In this episode of Innovators Inside Podcast, Jim Stallings, Founder and CEO of PS27 Ventures, shares hard-earned lessons from a career spanning the U.S. Marine Corps, senior leadership at IBM, and early-stage venture investing. Jim has led through disruption at massive scale and now helps founders do the same in fast-moving AI-driven markets. This episode offers practical insights for leaders, founders, and operators who want to stay relevant as technology and expectations change faster than ever.
Here are the five key takeaways from their conversation:
Jim makes it clear that innovation cannot be treated as a defensive move. Companies that wait until disruption is obvious are already too late. At IBM, he saw firsthand that growth only returned when the company embraced change instead of protecting legacy systems. Leaders must choose to disrupt their own business before someone else does.
One of the most powerful lessons from Jim’s experience leading IBM’s Linux business is that the real fight is often internal. Incentives, fear, and comfort with the status quo create resistance. Jim explains how using the voice of the customer can break through internal blockers and force organizations to move forward even when change feels uncomfortable.
As a venture investor, Jim evaluates founders before technology. A strong leader with vision, adaptability, and emotional intelligence can navigate uncertainty and change direction when needed. A flawless plan without strong leadership rarely survives contact with the real world. Teams follow leaders, not slide decks.
Jim highlights how AI is collapsing product cycles from years into months. Tools like Copilot and AI agents are reshaping how software is built, staffed, and scaled. Founders and leaders must adapt to this pace or risk falling behind. Speed is no longer optional. It is a requirement for survival.
From launching Linux in emerging markets to investing in founders others passed on, Jim emphasizes the value of non-obvious bets. The biggest opportunities often appear before the market agrees they matter. Leaders who learn to spot these signals early gain leverage that compounds over time
This episode is a reminder that disruption is not a moment. It is a mindset. Whether you are leading a global enterprise or building an early-stage startup, the principles are the same: lead with conviction, listen to customers, move fast, and never assume the current model will protect you tomorrow.
Have a question for a future guest? Email us at innovators@alchemistaccelerator.com to get in touch!
Timestamps
📚 00:00 The Innovator’s Dilemma and why it still defines innovation today
🗓️ 02:45 AI tools, gamification, and how platforms drive behavior
🧠 13:08 The most critical skill for future leaders: iteration
🪖 15:04 From the Naval Academy to IBM leadership
💡 23:43 Turning Linux into a $7B business at IBM
🛡️ 27:25 Using the voice of the customer to overcome internal resistance
🏛️ 33:17 Why putting Linux on the mainframe changed everything
🔬 37:15 Patents, invention timing, and winning before the sale
🌍 41:06 Why emerging markets adopt innovation faster
🧑💼 43:22 How PS27 Ventures evaluates founders and ideas
⚡ 46:25 AI speed, Copilot, and shrinking innovation cycles
🤖 50:49 What it really means to be AI-native
🏆 56:06 Leadership vs planning and the investment that proved it
00:00:12:27 - 00:00:39:04
Layne Fawns
What does it really mean to lead through disruption? Today's guest, Jim Stallings, has built a career on that question. As the founder and general partner of 27 ventures, Jim invests in companies using AI to reshape industries from fintech to B2B software. Before that, he led multibillion dollar divisions at IBM, served as a marine Corps captain, and helped bring enterprise innovation to life at global scale.
00:00:39:07 - 00:00:50:25
Layne Fawns
He's here to share hard won lessons on leadership transformation, and why every company must learn to disrupt or be disrupted.
00:00:50:28 - 00:00:52:24
Layne Fawns
Jim, thanks so much for being here with us.
00:00:52:24 - 00:00:56:07
Jim Stallings
Thank you for having me. This is quite an honor.
00:00:56:10 - 00:01:08:25
Layne Fawns
Awesome. So, you know, just based on that bio alone, I have several questions that I want to dive in on. But I really want to get down to the nitty gritty and play a game first with the two of you, if that's okay.
00:01:08:27 - 00:01:09:15
Ian Bergman
I'll. Let's do it.
00:01:09:20 - 00:01:10:27
Jim Stallings
All I games.
00:01:11:00 - 00:01:22:18
Layne Fawns
All right. Okay. So yeah. So let's play a little bit of rapid fire here. So, Jim, this first one's for you. What's one book that is profoundly shaped how you approach innovation or leadership?
00:01:22:21 - 00:01:49:00
Jim Stallings
It's probably goes all the way back to, a book that, I read called The Innovator's Dilemma. And it was a it's really was about, you know, do you cannibalize your product? How do you if you've got a market position, how do you, you know, cannibalize your product or innovate? I mean, you're you're in a dilemma of whether you take on the new challenge or defend the old pristine cleaner.
00:01:49:01 - 00:01:50:21
Jim Stallings
I was thinking of his name. Way back.
00:01:50:24 - 00:02:11:07
Ian Bergman
Well, it's. Yeah. And it's such a and it's. I've. I've read that too. It's such a good book and it is so foundational. And I think what's really interesting, I know we're going to get into this later, but like that book was, was written a couple decades ago now, which is crazy. Yeah. And, yet I feel like we're living it more than ever, right?
