Redeeming The Start-up Landscape

This is a summary of an interview between Dr Michael Mol and Paul Kim, which was recorded live at the Ziwani launch on 24 June 2021. You can watch the full video here or listen to the podcast here.

 

MM: Paul, you are a co-founder and the CEO of Redemptive Capital, a small investment firm focusing on supporting companies that seek the flourishing of low-income South Africans and their families. An actuary by trade, you have expertise in start-ups, behavioural economics and redemptive design. As we get into our discussion today, what is it that you do – from your perspective?

PK: To be honest, I think we are still figuring that out. In the turbulence of 2020, three partners (myself, Pieter Wasserfall and Louwtjie Venter) started Redemptive Capital and the idea was to rethink what start-ups need for the benefit of low-income workers in South Africa. So, there are a couple of unique characteristics that we intentionally put into place at the beginning to ensure that we do not go awry from our mission.

First, we are 100% owned by a PBO (Public Benefit Obligation) as a trust and that is a really interesting tension for us, because every time we deploy capital we have to think, “Should we give this money away, or should we rather use it to fund a company that can potentially solve the problem sustainably?”

Secondly, we call ourselves a ‘full stack investor’. What that means is that companies do not come to us for money alone. Money is one of the resources we provide, but we look at each company and ascertain what is necessary to increase the probability of success. From CEO services, product management, even software development, we find or provide it on their behalf.

Lastly, Pieter and I are both actuaries, so one of the first things we were taught was the power of compounding. Think of it this way. If your investment grows at 10% a year, you double your investment every 7 years, which means that over a 49-year period, 50% of your total growth happens in the last 7 years. From an impact perspective, if we can hold on for that long, the last 7 years of our attempts here on earth actually doubles the impact we have had in the previous 42 years. So, we believe that we need to commit to the problems of South Africa for the long run in order to create change.

MM: What is interesting is that the Bible talks about the Year of Jubilee also being the seventh year, so maybe there is some actuarial science in that. You said something in the past which struck me – that the rise of charity, or the need to give money away, is a reflection on business denying its responsibility. Would you unpack that statement for us?

PK: We need to take a step back and remember that God designed these different organisations for a purpose. So business was not created by man, and charity was not created by man. They were intentionally available from God’s library of IP for us to utilise. What we have seen, though, is a huge rise in charities. My comment has nothing to do with charities – they are a critical supporting component in a post-fallen world, and they often prevent total collapse in the environments that they operate in. What has happened though, is that business has shied away from the risk of serving the world in a holistic way.

Let’s consider two examples. Andy Crouch says that since the 1990s maternity fatality in developed countries has decreased by about 50%. In the US the opposite is true – maternity fatality has increased by 50%. This is not a technology problem, it’s a business problem – of getting the right technology to the right places in a cost-effective way.

Think about food. In our world today we have enough food. Unfortunately, so many companies have to throw food away, or dump their products in other countries. If there is enough food, why are people hungry and dying from malnutrition? Because again, business has not stepped up to the plate to make sure that the food gets to the right places, at the right time, at the right price.

MM: You are right, we can feed the world with the food we throw away.

PK: We can. And that is a business challenge, not a charity challenge.

Imagine that Adam and Eve did not fall into the trap the snake set before them in the Garden of Eden. What would have happened then? They were given a mandate in Genesis 1:27–29 to “Be fruitful and multiply and fill the earth and subdue it and have dominion”. What would have emerged, is that their work would have multiplied. As they took what they learned in the Garden of Eden and expanded into the wilderness, business would have arisen in order to multiply those good effects. Charity may have existed (I am still on the fence as to whether or not it would have), but business would have been the primary vehicle of going from a garden to the city. What has happened, is that business has abdicated its responsibility. Behind every charity, if you scratch beneath the surface, you will find that somewhere along the line, business has failed.

The scary thing is that many Christians think making money from business in order to give it away is the primary role of an ethical or redemptive business leader. It is quite a popular idea these days. The problem with this is that they are subtly still reinforcing the idea that a mess can be made, as long as you ‘pay for it to be cleaned up later’.

MM: So you are not against charity, or against business – you are challenging business by saying, “There is a responsibility you need to live up to.” It is a monumental task which you set out with your partners to do, and the question is, “How are you going to change the world with this idea? Can one man, or three men, do it?”

PK: The short answer is that one man did it, and that is Jesus, but I will get back to that. The reality is that it is not meant for one human to do.

First, we are not penguins in the Sahara. What I mean is that if you consider Genesis 1:27–29, humans were the only beings created in the image of God and given the mandate to go forth – to explore the world, to subdue it, to fill it, to multiply it, and so on. So as daunting as the challenges are, we must realise as Christians, as humans, that we are the only ones who have been given the potential and the tools to be able to do this, irrespective of the challenge.

Secondly, remember that the Garden of Eden was a confined space, in the wilderness. That was where all the greenery was. Put yourself in Adam’s shoes – he had to take what he learned in the Garden and expand it to cover the entire earth. As daunting as it is for us, we as humans have already been given the tools that would have enabled Adam to accomplish that. We have a jump-start because D-Day has already happened. We know, from looking back at World War II, that D-Day was a critical turning point where the Allies broke through the German forces. In the same way for us – the death and resurrection of Jesus has broken through Satan’s defensive lines. He has broken through and has defeated sin and death, which means that there is hope. There has been a turning point, and we are following in His wake.

