Henry Kaestner is a successful entrepreneur having founded or co-founded three companies in the Research Triangle of North Carolina with more than $300 million in annual revenues, including Bandwidth which went public in November 2017. Henry is a co-founder and Partner at Sovereign’s Capital, a venture capital fund that invests in faith driven companies in Southeast Asia and the US across the SaaS, Consumer Goods/Services, and Healthcare industries.
Henry serves on the Board of Directors of Bandwidth, CloudFactory, ThriveFarmers, First, and RevBoss. Additionally, Henry serves as an elder in the Presbyterian Church of America and currently lives in California with his wife Kimberley and their three sons.
Ray: Well, hey everyone, this is Ray Hilbert, host here at Bottom Line Faith and this is the program where we love to bridge that gap between faith and business in the marketplace and interview some of the most amazing leaders from across the country and really take a deep dive and learn how their faith impacts their leadership. How they integrate their Christian faith into business in the marketplace on a daily basis. I’m really excited about today’s episode of Bottom Line Faith. We had an opportunity recently to interview Henry Kaestner. Now he is the managing principal at Sovereign’s Capital. They’re a venture capital fund. They invest in faith-driven companies and not only in Southeast Asia, but also here in the United States. They’re headquartered out in Silicon Valley. We actually interviewed Henry about the middle of the year in 2018 for kind of a standard episode of Bottom Line Faith, but that was so powerful, we wanted to invite Henry back for part two of that conversation. And it was really fun and unique, the environment in which we got to have part two of our interview with Henry. We hosted Henry at a workshop on Thursday, November 8th, 2018 in Indianapolis, Indiana. It was the day before our annual Truth At Work Conference and we brought together 60 CEOs for the afternoon to talk with them about what it looked like to have a kingdom based culture and a company that really glorifies God in the marketplace. And so today’s Bottom Line Faith episode is that conversation that we had with Henry Kaestner, and I think you’re going to love what you learn today. Henry, are you ready?
Henry: I am ready.
Ray: Awesome. Awesome. Many of you know Henry, but Henry Kaestner, an entrepreneur currently living in Silicon Valley. Is that right?
Henry: Indeed, indeed.
Ray: From the East coast to the West coast.
Henry: That’s right.
Ray: We’ll hear more about that in just a moment. He’s cofounded many companies over the years, including Bandwidth. Somebody may know the Bandwidth story that was able to go on the public NASDAQ trade a number of years ago and today Henry and his team and several of them are here in the room with us today and many will be at the conference tomorrow. Henry founded Sovereign’s Capital and we’re going to learn all about Sovereign’s Capital today. So folks, if you’re listening to this podcast as a recorded version back to the program where we bridge the gap between faith and business and to our live studio audience. Can we hear a greeting for our listeners?
It’s kind of fun. We hardly ever get, I think this is the second time we’ve done it in front of a live studio audience. And so we’re excited. Well Henry, tell us just a little bit of your background, a little bit of your story.
Henry: Sure. Thanks for having me, by the way. This is incredibly cool to have a live audience and get the feel and the vibe from all of you all. I’m just so thank you for being here and allowing me to be here as well. A little bit on my background. I grew up in Baltimore, Maryland and I grew up, I went to this school at the University of Delaware and I discovered my first love and that was that I can make a t-shirt for $5 and sell it for 10. And I’ve never been a great math guy, but I could do that math. And before I got to college, I had sales teams of one form or fashion about 50 schools up and down these coasts. And I had a lot of fun doing that. But I had some copyright infringement problems. And as it turns out, the university’s not happy about their name being associated with the Simpsons or pick your alcoholic beverage.
And that was bad. So my dad told me, he said, look pal, you can plead naiveté as I did at 20 but by the time you’re 21 you got to get a real job. And so I like, okay, that sounds like that’s important counsel. And so I went and saw the movie Wall Street with Michael Douglas and I saw the character in there, Bud Fox. And Bud Fox had two phones going and he had the apartment on the upper West side of Manhattan and life looked good. And he was dating Daryl Hannah and I said, that’s who I want to be. And that’s a big, big warning sign for you. If your first role model is Charlie Sheen, I should’ve known better. But that was a period of life for me, which was characterized by the search for happiness and trying to find it in fame and in money and in girls and all the different things.