00:02:11:08 - 00:02:17:12
Ian Bergman
Yeah, we're living that that tension more than ever. So. Yeah, that'll be that'll be fun. It's a that's a good one that folks have.
00:02:17:12 - 00:02:35:22
Jim Stallings
It was one of the first ones that read about innovation, because we were at the time and the IBM company we were facing, you know, a new set of challenges and nobody, you know, that was a book this year. And everybody, when I read it and and the principles, you're right, are relevant today probably more than ever. So almost a book.
00:02:35:22 - 00:02:37:00
Layne Fawns
Ahead of its time.
00:02:37:02 - 00:02:38:06
Jim Stallings
Yeah. It was. Okay.
00:02:38:06 - 00:02:45:08
Layne Fawns
Next one's for Ian. Ian, what's a guilty app or, sorry, a guilty pleasure app or tool that you can't live without.
00:02:45:10 - 00:02:46:09
Jim Stallings
Oh, man.
00:02:46:11 - 00:03:11:06
Ian Bergman
Okay. I'm not allowed to say TikTok anymore. Because, like I said, it's true. So I'm going to say, actually, no, I'm going to I'm going to share my new favorite. I don't think this is a guilty pleasure, to be honest. I just kind of love it. Like, my new buddy Holly is my AI scheduling assistant, and I have played with so many of these things and none of them have worked.
00:03:11:06 - 00:03:24:11
Ian Bergman
And I am like, I'm falling in love with my buddy Holly, which is an AI driven service, to help with calendar management. And at this point, three weeks in, I don't think I can live without it.
00:03:24:13 - 00:03:26:27
Jim Stallings
Oh, wow. So what will look it up?
00:03:27:00 - 00:03:29:01
Layne Fawns
What makes Howey so special?
00:03:29:03 - 00:04:02:17
Ian Bergman
How is friendly? How is. How is named Howey. Oh, he's a, It's an AI scheduling system that works via, email and, and, other multi-channel interactions, SMS, etc. but, something about it. Walks the line sufficiently, walks the line between sort of, you know, acting in the way that, a really good human aeei would act, but also not like obviously being automation and AI.
00:04:02:18 - 00:04:19:12
Ian Bergman
It's not pretending beyond the name. Something about it just kind of straddles this line of utility and delight. That I like. And so, yeah, I'm, I'm pretty excited. Doesn't, doesn't, doesn't replace, admin support or our back office but really compliments it tool.
00:04:19:13 - 00:04:19:28
Jim Stallings
00:04:20:01 - 00:04:21:16
Ian Bergman
And yes, at all.
00:04:21:18 - 00:04:25:26
Layne Fawns
Oh, that's much cooler than my guilty pleasure of what's yours.
00:04:25:28 - 00:04:26:15
Jim Stallings
Yeah.
00:04:26:17 - 00:04:36:10
Layne Fawns
I don't honestly, there's too many ads for it out there that probably drive people nuts, so I don't even want to say it out loud, but it's like it's one of those, like, little, like, Candy crush style.
00:04:36:10 - 00:04:37:09
Ian Bergman
Like, I hate.
00:04:37:09 - 00:04:49:00
Layne Fawns
Those have, like, and I, I don't know why, but it's like what I need to turn off my brain and just play these little puzzles and, yeah, decorate a room or a castle or something. I don't know, it's just it's just stupid.
00:04:49:01 - 00:05:10:05
Jim Stallings
Like the ones that like a distraction. Right. You know, from. Yeah. You know, not work apps like AlphaGo. So I don't know if you, you know about that when it's on Bloomberg every day. Yeah. It's like world. You know what. Oh yeah. It's, you have to guess the words and connect the dots. So it's a physical game anyway.
00:05:10:06 - 00:05:29:12
Ian Bergman
It's actually wait like let's let's get into this. This is actually innovation in a way. Like it's really interesting. Like New York Times has their games. Bloomberg's got their games. I've recently gotten into the LinkedIn games and I love you guys. Play them. But you know they've got like 4 or 5 that I play actually religiously every day.
00:05:29:12 - 00:05:50:09
Ian Bergman
So I can, you know, maintain my streak and beat all of my colleagues and all that good stuff. But it's really interesting, right? Like there's little I feel like this is actually fairly new, these little moments of gamification within the umbrella of other sort of media or network places that you go. And I, I don't know, now, I play them every day.
00:05:50:12 - 00:06:07:25
Jim Stallings
Yeah. I mean, every platform, if you think about it, has they're trying to find ways to keep you engaged. Yeah. And they're, you know, at the bottom. Right. You've sort of read the news or you read the report and you've done what you gotta do. And at the bottom, it's sort of a, comic relief moment. Right?
00:06:07:27 - 00:06:09:28
Jim Stallings
But it keeps you on platforms.
00:06:09:29 - 00:06:26:21
Ian Bergman
So it's monetization of the most, you know, the literally, literally the one thing that is finite, which is time. And so they're getting every little they're squeezing every bit of monetization out of it. We'll see. Jim, thanks for really bringing me down. I'm like, oh, they're being nice. They're entertaining eyes. And Jim's like, no, oh man. They're driving engagement.
00:06:26:21 - 00:06:27:00
Ian Bergman
Yeah.
