We look at unicorns in the business world as companies valued at $1 billion or more — rare and desirable. In the world of investing, Black venture capitalists like Jim Stallings are so rare, they’re almost unicorns themselves.

Black VCs represent just 3 percent of the total, according to a 2018 report by Richard Kerby of Equal Ventures — one of the few Black venture capitalists in Silicon Valley.

But Stallings isn’t in Silicon Valley — he’s in Jacksonville, and the fact that he’s investing in tech makes him rarer still. Stallings has tech companies in his portfolio from inside and outside the state.

A former military man, Stallings has senior global leadership experience with multinational companies including IBM and GE. He created PS27 Ventures in 2013. PS27 Venturesis focused on early stage tech companies in financial services, medical tech and software.

Listen to GHOGH with Jamarlin Martin | Episode 46: Kai Bond
Jamarlin talks to Kai Bond, managing partner at Comcast Ventures Catalyst Fund. They discuss the Fyre Festival being flagged during due diligence and Kai’s observation that most African-American entrepreneurs are under-negotiating. They also discuss a Washington Post article suggesting Facebook is psychopathic.

Stallings talked to Moguldom about his passion for helping early-stage startups, what Black founders should remember when approaching a VC and how he got a 10x return investing in a company he wasn’t looking to invest in.

Moguldom: Why did you start PS27 Ventures?

Jim Stallings: I have a passion for business, and I like teaching. I have been very fortunate in my career to learn from some great business leaders. In this stage of my life, I wanted to pass on what I have learned. Investing just seemed like the natural way to be able to do all of that. I love working with early-stage companies. They are open to ideas, are flexible and adaptable. We take the money and our experience and combine it as an offering for some really extraordinary companies we run into. Of course, we’re doing this for money and not philanthropic purposes, but it all comes together, and it has been a joyful run.

Moguldom: Why do you think some investors stay away from working with early-stage companies?

Jim Stallings: It is because it is high risk and they tend to not want to invest in something they do not understand. Some of the angel investors I run into are from older industries. They don’t quite understand the value of these new solutions. The second reason is these companies are unproven. They don’t have the resources and means to go validate if the idea is actually going to work. One of the reasons why we structure PS27 Ventures the way that we do is because it is one-to-one-and-a-half-year process of training and content. We don’t just give out money. There is a rigor in how to operationalize the idea. In many ways, the rigor is even more valuable than the money received. Some investors just don’t have that structure, time or interest.

There is no greater fear in the mind of an investor than missing out on a great deal. Some will lose money on things they understand and not get upset, but if they miss out on a deal and someone else makes 10x what they put in it, they get very angry.

Jim Stallings, CEO of PS27 Ventures, a VC firm focused on early-stage tech companies in financial services, medical tech and software. 

Moguldom: Here in Florida, the conversation is that investors are really more focused on real estate or the older industries. What do you think it will take to get them to invest in startups?

Jim Stallings: That theory is true. There are a lot of people and banks that will do a real estate deal in a heartbeat. The economic incentives, the banking incentives, the banking and investment process is all geared for that. A lot of people in Florida have made a lot of money in real estate. The investment focus is going to change when we have some big home runs. Money flows to success. We need an equivalent of a Google, Facebook, Apple or Dell-like entity here. If we can get two-to-three of those types of moves into the area around some of these universities here, it will change overnight. It’s not much more complicated than that. There is no greater fear in the mind of an investor than missing out on a great deal. Some will lose money on things they understand and not get upset, but if they miss out on a deal and someone else makes 10x what they put in it, they get very angry. The more deals like that to happen in the state, which I think they already are, and get more visibility, it will turn the state into a very attractive place.

Moguldom: PS27 Ventures has a healthy roster of various types of companies. Do you feel as though you have the next Apple, Google or Facebook within your portfolio now? If so, which ones do you think?

Jim Stallings: That is putting me on the spot. I was just on the phone with one of our companies, Bluewave Technologies. They came out of the innovation hub at the University of Florida. They have a series of patents in the area of disease control. This is a big area because people are discovering patients are dying from infections they obtain while in the hospital. You could go to the hospital to get relieved of one thing or infection and can end up getting a superbug in the hospital and die. Bluewave has patents and intellectual property. All they need to do is scale. This company and their solution could turn into a unicorn because the problem is so big. We are very proud of all of our companies. Without a doubt, we feel this one is on the way to being extraordinary.

We see things from a financial perspective and how consumer groups will react. The challenge has always been “do the founders see it that way?” How do we work together to see the same thing or see the opportunity the same way?

Jim Stallings, CEO of PS27 Ventures, a VC firm focused on early stage
tech companies in financial services, medical tech and software. 