And we all know because we’re listening to the podcast, how that story can end. And so I had that proverbial God shaped hole. I came to know the Lord at age 28 after having moved to North Carolina and set up a company having remembered when I felt most alive. And that was when I was my own boss. Not working for the man but working for The Man, so to speak. But I was 28 I came to know the Lord. We started a business called Bandwidth then and then through the grace of God that’s been blessed and it’s really grown and given us the platform we’ve got now.
Ray: So some of us are familiar with Bandwidth, some of us are not. So give us a background on Bandwidth.
Henry: Sure. So Bandwidth is a telecommunications company. And over the course of time we also launched a company called Republic Wireless. And Republic Wireless is a mobile virtual network operator, a cell phone company. We have about 300,000 subscribers on that and we invent really cool technology. So we’ll take a cell phone and a walkie talkie and marry them and create a relay device, which is a cell phone for a little kids, ages 6 to 12. So it’s always on you and wherever Johnny is at a play date across town. You can get him real time but without the screen. So that’s one of the things we do there. But then the larger company is a company called Bandwidth. We took Bandwidth public last November and Bandwidth provides telecommunication services to high end technology companies. So for instance, we power all of Google Voice. We have 12 different product lines of what we power at Google. We do something very similar for Microsoft and most of the major technology companies will power their voice initiative.
Ray: Okay. And then now tell us about your current venture, Sovereign’s Capital. What do we need to know about that?
Henry: Yeah, so Sovereign’s Capital is an investment fund that invests in faith driven entrepreneurs. We came to understand early on at Bandwidth that the institutional capital markets did not know what to make of a faith driven entrepreneur. We were two and a half years into the business. We had had some modest success, but we had made the pivot and we’re sure that we were onto the right business model. And so we came out to Menlo Park and went up and down Sand Hill Road and we didn’t have fish on our business cards and we didn’t talk about our faith on the first visit. But when it came around to a second or third visit, we would share about the why. Why we did what we did and about our foundational values, which were faith first, then family, then work, and then fitness. And as we did that, and we made it clear by the way, we’re going to hire the best person for the job.
This isn’t going to be a holy huddle, but our faith is the most important thing for us. And we might do things like pray before board meetings. As we talked about that we got a lot of blank stares. And really I think in a best case scenario, we were misunderstood. In worst case scenario, we felt prejudiced against. And so we went 0 for 40 in venture raises. And then Bandwidth of course has done really well between Bandwidth and Republic Wireless. We have about 900 employees now and came to understand of course that a Christian led business can compete and win, but that institutional equity, it doesn’t really know what to make of that. And so we started Sovereign’s Capital believing that transformation happens in the marketplace and that capital equals influence and that if a Christian led businesses can compete, then therefore a fund that invests in them should be able to do the same as well.
Ray: Well, fantastic. So as you look and as you come alongside companies and we talk about in this framework of kingdom minded, I know you talk about along lines of companies that are investing in human flourishing. I know that’s a term you use a lot. What are the traits and characteristics that you and your team are looking for to help you determine if this is in fact a kingdom minded company? We have many CEOs and business owners in the room today that are wanting to build kingdom minded companies. So what are those traits and characteristics you and your team are looking for?
Henry: So that’s a great question. So multiple facets to that, but we have a framework we like to look at that’s leaders transformed. It’s the concept of stewardship versus ownership. Ministry in deed and ministry in word. And so I’ll unpack those real quickly. The first one is leaders transform. Does the leader understand that there is a God who loves him or her? Is that at the root of their identity? Have they gone in their faith life to a place beyond just going to church and intellectually understanding that there is a Lord and savior of their life? But if they come to understand that their primary identity, and this is super important, isn’t as an entrepreneur that’s growing at 20% month over month, but that their baseline identity is as a beloved child of God. And we all struggle with that. And none of us completely nail that. We’re all susceptible to different things creeping in and becoming part of our identity. But a leader transformed as somebody who has a personal relationship with God and has accepted the gift of life through Jesus. That’s number one.
Number two thing that we look for, and I left it on the original thing is excellence. There’s a Swiss American theologian named Francis Schaeffer who effectively said, it’s the degree that we do our work well, that we have an opportunity to witness and be heard. We believe that a Christ follower has fully embraced their calling, has a great opportunity to do awesome business for the glory of God, and that is to really get out there and they compete and win and they are leaders in their industry. Then they have an opportunity to transform an industry. That’s what we’re looking for. Some other things, and I mentioned before, stewardship versus ownership and this happens is who owns this business and a lot of that, and I think that that’s kind of obvious.