00:06:27:06 - 00:06:44:03
Jim Stallings
And they're learning about you, by the way. That's true. They're you know, they're insights into you know what? You know what you don't know. And, you know what? It's just they're just ways that they can feed the algorithm about you. They can.
00:06:44:10 - 00:07:07:22
Ian Bergman
And it required somebody to think a little bit differently. Like that is interesting. Like it requires like if I think of Bloomberg, I think of essentially an information sharing organization. Like that is what I think of like it's news and data and it required somebody to think very differently at some point about something that maybe seems trivial and small, but actually might be quite consequential.
00:07:07:24 - 00:07:15:24
Jim Stallings
Yeah. And I'm sure they laughed at the team in the beginning that proposed it. Let's get out of here. And now, you know, here.
00:07:16:00 - 00:07:34:02
Layne Fawns
And now look at it. It makes me think of two things. And I think there's one about being human that inherently makes you more receptive to things that are gamified. Because when I think about it, like, I am more likely to go the speed limit when there's one of those digital signs that has a green happy face and I'm like, got to get the happy face.
00:07:34:02 - 00:08:03:05
Layne Fawns
Like I got to get from yellow to green. And I've noticed, like, they just put this up in my neighborhood and everybody is going the speed limit because I think we're all trying to and I think to the more that we have kind of like the houses of the world and AI starts to sort of accelerate, I feel that those little gamification structures that cause you to have to think or, you know, solve a puzzle or a problem or something like that.
00:08:03:05 - 00:08:16:18
Layne Fawns
That's I think it's really good for our cognition. And I'm not saying I don't know if that that's like why they're doing it. Like you said, it is likely for engagement, but it's really good for us. It's almost like hiding the medicine in the sugar, like.
00:08:16:20 - 00:08:45:00
Jim Stallings
Yeah, yeah, yeah. Plus, we tend to associate games with kids and young, younger people, right? And it gives us a chance to play, you know, old people like me. It makes us like, okay, we're playing too, you know? So we're having fun too, while we're doing serious reading and writing and work. So and we, we tend to have that inside of us anyway, and it brings it out and we want to come back to it.
00:08:45:02 - 00:08:47:10
Jim Stallings
You know, we get we get attached to it.
00:08:47:12 - 00:09:08:01
Ian Bergman
Have you guys have either of you heard about, the tunnel lighting projects that sort of like, gamify the speed at which you're driving through tunnels? Like, I think there's a big one in Sydney and another one in Scandinavia. You know, I'm talking about Jim's nodding a little. It's like. It's like it's it's really it's actually really cool.
00:09:08:03 - 00:09:28:16
Ian Bergman
This is a total tangent. But what they do is they use lights on the side of the tunnel, like light rings or things to, to basically to pace you, to pace you at the speed you should be going. And it's, it's not to slow you down, it's to speed you up because drivers lose context. We all know like you start going uphill.
00:09:28:16 - 00:09:39:25
Ian Bergman
You slow down without thinking. You cause a traffic jam. You're going through a tunnel, you slow down. And so apparently, you know, drivers are like, oh, I gotta keep up with the light, right? Yeah. And yeah, they do.
00:09:39:27 - 00:09:43:19
Jim Stallings
Yeah. I love the feet. Yeah. Consistency matters in traffic. Right?
00:09:43:19 - 00:09:44:29
Ian Bergman
So yeah, it's everything.
00:09:44:29 - 00:10:09:06
Jim Stallings
I just bought a new car and it has a heads up display in it. Now when I was early in my military career in fighter cockpits, they had something called a heads up display which allowed the fighter pilot to look forward. And instead of looking down at their dials, you know, for speed and altitude and all that, it was reflected in it literally in the canopy.
00:10:09:09 - 00:10:29:08
Jim Stallings
So I got one of those in my car and, and cool in it and it, and, you know, to your point about colors, you know, I get red, green, yellow, all kinds of things. And and by the way, there's a button you can hit on it. It says augmented reality. So now the street becomes almost like, a game.
00:10:29:11 - 00:10:38:26
Jim Stallings
It's got lines. So if I, if I'm driving and I bump it, you know, I'm crossing the lines. It's in a display. It turns a colored blanked. I mean I'll get something.
00:10:38:28 - 00:10:43:00
Ian Bergman
Oh I that's me. That's a heads up I've used.
00:10:43:02 - 00:11:00:04
Jim Stallings
Yeah. So it's, it's where to everything is going now. Right. So I don't have to look at my dials. I don't look at my speed. I don't have to. You know, know, if I'm actually crossing that line, it tells me, it shows me, and it's in my line of sight when I'm looking forward. The other thing I found out that,
00:11:00:07 - 00:11:18:04
Jim Stallings
And I found this out the hard way is that there's, I would look away at my phone, and I would get this beep, and I was wondering, how does it know that I'm looking away? Well, I found this device right below. Right above the steering wheel that looks at my eyes.
00:11:18:07 - 00:11:18:15
Ian Bergman
Yeah.
00:11:18:17 - 00:11:40:21
Jim Stallings
And and it sort of can see a human face. And if it's not, if you don't see the eyeballs, you know, in a certain position, it'll it'll let you know. Yeah. So anyway, now it's a little bit of a game between me and the car and that's it. And here's what I learn it. I can hack it by wearing my sunglasses.
