it was just
God’s hand on our business. Eric and I were faithful to give. We always maintained our
10 percent of revenue and then faithfully gave 10-20 percent of our profits as we took
them out of the firm. We built our company up to 35 employees. We had 12 people
working out of a 1,000-square-foot office before we could find new office space. It was
explosive, and God’s hand was all over our business. We couldn’t believe what He was
doing.
Doubts Emerge
We had two years of prosperity. Then in 1997 the small cap market got hit
pretty hard. The large cap market didn’t fill it as much, but our business really suffered
and we had to go from 35 down to 12 employees over the next two years. At the end of
1998, we were about to drop to six people and it had gotten very difficult to do a
transaction, and I was starting to question God. We had given a lot of money to
ministry, and I was involved with a number of ministries, and I asked God, “Are you
trying to tell me something? Am I to be a ministry professional instead of a business
professional? Am I to go into the full-time ministry?” Plus, I really wanted to be home
with my daughter. I did something which I rarely do—it is really the only time I have
ever done this—I put out a fleece to the Lord. I said, “Lord, Christmastime is coming. By
early next year, if I don’t see your hand on our business, I am going to take it home
and get involved with ministry. I am going to take that as a sign that is what I should
do.”
I laid that out to the Lord, and in late 1998 we signed a transaction called
Shopping.com, where we just received some warrants for doing the deal. It wasn’t a big
deal. It didn’t raise hardly any money for our firm, but we had 490,000 warrants in this
company. Now, a warrant is an option to buy stock at a certain price. Well, we didn’t
think anything about it. We went home for Christmas and came back in January thinking
we have to lay off six more people and these people have been with us since the get go
and this is not going to be pleasant. And we were down to just two or three months of
working capital at the time. And a little company named Compaq Computer decided
they wanted to get into the online shopping business. And, of course, the dotcoms were
starting to heat up at that time. Well, lo and behold, the Compaq Computer did an
acquisition of that company, Shopping.com for $400 million and our 490,000 warrants
turned into $3.5 million and that happened in January, just eight weeks after we signed
this little deal with them. So it was just an unbelievable fingerprint of God on our
business. It gave me assurance and conviction that God had told me this is where I
want you. I do not want you in full-time ministry. This business, this is your calling, this
is your high calling. You do not have to be ashamed to be a businessman because I
have called you to be a businessman in the resource ministry.
We went forward with conviction and confidence. Of course, $3.5
million with our 12 people allowed us to really put some money in the bank to rebuild
our firm. Over the next two years, in 1999 and 2000, in 1998 we developed another
security called A Private Equity Line. And a private equity line allowed small companies
to tap shelf registrations of common stock to pull those down and sell into the market
and raise money. And it was much like what the large companies could do, but we
developed the security and didn’t know how it was going to work, if it would work, we
didn’t know.
God blew our socks off again. In 1999 and 2000 we did 50 transactions of this
private equity line and our portfolio of warrants and options that we received for doing
those transactions grew to $200 million. As you can imagine, we were hanging on for the
ride because God was blessing us. It wasn’t anything we were doing; we were just
hanging on to God’s coattails. And we were aggressively giving to ministry.
Business and Ministry Serving Christ Together
I want to tell you a little bit about some of the ministry work we did during
those periods. We set up a giving fund in our business and our giving fund would
gather. As we got revenue in, we would put our 10 percent in, and then we would then
decide how to give that out. And of course, Eric and I would then take our capital that we
took out of the company when we did profit distributions and we tithed that as well
aggressively. And the ministry work that we did was the most fulfilling part. As you might
imagine, being in the dotcom euphoria that everybody was in, that was pretty exciting.
But the real excitement came in the ministry work we did.
We started an organization called Ministry Ventures, designed to be an
incubator for startup ministries. Over the next couple of years Ministry Ventures
launched 12 new ministries, everything from kids camps to ministries doing teen
evangelism, to homeless ministries, to ministries developing Bible curriculum for kids.