We’re preaching to the choir a little bit here, the people listening to the podcasts that are at this event, but that really extends the route to an exit of a company. Lord willing, there’s going to be success and there may be an exit someday. What does it look like for the business owner to have a financial finish line in mind so that when they have an exit, they already have a plan in place about how they’re going to steward those assets for the glory of God and participate in what God is doing through the world? The greatest joy is giving and participating in God’s work here and abroad, talking about that and a business owner who’s open for that conversation is essential to other things.
Ministry in deed. We want to invest in companies that do a phenomenal job of loving on their employees by providing outstanding benefits. Again, above and beyond what they’d see in the industry and on the community. And then lastly of course ministry in word. The ability to talk about why we do what we do. There’s some great research out there that talks about how important it is that we talk about the why and Clayton Christianson talks about it and Jim Collins of course, in that great ted.com video with Simon Sinek about how important it is we talk about why we do what we do as Christ followers. We need to be able to talk about why we do what we do. So our foundational story and the process of that what does it look like to pray with non-believer employees? Is it appropriate or not for us to have a corporate chaplain? Things like that.
Ray: And those are things that, for those of us who are in the room today at this event, we’re going to be exploring those tools and resources and platforms. And so you’ve touched on it with a few of the things you just shared, but could you dive a little deeper, Henry, in terms of what is the culture like inside of a kingdom company as you look and evaluate, what are the things that get manifest that it really is a kingdom minded organization?
Henry: Yeah, it’s a great question, but revisit the why thing. It starts with that. What is your purpose? Why do we do what we do? Of course our business, all of our businesses need to transcend the manufacturing distribution of widgets. Where’s our identity? Why do we have this desire to grow and compete and win? Where does that born from? When we can start off with a culture that, that looks to mirror the most important things to us in our life. So I talked before, number one for us is faith. Number two is family, then work and fitness. And I’ll unpack them real quickly. Cause I think it’s important because you need to understand that your culture, if it’s going to be sustainable, needs to mirror who you are as an individual and who God’s equipped you to be and who you want and aspire to be, or it won’t have sustainability. There’ll be something that you write and it’ll go on your brochure, but it won’t really have that type of staying power. And so for us, we like to work out at lunch. So we had my business partners, a world-class endurance athlete and he’d finished top in the Carolinas at Kona, the world championships in Ironman without even training. It’s freakish. It’s amazing. I’m a neighborhood class.
Ray: What is that he does? What’s that? World-class what?
Henry: Endurance athlete.
Ray: Okay. Just want to make sure I understood.
Henry: You’re a baseball guy.
Ray: Lot of down time in baseball.
Henry: That’s right. Endurance athlete. So if there’s athlete and I am a neighborhood class endurance athlete, and I live in a small neighborhood, mostly of retirees, but I usually come out on top. But I also like to work out and so we decided we’re going to have a culture that mirrored who we were as individuals. So 900 employees, two thirds of them workout. And that means that we have that champion citywide champion ice hockey team, great basketball team. We entered a team in the trans Rockies mountain bike race and finished second and we entered a team into the Race Across America endurance cycling race, that preeminent, event in endurance cycling and won it. We’re really serious about that. But that’s not as important as our work. Again, this culture is coming back from who we are and God created us to be.
Work is important. When we work, we feel God’s pleasure. To another 1980s movie reference for you. And then to his family. Work’s really important, but it’s not as important as family. So David has six children. I’ve got three, remember he’s world-class. I’m neighborhood class. And it’s important for us to love on our families. It’s who God created us to be. It all flows from God’s creation. And then the most important thing again, is our identity as his beloved children. So when you’ve got to be thoughtful about culture and it needs the mirror the creation story and how God has made us guide as a worker. God worked six days of the week. So work factors into it, but it needs to come from our faith.
Ray: Yeah. So, along those lines then, you know, there’s the mindset that, and you talked about this a moment ago about stewarding resources perhaps upon exit of the business, that we’re selling the business and we’ve got some resources to invest in the kingdom. But what you’re talking about is building kingdom while we’re running the business. Would you just kind of talk a little bit about the importance of understanding that it’s a both and. And not just wait until you have the resources for kingdom work, but the business itself has ministry, right?