00:11:40:24 - 00:11:50:05
Jim Stallings
Yeah, because it won't see my eyes in anyway, so. And it's not smart knows how to get away with it. But if it's all game.
00:11:50:07 - 00:11:57:03
Ian Bergman
What is happening? It is gaming. Oh that's cool. Well, I want your heads up display. All right, all right, let's, That's cool. What's the next question?
00:11:57:06 - 00:12:03:26
Layne Fawns
Okay. Next question for Jim. If your company had a mascot, what would it be?
00:12:03:28 - 00:12:32:06
Jim Stallings
Well, it would be my dog. Because my dog. Yeah, my dog, Bentley is the most popular. He's way more popular than I am, it turns out. You know, everybody knows him. Everybody knows him. Your neighbor knows everybody. So he would be the. He would be the mascot. I mean, he's well known and, And on on LinkedIn, I referred to him as Bentley to talking dog because he.
00:12:32:08 - 00:12:49:24
Jim Stallings
Over the years, I've learned how, you know what his languages and he's learned mine. And we talk all the time and so he it anybody has a dog will know what I'm talking about. But I'm 100%. Yeah. He'd be the he's he actually is the company mascot. You know everybody when they talk to me, they don't ask me, how am I doing this?
00:12:49:24 - 00:12:52:16
Jim Stallings
How's Bentley, I guess.
00:12:52:16 - 00:12:55:06
Ian Bergman
I mean, we all do. We have to. You have to take that as a compliment.
00:12:55:08 - 00:12:59:04
Jim Stallings
Yeah, yeah yeah, yeah I do, I do. He does.
00:12:59:06 - 00:13:07:27
Layne Fawns
Love that. Okay. Ian, last question. Before we move on, what is a skill that future leaders absolutely need to master.
00:13:07:29 - 00:13:37:19
Ian Bergman
Well, iteration like creating creating an environment where the team can iterate. And like and this is I'm talking my own book here a little bit like with innovation. Right. But like we're on an innovation podcast. So why not. But you know there are some fundamentals of leadership involving vision discipline. And you know, sort of setting up an environment of success that I think span all times.
00:13:37:19 - 00:13:58:23
Ian Bergman
But I do you talk about future leaders. I think we're living in a world that is less predictable every year, every month, every day requires more adaptability. And adaptability is fundamentally a process of iteration. And, so that's that's it. And I think that's tough. I think that's really tough for a lot of a lot of leaders today.
00:13:58:25 - 00:14:23:04
Jim Stallings
Yeah, I would agree. Yeah. Technical leaders are disciplined. And many times that gets in the way of what you're describing. Right. Because they have a clear focus on I've got to build this feature or capability the way I see it. And in today's world, the way you see it, the need may be different in six months.
00:14:23:06 - 00:14:23:15
Ian Bergman
Yeah.
00:14:23:22 - 00:14:31:07
Jim Stallings
And you've got to be ready to iterate to use your word or the questions were there. So that's a critical skill.
00:14:31:09 - 00:14:57:29
Ian Bergman
Yeah. Yeah I think so. And I think it's you know I think it's tough. I think we should talk and you know, we're going to get into the meat here. I think we should talk about that in a little bit, because, I, you know, I've, I've spent a lot of time in large organizations that really, really struggle with kind of, you know, moving the train on to a different track or whatever metaphor I want to use here.
00:14:58:02 - 00:15:03:18
Ian Bergman
You know, and I think, I think that's getting more important every day. Well, yeah. So let's let's dive in.
00:15:03:20 - 00:15:26:20
Layne Fawns
Yeah. Actually, so I think that this is a really good, place to segue. So I would love to know more. Just kind of like some of the steps that have led you throughout your career, you know, from military to large corporation. And then ultimately, you started your own venture firm. And so, you know, why? Why leave?
00:15:26:20 - 00:15:31:15
Layne Fawns
What, like, what possessed you to want to go out on your own and start something new?
00:15:31:15 - 00:15:56:27
Jim Stallings
Yeah. Well, I, I don't know if there's a word for it, but I've always felt this like I was a pioneer. That I was, you know, look, I've always looked for the edge of change and. And some of it began when I was a young kid. I was the first in my family to graduate from high school.
00:15:57:00 - 00:16:17:21
Jim Stallings
And I was the first to ever go to college, you know, to the Naval Academy. And, you know, I was a first to, you know, get into, you know, be an officer in the Marine Corps. I mean, things, and I've just always found, throughout my career, that on the edge is where the most fun is.
00:16:17:23 - 00:16:40:13
Jim Stallings
And the biggest challenge. And, it inspired me to go in the Marine Corps. I just felt like, well, that's, you know, what was it? Toughest group I could get in, and it was murky. So. And I felt like if I could do that, it'll prove something to me and others around me, and I'll learn a hell of a lot in the process.
00:16:40:13 - 00:17:07:20
Jim Stallings
So, and then technology came into my life, and I just always sort of look for what? What's so what's the hot, new big, hard thing? And if you look at my career in the IBM company, I was always either on a business that was in trouble, trying to fight its way back to relevant, or I was on the bleeding edge of something and we had to go make it a business.
