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The clinic that I mentioned earlier was one that they gave money too. GL, ads

Eric S. Swartz, age 48, was appointed a director on November 3, 1999. Mr. Swartz is the founder and President of Roswell Capital Partners, LLC and previous founder and President of Equiplace Securities, LLC (formerly Swartz Investments, LLC), which he started in 1993. Prior to 1993, Mr. Swartz was a Vice President at Bear Stearns & Co. specializing in foreign institutional equity investments in U.S. securities. Prior to that, Mr. Swartz was a Vice President with Oppenheimer & Co., where he was involved in overseas placements of equity and debt for institutions in Germany, Austria, Switzerland, France, Australia, and New Zealand. Mr. Swartz has approximately 20 years of experience in the securities business.

Learned When the Bubble Burst: Good-Times Giver or Generous Giver?

By Mike Kendrick

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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.