Henry: No doubt. As we’re creating, innovating, we have this incredible platform and it may be the biggest platform we’ll ever have, candidly. Once you sell your business and your ability to have that type of impact in the marketplace with employees goes down just a little bit with time, right? But when you’re out there talking to customers and really competing, that’s a time where you have maximal influence and you get a chance to love on people, your partners, your vendors, your customers, your employees in a way the points of God. Maybe you have an opportunity to make a redemptive product or service that is about bringing God’s kingdom here on earth as it is in heaven. Maybe it’s not necessarily the product that’s redemptive, but the way you go about it that’s redemptive. Maybe you have an opportunity to redeem just a traditional old line industry, but the way you do it values employees where they get a sense of missional purpose and calling. So we have an incredible opportunity right now to bring back God’s kingdom on earth as it is in heaven, no matter where God has us in the work field.
Ray: I love it. I love it. So what are some of the challenges that you see faith-driven entrepreneurs wrestling with in the marketplace and how does that play out? There’s some challenges, right, to living out our faith?
Henry: There’s no doubt about it. I’ll come back to my favorite one is identity. We have 30, we’ve made 39 investments in companies. And we make investments in fast growing technology startups, right through traditional industries and light manufacturing. I’ll tell you, out of the 39, virtually all of them, the CEOs have had serious issues with anxiety at some time during their tenure, which betrays of course that they’re afraid of something. It’s really difficult when you’re running a business and especially one that’s successful. Now all the businesses we invest in, they have traditional secular venture capital in them as well. We’re investing in very successful companies that attract lots of different financial partners. Challenges really is that, you know, even for us who have friends and neighbors that know the Lord like we do when we’re written up in the newspaper, like, dude, I just read about you. How cool is that? And that just starts to creep in. And so you know what the thing actually really challenges me a lot with that and because it impacts my life as an investor is, I’ve got three boys. We look at Proverbs. It’s great cause you know, you always know where you are in the month, 31 Proverbs 31 days. I can do that too. I can do that. The 16th day of the month and the 21st day of the month are some of the most convicting cause 16:2 and 21:2 talks about all of a man’s ways seem pure to him, but his motives are weighed by the Lord. For us as business owners to understand what are our motives? Why are we doing what we’re doing? Ostensibly, we’re at this conference or we’ve tuned in to this podcast, oh it’s for the glory of God.
But is it really? In my case, I’d like to have a phenomenal bottom line return from my LPs. I’d like to be able to compete and win against all the sector or venture capital, private equity funds are out there. I love being a top quintile fund. It’s really important to me, but is it too important to me? Am I really doing what I’m doing for the glory of God or am I doing it for the approval of peers or for the financial results? What does that look like? We had our annual meeting a couple of weeks ago and we had a great speaker, a guy named Tim Keller is a pastor from New York City came out.
Ray: I was there.
Henry: That’s right. Of course you were. And so it came out, and he talked about identities, you remember right? And he said, look, you guys are out here in Silicon Valley is so focused on you know, being the top quintile this or if you’re an entrepreneur, you know, being in the Forbes list or the Fortune list or something like that. And what did Jesus say? Well, there is some seculars that scorecard back then too. You know, incredible things were happening, miracles were happening, you know, demons were being driven out and people were being healed and the disciples came back and celebrated that with Jesus. And Jesus said, don’t rejoice in that. Rejoice that your name is written in the book of life. What he was reading was that his disciples were so focused in the metrics and the KPIs and the scorecard that they lost sight of what’s really important. So I think at the time, Jesus was probably pretty fired up that, you know, great things were happening. The kingdom of God was advancing, but he saw the hearts of his disciples, they had lost what was really important. So that’s what we all struggle with. And I can get up here with you and talk about on a podcast, but you know what? Tomorrow I’ll go back and I’ll struggle with it again. But to the extent that I can keep that conscious and top of mind to talking to our portfolio CEOs and people like you, I stand a much better chance.
Ray: I love it. That is really great stuff. So what is the market place look like for people that want to steward their investment, the capital that God’s given them in a godly way? What’s that look like?
Henry: That’s a great question. You know, so we talked a little bit before about generosity and stewardship and come to understand, of course, that is, we have material wealth. We have an incredible opportunity to participate in the work that God is doing in the world with our giving pocket. And increasingly we get a chance to spend time to think about how to do it well and in community, but infrequently do we have discussions about how to handle the investment pocket.