00:17:07:23 - 00:17:36:17
Jim Stallings
And, you know, I can share lots of examples of it, but that's that's it. So when I left IBM, it was just natural for me to say, well, let's go invest in all these new technologies. And in the short term, I've been doing this. It's changed dramatically what we invest in. But I've found it's kept me, fresh and relevant and talking about the important things and learning about the important things in business, in life.
00:17:36:19 - 00:17:59:14
Jim Stallings
And it's just sort of been a spirit inside of me from the beginning, because there were no examples when I was growing up. There were no examples of of any of these things around me. And I'm reading. Reading about them, I think inspired me. I'm going to go because a big world out there and I'm going to go discover it.
00:17:59:16 - 00:18:24:05
Ian Bergman
Is that spirit like what I want to know what what inspired you to that step into the Naval Academy? Because, you know, first high school, first college, like, that's, these are a sort of pioneering big steps. I want to know, what was it that drove you to the path of the Naval Academy? Because I suspect I'm going to ask this in a little bit that that was foundational.
00:18:24:06 - 00:18:28:06
Ian Bergman
Maybe in setting you're setting up what your what your post military steps were.
00:18:28:08 - 00:18:59:02
Jim Stallings
Yeah. I mean, it was I mean, I'll tell you a quick story. When I was a kid, the moment it all sort of clicked, I don't know how old it was, maybe 12 or 11. It was a Saturday morning. I was outside in my front yard playing with my buddies. And on a Saturday morning, you know, we're throwing rocks at things and chasing cats and climbing trees and, chasing girls and, you know, things, that little boys do.
00:18:59:04 - 00:19:24:16
Jim Stallings
And there was a taxicab that pulled up out in front of our, our street, and it was a sidewalk. And there this, this military person got out of the taxi in their uniform, and they and they were walking down the sidewalk where in front of our homes. It was a it was an apartment complex. So we passed, you know, my buddy's, Kevin's house.
00:19:24:16 - 00:19:48:17
Jim Stallings
And then he passed Alfred's house. And then right then he eventually passed my house where we were playing. And we stopped and stared at him. And, and then we he was walking ramrod straight down the sidewalk, and we fell in behind him almost as a joke, and got in the line, and we were giggling and walking behind him.
00:19:48:19 - 00:19:49:05
Ian Bergman
Humming, and.
00:19:49:06 - 00:20:17:24
Jim Stallings
Stopped and turned around and looked at us, you know, which scared us. And he did a hand salute and turn around and walked away. And that's during something in my mind. And I discovered later that was a US marine, you know, I learned what the uniform was. Many, you know, sometime later. And I said, I want to do that because, you know, it stunned us.
00:20:17:26 - 00:20:36:01
Jim Stallings
There was nobody in our neighborhood, you know, it was sort of look like that or walk like that, or and I just gravitated towards that. And I learned about what the Marines were. And then the question was, why do you become a marine officer? Yeah. You know, all these options. And I said, well, I want to go to a naval academy.
00:20:36:01 - 00:21:00:29
Jim Stallings
That's hard to do. So that was it. I mean, it was, you know, images matter in life, especially with young people. If you read around bad images that that has an effect. But then if you're if you see something positive, it it could inspire someone. And it inspired me and that's, that's how my life got going. And and that's what it was.
00:21:00:29 - 00:21:14:05
Jim Stallings
So I everything from that moment was, how do I get to that? How do I get to the academy? I get a commission in the Marine Corps, be an officer. I wanted to lead troops, from day one, from when I was 11. Yeah.
00:21:14:07 - 00:21:39:17
Ian Bergman
Amazing. Well, I mean, I okay, that was a visualization. Like all of us were there with you, which is, which is really cool. And, I love the, you know, the I don't know, the focus, I guess that it that it brought at a young age. That's that's really cool. And I also love how it connects to something that you said earlier, Jim.
00:21:39:17 - 00:22:02:01
Ian Bergman
You said, it's more fun at the edge, I think you slightly different words, but, yeah, it's true. And, you know, certainly by reputation. Right. The US Marine Corps is an organization of, of course, discipline and grit, but living at the edge in many ways. Right. And figure out how to get it done. And I think, I think that's really, really interesting.
00:22:02:03 - 00:22:41:11
Ian Bergman
I'm curious. I want to ask you about some of those stories from the time at IBM, some of the cool stuff that you worked on and what that taught you about innovation. I'll set up a little context, like we were talking about before the show. I had a, I had a brief stint at IBM, and it was interesting because I was there as an intern and it was at a time where the company was, I think, at least in popular sentiment, struggling, trying to figure out how and how to navigate a transition from what felt like a technology organization to, or of a services and consulting organization was certainly the public
00:22:41:11 - 00:23:12:11
Ian Bergman
sentiment. But here's here's the reason I mentioned this. I walked in as an intern to Almaden and just outside of San Jose and Silicon Valley, and to the research facility. And I was surrounded by the biggest nerds, the maddest of mad scientists. There was like a particle accelerator in the other cubicle next door. There was a button on the wall that would evacuate and recycle the air in the entire facility.