We designed a 16,000-square-foot office complex in a beautiful building in Alpharetta,
Ga., spent $1 million setting up this office space. Eight-thousand square feet was
developed just for ministry and the other 8,000 was for our business. It was designed
for about 100 people, and we had about 50 employees at that time. So Ministry
Ventures and not just Ministry Ventures, but we also housed a church since Stone Creek
Community Church in Atlanta’s offices had burned down unwittingly by lightening.
We also housed about 12 different ministries and it was the richest, most
rewarding experience you could imagine. Walking down the halls of our office, one side
you would have a board room with CEO of a company giving his pitch to raise money
and our bankers would be in there with him. On the other side of the hall would be a
ministry entrepreneur sharing his vision with donors or with his staff talking about the
kids camp that they were preparing for, or a trip overseas to do missions work. It was
just such a rich, rewarding time.
Ministry and business partnered alike. God resourcing that work was incredible.
We had the opportunity to resource and provide seed capital for North Point Community
Church. When they were just finding their property, we were able to participate in that
and participate in purchasing the land or being part of that. That is like getting the
founders stock in Microsoft. God gave us an unbelievable opportunity to get involved
with so many things. We gave six-figure support to homeless shelter for women and
children in downtown Atlanta, seeing women and children taken off the streets and fed
and clothed. We helped significantly a ministry for kids with cancer that parents would
take them on beach side retreats (they do a dozen camps a year). We helped buy land
for a Korean startup church. I could go through the list, but I just want you to get the
feel for the rich, rewarding time and how God resourced our business. And we were
faithful to be aggressive when we had the money to do so.
One of the memorable times is we had was Christmas 2000, when we had a
ministry gala at the Ritz Carlton Hotel in Buckhead, Atlanta. We brought that group
together to celebrate what God was doing in ministry. And it was our business people
and other business people that was partners, our accountants and attorneys and people
who had worked with us in business and then just a rich cross section of ministry people
who had been involved with us. It was a celebration of what God was doing between
business and ministry, and it was just such a dream fulfilled for us. It was the pinnacle
experience for us of the joy of giving and the joy of allowing business to be partnered
with ministry, and it just seemed like God was all over what we were doing. There was
ministry fruit, there was business fruit. But little did we know what the next two years
would bring. The Nasdaq stock market dropped 80 percent, and you might imagine what
the small companies in the Nasdaq market did. They dropped 90 to 100 percent.
Lord, Why Have We Lost Everything?
Our $200 million portfolio went to nothing. Our revenues for investment
banking—you could not sell an investment banking deal. It is still very difficult, even
right today, it hasn’t really changed. Our revenues dropped off a cliff and dried up to
nothing. Just as we thought the market was getting its head back above water,
September 11th came, and it has been a time of uncertainty and turmoil in the
markets. We had to go through the painful process of lay-off after lay-off, from 50 down
to about 12, and that is where we are today. Time after time we had to turn down
ministry requests. The ministries with whom we had been so locked arm-in-arm had us
in their plans because we had been giving such significant resources. We had the painful
task of telling them our revenues wouldn’t support those kinds of contributions, here is
what we can do. But of course, it was much less. Our business was basically hanging by
a thread and our ministry, the donations we were able to make out of revenue, we had
no revenue and so we were still trying to give as best we could, but it was down to a
trickle of what it once was.
So over the last two years we have asked ourselves, “God, why? Why, when
things were going so well and we were what we thought to be faithful, did this all go up
in smoke? Why are we having to dismantle what we had put together?” We just got
through the painful process of dismantling that 16,000-square-foot office and moving
our business into a 2,800-square-foot Class B office space. And all those ministries were
spread all over Atlanta trying to find a home. Why? And so we grappled with that over
the last couple of years as we have gone through this process, and we are grappling with
that today. But we have prayed and sought God’s guidance on what we need to learn
from this. There are seasons of planting and then there are seasons of harvest and
then comes winter. And in the winter we are tested. This is a time of testing for us. The
test we are going through is this: Are we going to be “good times” givers, or are we
going to be generous givers in good times and bad? Are we just givers when God is
blessing and resourcing—giving out of excess? Or are we going to give when things get
tough?