What are the different companies and assets and funds we might invest in? The Islamic world has Suria compliant funds that have more than $2 trillion in them. There’s virtually nothing that exists on the kingdom side. Now, to be clear, there’s an asset class which will allow you to have negative screens, things like no alcohol, tobacco, gambling, pornography and things like that, and they’re great. We shouldn’t as Christ followers be invested in them, but what does it look like for us to invest positively, proactively for the gospel? Where we look at investing in companies, maybe it’s a publicly traded company that employs chaplaincy. That’s where I want my investment dollars to go to work. Maybe it’s multifamily real estate or you buy a 350 unit complex and you take one of those units and you reserve it for a chaplain that can run the Alpha Course and Young Life, things like that. That industry by and large doesn’t really exist in America. And it’s a big challenge. And we as Christ followers have an opportunity to be more intentional about that. Now, fortunately, there are some things that are developing and I like to think that severance is a small part of that, surely not the biggest part where we invested in private equity and venture capital, which isn’t very liquid. But as new funds develop, then employee things like, again, publicly traded companies, real estate, you’ve got a great opportunity to be able to focus in on your investment dollars for a positive impact.
Ray: Yeah. So Henry, we have just a couple of moments left here in, so what would be the one last piece of insight or counsel or wisdom that you would like to pass along? Not only to our guests in the room today, but to the thousands who are listening online.
Henry: Well, I’ll bridge off this last point. So in the point that I made before that, two things. Number one, identity. Who are we really? And do we really believe it? We know that if we were given a true false test, can you earn your salvation or not? We’d probably all get that right. But do we act and do we work as if we really believe that’s true, that we are beloved children of God and that when God sees us, he sees his Son? Do we believe that? Do we have an opportunity to steep in that reality and then see our work as worship, as gratitude? Like, Oh my goodness, I can’t believe this. I’m going to have eternity with the living God and I couldn’t earn it. He gave me this free gift and I now am so fired up. I want to give everything I can, all my talent, my experience, my gifting and everything and bring it to the altar, my meaningful form of worship. Are we there? So that’s one thing I’d ask them. And then the other thing is on the investment side, which is this is a culture in which people have from all sorts of different walks and political leanings and faith walks. They’ve come to understand that capital equals influence. A partner from Sequoia, the largest venture capital fund, just raised a $15 billion fund two months ago, said that they invest in the seven deadly sins. That’s their investment thesis. They invested in DoorDash because it hit sloths and gluttony. Capital equals influence. Each of us have an opportunity to be able to ask our fund managers, how do you think about chaplaincy? What does that look like? Do you, is that something, it happens at every sports team in America. That’s a pure play on human capital. You as a fund manager, do you look to invest in companies that allow somebody to bring their whole selves to work, including their spiritual lives? That’s a great question. So capital equals influence and then identity.
Ray: Fantastic. Gang, would you all just join me and thanking Henry for our time today ere at Bottom Line Faith? Well folks, if you’re listening online, we just want to say thanks for joining us again today. If you’re not a regular subscriber, you can do so on Stitcher, Google play, Apple platforms. It’s available all over the internet. Check us out at bottomlinefaith.org and you will see amazing Christ followers from around the country modeling and living out their faith and giving us best practices on how we can do the same. So until next time I am your host here at Bottom Line Faith, Ray Hilbert, encouraging you to live out your faith in the marketplace. God bless. See you next time.
Well, I really trust that you got a lot out of that conversation with Henry in front of that group of 60 CEOs recently and where he really just walked us through what does it really mean to be a faith driven entrepreneur. We’d like to encourage you to go online and offer review for the program. That is how you can help us grow the program here at Bottom Line Faith is offer review. Give us some great commentary that helps to get us to the top of the search engines, and if you’re not a regular subscriber, please go onto your podcast program, whether that’s Apple, iTunes, Stitcher, Google play, whatever it may be. Subscribe, receive this program every week. It will change the way you lead in the marketplace. Until next time, I am your host here at Bottom Line Faith, Ray Hilbert, encouraging you to live out your faith each day in the marketplace. God bless. I’ll see you soon.
Thank you for helping me to find the Christians who lead without losing their relationship with the True Leader.
After 14 years in the mission field I returned to the professional world in the USA and I see it with different “eyes” now. I greatly appreciate Henry Kaestner’s approach to finances – stewardship rather than ownership, and how can we best invest financially in Kingdom work.