00:23:12:11 - 00:23:34:28
Ian Bergman
This is like a bunch of cubicles and offices in case of a chemical leak. And I was, you know, I was like, Holy cow. Like, there's research, engineering and science happening here. So all of that existed for decades within IBM. So I would love to hear some of your stories, like what are some of those, you know, cutting edge projects you worked on and.
00:23:35:01 - 00:23:35:19
Jim Stallings
What.
00:23:35:19 - 00:23:43:04
Ian Bergman
Did that teach you about both what works and what doesn't in bringing innovation to market?
00:23:43:06 - 00:24:16:14
Jim Stallings
Yeah, well, probably one of the most interesting, maybe the most interesting and most impactful assignments I got one day was, to run the Linux business. This was, around 2000, early 2000 and 2005 ish timeframe. I was in Orlando in a sales meeting. I got a phone call from a gentleman back in New York that says, you've got a new assignment.
00:24:16:16 - 00:24:39:25
Jim Stallings
And, at the time, I was in sales and he said, and I said, well, what is the assignment? He said, well, we want you to take over the Linux business. And I said, What is Linux good that it's, open source software. And I said, what's open source software? I'm a hardware guy. Right? And he said, it's free.
00:24:39:25 - 00:25:03:18
Jim Stallings
It's free software. And I remember saying, I'm the greatest sales guy in the IBM company, and you want me to do free software? I don't, you know what I mean? Like, I want to go do something hard, like sell big stuff. He says, no, no, no, no, you got to understand, the business is small. Linux is small now, and we want to make it big.
00:25:03:20 - 00:25:24:09
Jim Stallings
And I was arguing with I said, look, I'm a the greatest sales guy in the company. I want a big assignment. This is a little I mean, what what do you want me to do here? And he says, look, come back to New York and we'll talk about it. So I fly back to New York. I sit down and I get with him and, he says, we're in a transformative moment.
00:25:24:11 - 00:25:45:21
Jim Stallings
I'm, windows is dominant. It had at the time, like 98% market share on the desktop. And we're going to disrupt it. And I said, what the hell are you doing with me? I mean, I don't I it have I got no chance of being successful at this. I'm going to fail. I want to I want a career.
00:25:45:21 - 00:26:14:29
Jim Stallings
You're trying to end my life here. And he says, no, we can do it. So what is the strategy? And he said, we're going to, do it with customers. Anyway, I said, okay, I'm in, you know, because the other part of me kicked in. Okay, now I like a challenge. I want to, you know, beat somebody in the marketplace and customers, you know, I'm a sales guy.
00:26:15:01 - 00:26:43:09
Jim Stallings
This is okay. This is good, but I wasn't I didn't consider myself a technologist. He was a technologist. And we became a pair. Me being customer focused, he was technology focused. And we took Linux inside of the IBM company from what was probably, less than $100 million business to $7 billion, over a few years, like three years.
00:26:43:12 - 00:27:00:27
Jim Stallings
And we did it with techniques and tactics that were not that were on the edge of acceptability in the IBM company because, as you know, IBM was by the book. Yeah. And we had to do some things that were off book, you know, not not in the, the one written, but.
00:27:01:00 - 00:27:19:13
Ian Bergman
And, and what were some of those things because for sure, there was a, there that's a wonderful story. And I think a fundamentally different way of thinking about revenue and monetization. Attached. Yes. No. Yeah. Because you're like, you know, you're like, I'm a sales guy. You want me to sell free? What? But but there's a real business that was very different.
00:27:19:13 - 00:27:22:12
Jim Stallings
But what the creative. Yeah. Well, how did you.
00:27:22:18 - 00:27:24:23
Ian Bergman
How did you get off book. How did how did you do it.
00:27:24:29 - 00:27:47:27
Jim Stallings
Yeah. So we realized, early on, I realized early on that we, And here's the other component to the story is inside of IBM, right? Linux was was an organism that was to be killed because it was disruptive to the operating systems and.
00:27:47:27 - 00:27:48:15
Ian Bergman
Antibodies.
00:27:48:15 - 00:28:16:25
Jim Stallings
Against DNA. Right. So it was like we're going to embrace, you know, a virus. Okay. This I mean, and so we found early on that the enemy was inside and the enemy was Microsoft on the outside. Yeah. And we had to convince the customer to adopt this capability. And only that was the only way we convinced the people inside of IBM and bring this disruption to the market.
00:28:16:27 - 00:28:41:06
Jim Stallings
So that was the dilemma, you know, but we it was a case of survival. Our servers, our operating systems wouldn't be relevant if it wasn't able to run Linux systems. And if it was, it would be disruptive to, you know, Microsoft in a stranglehold. Now fast forward to today. Linux is the most pervasive operating system in the world.
00:28:41:08 - 00:29:04:16
Jim Stallings
Even Microsoft, you get your surface tablet. It comes with Linux. So I mean, it's a great, you know, victory for us and IBM at the time was was a technology leader. And it was almost anathema to us to embrace this. And now CEO had the vision to to do and the courage to do it. And we did it.