Thirdly, a better tomorrow is real and certain. This is very important because it gives us a reason to endure. Revelations 21 and 22 talks about the second coming of Jesus and the new heavens and the new earth, but it does not talk about it in terms of a potential scenario. It treats it as a certainty – which means that all trajectories end up in the same point. Either you are on that trajectory, or you are against it and you will be thrown off. This gives us confidence that if we are doing things that are aligned with Jesus’ trajectory, our work will be honoured and multiplied. Ultimately, Jesus will take his rightful place when He comes again.

Lastly, in the new heavens and the earth, all problems will be solved. This means that all problems are solvable. It also means that we can (and should) contribute to the solution, but we will never solve the problem entirely. This creates a healthy tension where I can say, “God use me now” while knowing that I am not the one who is going to finally solve the problem.

MM: You answered a question I was going to ask, about when Jesus said, “For you [will] always have the poor with you” (Mark 14:7). That was not a reason to abdicate responsibility, but rather, “This challenge will always be there in front of you. Take up the challenge. You know you are not going to solve the whole problem, but you are going to solve parts of it.” Would you agree with that?

PK: Yes. Basically, He says, “Do not lose heart. Just because the poor are with you, does not mean you have failed. They are there to refine you, they are there to show God’s love to the world. You are not meant to solve it, but you are being used to alleviate the pain.”

A useful framework that I have learned to appreciate in terms of looking at challenges, is this. You do not start with your talents (which is what the western world has taught us). You start with WHO does God want you to love? Start with the people first. Then, HOW does He want you to love them? WHAT do you need in order to love them that way? Only then do you ask what you HAVE, and what is missing, and where do you get that? Start with other people and then work your way back to yourself, not the other way around. It is a less self-centered approach to the problems of the world.

MM: Thank you for the challenge. Now, turning our attention to Redemptive Capital. You invest in ‘redemptive businesses’. How do you define that?

PK: In our view, redemptive businesses fight the effects of sin in the world, and pull the arc of history’s trajectory back towards the new heaven and the new earth. Remember, all trajectories point towards the second coming of Jesus. There are obviously certain introductions that point another way, and how does business get involved in pulling that trajectory back?

And if we ourselves are not redemptive in our business as a funder, how can we find, filter and support redemptive businesses on the ground? So, we have had to rethink what it means to be an investor.

In the venture capital space, a common approach is to put money into 10 businesses, and hope one hits the jackpot and makes up the return for everyone. We feel that is actually a Darwinian or evolutionary approach – a kind of ‘survival of the fittest’. In contrast, we start off with what problem needs to be solved. We have a covenantal relationship with that problem – meaning that we are going to be involved with that problem until we die. Then it is a matter of figuring out when to get involved, how to get involved, and who to get involved. So, our approach is to look at the problems on the ground, look at what is broken and what are the effects of the fall, and seeing if there is a way to reinstitute Kingdom principles in a business, to multiply those principles in a way that serves the people. In our case, ‘the people’ are low-income South Africans and their families.

MM: When we think about Jesus’s miracles, we realise that all the miracles He did were to help people, through a restoration of the natural order of things. He didn’t suspend the natural order of things, He was actually saying, “This is how it should be. The way the world is currently, is not how it should be.” That is why I love your definition of redemptive business.

PK: To add to that, many people from non-Christian worldviews have now consoled themselves to the idea that death is natural. But actually, from a Christian perspective, death is not part of the natural order. It was not what God originally intended, and we are part of the process of pulling that back.

MM: You are a redemptive serial entrepreneur. How is that different from a secular entrepreneur?

PK: Many people talk about entrepreneurs as creators. Well, God is the only true Creator because He truly took nothing and turned it into something. The reality is that we as entrepreneurs do start with the real world, we do start with something. So ,being a redemptive entrepreneur is to say, “What are the raw building blocks that God has given me, and how can I turn them into better value goods to serve God’s kingdom?”

My mission is therefore very different from an entrepreneur exploiting any opportunity. An opportunity is a neutral thing, but that neutral thing is aligned with an intended trajectory. So, the question is, “Am I exploiting this opportunity to make myself more money? Am I exploiting this opportunity so that I can be on the cover of Fortune magazine? Or am I pursuing this opportunity because people need the product or service?” The motivation behind why we pursue opportunities, I think, is the biggest difference. There are obviously many downstream things that you would need to consider as well, but motivation would be the starting point.

MM: Now on to the principle of ‘gleaning’. It is a good farming principle, but how does it work in a business environment?

PK: Gleaning is primarily about leaving opportunities for the disadvantaged. As far as I understand it, when the Israelites harvested, they could not harvest their fields to the very edges. They had to leave a space for the widows and the foreigners to be able to harvest their own food, with dignity. In our world, unfortunately, monopoly is seen as the best business model, or trying to ‘remove as much oxygen from the room’ as you can, or competing to everyone else’s detriment.

Gleaning could mean, for example, that when you compete as a business for a specific person in a specific segment, you think about whether you have the best packaged value proposition, or whether you actually need another business to fill that gap. Mediclinic in its current format trying to service the townships is not going to work, because they just do not fit the township market. The best approach in this case would be to allow another type of company to meet that need.

Or, think about your employees. Are you taking up all of their productive time, so that they cannot use it for anything else? Think about your clients. In one of their investment statements, Netflix said they consider a husband taking his wife out for dinner as a competitor. They want to maximise the time they take away from a family. That is not gleaning. Gleaning says, “At some point, we do not want you to watch television anymore, because we want you to spend time with your family.”

MM: Thank you so much, that was really fascinating. I love your approach to redemptive business. All the best to Redemptive Capital, and may you go on to the next 49 years of really great, impactful work.

Paul Kim