Four Principles of Doing Business
There are four principles that God has shared with us as businessmen:
- Invest in eternity. We have made investments in a lot of things that are
not eternal, investments in companies, investments in these million-dollar offices, the
multimedia board room with the shinny marble floors, the 1950s diner café in our office,
private airplanes. The multimillion dollar portfolio was a sense of security and pride. But
all that is gone. It didn’t last. So, what’s left? We look at North Point Community Church.
We had a little part in that, helping. There are 12,000 attendees every Sunday. We look
at a Christian school we were able to fund significantly, 300 kids come in there learning
God’s word every day. We look at the hundreds of missionaries who we supported and
missionary training operation that we partnered with. We look at a dozen new Christian
organizations that are flourishing, God’s hand is on groups that continue what they are
doing for the Lord’s work. Bible study curriculums that were developed from
sponsorships that we did. A kids’ camp that just closed on 200 acres where kids can
come summer after summer to learn God’s word in a high-adventure environment. The
ministry of kids with cancer is flourishing. The homeless shelter downtown feeding
women and children. All that continues. It has not gone up in smoke like some of the
other things. These, as we have seen, are the eternal investments into our eternal
portfolio that won’t go away, and that is a huge lesson for us. Now this is the fruit that
remains, it is the heavenly, eternal annuities that just keep paying out year after year,
whereas those physical portfolios are all gone and probably will never pass out anything.
- Invest aggressively when you can. How I wish I could get my
hands back
on that $100 million portfolio that is now gone. Luckily we invested part of that, but what
if we had invested all of it ... how big would that be in heaven when we get there? We
never know how long God is going to let us hold onto the resources. If we sit in fear and
hold on, God may say, “You have held it long enough. I am going to give it to
somebody who won’t hold on to it.” So seize that opportunity because God is going to
continue to bless those who live with an open hand.
- Give not only out of income but also out of net worth.
Eric and I
(and Michelle and I as a family) have built up net worth over those periods of good
times, as you might imagine. But that net worth has diminished significantly over the
last period because we were pretty much invested in the market. But we still have a
significant net worth. Now the question for us is: Are we going to stop giving now
because we have no income currently? Giving is an act of worship. And as we all know
from the group that is here, we all know that is a huge act of worship if you are called to
be a giver. As a teacher teaches, a giver gives. Now are we going to stop worshiping God
because the stock market is down or because the land deal fell through or because
mortgage rates went up? Are we going to stop worshiping? As with the widow who gave
her last mite to the Temple treasury in Jesus’ day, God honors sacrificial giving much
more than He honors giving out of excess when it is easy or painless. This is a test. Are
we going to be generous givers or are we going to be good times givers?
- Maintain your integrity through difficult times. It
is so easy
to default on obligations or to not properly treat employees who have been with you a
long time simply because “it is a business decision.” We had a 16,000-square-foot
office space that we had to move out of. We have over $1 million liability in lease
payments to make on that. We could collapse an LLC. We are not personally
guaranteed. We could collapse it and just say to the office folks, “It is yours. Take the
LLC assets, there is nothing there.” But what would God call us to do? He calls us to do
differently. We could cut employees and not be fair to them; it is a tough time. It is a
time we have to be guarded about our integrity and about what God wants to use as our
witness because people watch Christian businessmen, especially when their backs are up
against the wall. The eyes are on you to determine if you are “just a bunch of smoke”
or “the real deal.”
I think we are all feeling challenging times. God takes us through these tests because
He is looking for people to whom He can entrust not just the things of this world but also
the precious things of the kingdom. And He is looking for men and women who will be
faithful to the call of stewardship through the good times and through the bad. I pray
that God will give us the strength to pass this test, and I pray that for each one of you
that we will be faithful stewards.
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