00:29:04:16 - 00:29:25:09
Jim Stallings
And it allowed customers to say, well, if IBM is endorsing this and we had big customers, I mean, the biggest banks in the world, the biggest governments in the world, the biggest manufacturer, they were saying, if you guys will endorse this, it must be something to it. And that was the. So we had programs and techniques and pilots in trials who made it very public.
00:29:25:12 - 00:30:01:04
Jim Stallings
The big weapon we had in all of this was the patent portfolio. And I discovered this later in the process. Yeah, the patent portfolio in the IBM company was 39,000 patents across every industry. And that you could imagine. Yeah, medical, legal, you name it. But anyway, we use the patent portfolio to inject features and patents into Linux to make it powerful.
00:30:01:06 - 00:30:22:09
Jim Stallings
And the more powerful it got, the more applications it could run in, the more equity it had between Windows and Linux. Yes. And as we close that gap over time, the customer says this is as good and cheaper than windows. And that was the strategy, the core of the strategy.
00:30:22:12 - 00:30:29:20
Ian Bergman
And it's really interesting because like, you know, we are talking like these are these are giants battling in the market, right?
00:30:29:21 - 00:30:31:24
Jim Stallings
Oh, this is, you know, Arctic warfare.
00:30:31:24 - 00:30:52:14
Ian Bergman
It was it's intergalactic warfare. And I'm going to, I'm going to give you some of the, some of the perspective from the other side of the trenches there in a second because, I was at Microsoft at the time, but, I didn't mention I didn't mention that you started it. But no, but but it's interesting because, you said something.
00:30:52:14 - 00:31:21:14
Ian Bergman
I want to highlight. You said I had to use the voice of the customer to convince people internally. And doesn't that feel so classic? Like you've got a you've got an executive team with vision, you've got people, you know, kind of, you know, in the field, like you're, you know, you are a field and sales leader executive. You probably had great people working for you that were executing this, but you had all kinds of blockers, probably a lot of middle management product owners, things like these antibodies that exist.
00:31:21:17 - 00:31:28:08
Ian Bergman
You use the voice of the customer. It sounds like to manage the battle within. Is that is that fair?
00:31:28:10 - 00:31:55:22
Jim Stallings
Yes. I mean, the other thing we did was we start, we formed a coalition, with other like minded companies. You know, Novell was out there, Sony was out there, a lot of companies that were not IT companies, but they were very interested in propagating a new a newer solution in the market for primarily the desktop and and eventually old systems, all operating systems out there.
00:31:55:24 - 00:32:22:01
Jim Stallings
So, Sony, I mean, they were, you know, Philips won. They had large patent portfolios as well. So they were doing they sort of adopted the strategy. We adopted. And there were about seven companies they put a lot of money in, but more importantly put a lot of patents in. Again, we were feeding the open system to make Linux stronger, more powerful, more capable.
00:32:22:04 - 00:32:40:04
Jim Stallings
And that caught the, inside of IBM. Now this, as you mentioned, we there were people that were ready to, you know, burn my car, in the process because. Sure. This was this was different the, you know, and then but.
00:32:40:06 - 00:32:55:13
Ian Bergman
Hang on, hang on, it's different. But like, people don't burn cars because they're different. People burn cars because you are striking at the heart of their own incentives or their own self-esteem or their own something. Right. Like it's it's I don't think we should underplay that.
00:32:55:15 - 00:33:17:12
Jim Stallings
Yeah. Yeah. I'll give you another example of that. So we said we're going to enable Linux inside of the IBM company. When are we got to get good enough to where it's good enough to be on one of our systems and good enough to support our customers solutions? Right. Yeah. And at the time, there were five systems you know, hardware platforms.
00:33:17:14 - 00:33:59:24
Jim Stallings
The mother ship of the IBM company was the mainframe. We decided we're going to put it on the mothership. Now this was like, you know, deciding we're going to, you know, have a party in the Vatican, you know, with a rock band. So I mean this was this, I mean it was totally like, you know, everybody wanted to start with something small, you know, do with the, you know, the low end X-series servers, you know, the Intel servers that if they if it doesn't work, nobody will know the mainframe, which is the holy grail of profit and growth in its in the biggest enterprises in the world.
00:33:59:26 - 00:34:23:01
Jim Stallings
They said, yes, we'll start there. So we I mean literally people through us out of their offices. But we did it. And because it was in large enterprise, these big systems were in large enterprise with very large customers. I mean, the biggest banks in the world. We said if we start the revolution, there, it'll be easy to go downhill.
00:34:23:04 - 00:34:47:20
Jim Stallings
And that's what happened. I mean, and it turned out it solved another problem. And we didn't think about it at the time. But we had another problem in that the mainframe was shrinking. It was being disrupted by other low end servers, and the internet was, was, was coming. And, so we said, let's put Linux on the mainframe and guess what happened?
00:34:47:20 - 00:35:05:24
Jim Stallings
It stemmed the decline and it actually started growing. And so it was counterintuitive. So then the mainframe people like, we love this thing called the X. And once we got the mainframe team in love with this thing, it was so easy to get the rest of the village.
00:35:05:27 - 00:35:28:07
Ian Bergman
Yeah. You got the hero. Yeah. And it and it is. And it is. It is really. You know, there's something else really interesting here. Like, you know, you guys saw the disruption, right? You saw it happening around you. You you knew that. You know the mainframe business as it was was shrinking. It was getting highly pressured. Right. You knew that there were other changes happening.