Moguldom: What is one of the most memorable challenges in starting PS27 Ventures?

Jim Stallings: Trying to understand how the founders think. We see things from a financial perspective and how consumer groups will react. The challenge has always been “do the founders see it that way?” How do we work together to see the same thing or see the opportunity the same way? In the early days, it is a challenge. We all want things to happen in a big way down the road. The other challenge is picking the right early members of the team. It’s like you’re going to Mars. You’re going to be in a capsule for 400-plus days. If you pick the wrong members of the team, it requires more work. We always look at what the first 100 steps of a 1,000 step journey look like. If those steps are not well planned, you can get off track. I lose a lot of sleep over the first 100 steps.

Moguldom: What are some of the notable wins of starting the company?

Jim Stallings: Back in 2014, we invested in a company because we needed them to provide us with their tech solution for another one of our portfolio companies which is a vending machine business. We found this company in Utah. They didn’t have a lot of money but they could build us what we needed.  So we invested in them. We weren’t trying to invest in their company. We were just wanting to invest in them for their development. It turns out their idea was so big and so good that within 18 months, a large company came along and bought them because they wanted to keep it for themselves. We ended up making 10x off the deal. Another one of our companies is a spice company we started working with two and a half years ago. We tend to invest in technology companies, but they wanted us to help them with management training and leadership because they were losing money. We made an investment. They just called me today saying they and we have to pay taxes on the profits they made. I’m mad we have to pay taxes, but it is a success story. They doubled in size and even with the investments, they still made a profit.

Moguldom: How do you go about building a team to be able to go out and scout companies to develop and invest in?

Jim Stallings: When I first started it was just myself. I can recall sitting at a Starbucks with one of the founders I had invested in. They told me they hired some people and found an office. I asked them, “what are your sales like?” He said, “we don’t have any sales.” I told him I would be back in a couple of weeks and we could talk again. We met back up and I asked, “How many sales have you gotten?”  He said, “We got some sales. A couple of customers have bought our product.” I asked, “Did you make any money?” He said, “I don’t know.” Each week, I realized there was something they didn’t know. I realized, if I didn’t help these guys, I would never get my money back. So I started finding people who had the same passion I had for teaching, coaching and mentoring along with knowledge these startups don’t have. Now we have full-time employees and on-demand advisors with high-level expertise. We have built a group of lawyers, property experts and what we call a “ring of fire.” These are our people we go to when things get complicated and they share our space. We really created a community for our entrepreneurs and that’s been a secret to PS27.

Investors are not looking for companies which are going to be dominant in a region. They are looking to invest in something which gets built out to a billion dollars. If you’re not thinking about that scale, don’t go to a VC.

Jim Stallings, CEO of PS27 Ventures, a VC firm focused on early-stage
tech companies in financial services, medical tech and software. 

Moguldom: What is one thing Black founders need to know before trying to engage with a VC?

Jim Stallings: The most important is they have to be able to convey to an investor why it is going to be a big idea — not a big local company but a big global company. Investors are not looking for companies which are going to be dominant in a region. A lot of people will come to me with an idea which could be very profitable. They are just looking for capital to add on to the business. A VC is not interested in adding on to your business. They are looking to invest in something which gets built out to a billion dollars. So, if you’re not thinking about that scale, don’t go to a VC. Go to a bank or friends and family. Far too many people come to a VC for a loan. A VC is not going to loan you money. They’re not interested in 5-percent or 10-percent loans. They’re interested in 10 times what they put into the deal. The other thing is the founder needs to be grounded in the financial metrics of the business. Know what a P&L is, balance sheet, revenue and how it is different from profits. We have a sign in our office, “finance is to business what music is to dance.” It’s hard to dance without music and it’s hard to run a business without knowing finance. If you don’t know it, get someone else who can be your go-to person on it.

Moguldom: What amount have you invested to date?

Jim Stallings: We typically do about $50,000 to $300,000 in seed money. The companies we invest in have a product. They just aren’t sure how to get it going or need to hire people, but they have demand. We provide the capital to inject enough fuel into the company to get things really moving. We will work with them to go and raise a Series A round. We have done around 20 companies over the last six years, so you can do the math.

Moguldom: What do the next five years look like for PS27?

Jim Stallings: Our portfolio looks a lot like a university. We have some freshmen, sophomores, juniors and seniors. It takes about five-to-seven years to really start to get some value. We’re really excited about our seniors. They have raised A rounds and pre-A rounds. We’re beginning to see our value in our investments go up. We expect half of our portfolio to exit. We’ll be doing some reinvestment in those companies or in new ones. We want to have 50-to-60 companies in our portfolio. We’re not slowing down. We expect to expand and move into a new facility in the next five years. We’re excited about the next five years.