00:35:28:07 - 00:35:34:12
Ian Bergman
You obviously knew about like Microsoft's position in desktop and, you know, across IBM's portfolio, you saw it. So you weren't.
00:35:34:15 - 00:35:34:20
Jim Stallings
Yeah.
00:35:34:21 - 00:36:06:22
Ian Bergman
You weren't blind. But the challenge was, you know, to rally people, to react appropriately. And I want to I want to use this to talk about something else that you talk about, actually, you know, you've said it's on your LinkedIn. Actually, that innovation should be the core offensive strategy of any company, either disrupt or be disrupted. Was it at IBM or is that something that you sort of learn, sense and try and institute more systematically?
00:36:06:25 - 00:36:18:13
Jim Stallings
No, it started it started at IBM and it started from some of the experiences I was just sharing. Right? I was learning as I was going through that. When you look back over time, these.
00:36:18:13 - 00:36:29:21
Ian Bergman
Technologies, like you were playing defense, though, like, sorry to interrupt. Like that story sounded a little bit like not not not defense like you were, you know, you weren't in a fighting retreat here, but you were reacting to others around you.
00:36:29:21 - 00:36:54:10
Jim Stallings
Around the game product. We needed growth. We needed growth, and we weren't getting growth. And we needed a play to get growth. We also needed to change the dynamic of the market, right, so that the the leverage was not on on Windows in Microsoft. Right. Because we didn't we just didn't have it at that segment. And and again, the lower end of the market, you know, everything.
00:36:54:10 - 00:37:29:06
Jim Stallings
Not that mainframe was growing. And in the core was was where everything else was growing. And the core wasn't. So we had to participate in where the growth was. So Linux was one way to to get there. But I mean, it was through a whole series of, of innovation. I will tell you, another place I learned about disruption was an innovation was, I got another assignment, where I was I was called to run the intellectual property division of the IBM company, and my reaction was the same.
00:37:29:06 - 00:37:52:22
Jim Stallings
I'm like, wait a minute, that's not sounds like lawyers. I mean, I'm not a lawyer, I'm a marine. I mean, what am I doing here? And, and part of it was for me, you know, I think management was saying, look, you need to learn some things. And as I mentioned before, we had 39,000 patents and it was across a whole range of industries.
00:37:52:24 - 00:38:35:06
Jim Stallings
Now, what I learned in that was the battle many times is one not at the point of the sale. It's at the moment and point of an invention and innovation. So in that job running the Intellectual Property division, I got a chance to work with researchers in the IBM company. And and if there's a, secret in the company, it was the engineers and inventors in research because they had the freedom to look out beyond today and relieve the pressure of a quarter, you know, making a quota and invent things.
00:38:35:09 - 00:39:01:18
Jim Stallings
And I would spend hours and days with them on the future. And I was discovering that many years before the customer feels the need to change, they've seen the innovation or created the innovation to, to to change it. So they were they were working and I would and that's when I began to see, well, this happens early, right.
00:39:01:18 - 00:39:48:03
Jim Stallings
If it's a fad, you're late. If it's popular and selling briskly, you're late. So and the value the people that makes the most money are the people that invent it and adopt it early. Not, you know, it's when it's commoditized and it's available to everyone. So those are just lessons I learned working in the patent business. The also I learned, and many people don't know this, but because IBM had so many patents across so many different industries, it generated over $1 billion of free cash flow, which could fund innovation, you know, because, you know, people wanted to either use the patents or by the patents or get assignments or the patents.
00:39:48:08 - 00:40:06:04
Jim Stallings
Of course, it's just, you know, it's just money. So. So I didn't even know this existed. You remember I was a sales guy. I just thought it was about hand-to-hand combat, you know, you know, if you're stronger or you just beat the guy up and you win and you find the battle is one long before that.
00:40:06:07 - 00:40:26:09
Layne Fawns
So when's the right moment to strike late in terms of so you you've got these teams of people that you said have built solutions that customers don't even know they have a problem. Yeah, yeah, yeah. But you have to adopt it early. So how how do you know when that right moment is to introduce something brand new to the market.
00:40:26:13 - 00:41:06:11
Jim Stallings
Yeah, yeah. I don't I don't know, it depends on what it is. But here's what I learned. Along the way, you have to. The other lesson I learned in this was it's it's not your core customer that's going to be the the change agent. It's going to be the competition of the customer. Many times, the smaller emerging capability that's in market, that's open and ready.
00:41:06:13 - 00:41:27:27
Jim Stallings
I'll give you a great example when back to the Linux business, we found the emerging markets Brazil, Russia, India, China, Korea, Africa. We started there. We found they were ready. They didn't have the incumbency of these other technologies.
00:41:28:02 - 00:41:30:21
Ian Bergman
You were you were either leapfrogging or deploying.
00:41:30:24 - 00:41:54:13
Jim Stallings
And so we found it was one of the things I learned was that these emerging markets and emerging industries, will leapfrog. So we found those who were the early. So we sort of pivoted from some things and went to these other markets and it caught on fire. I mean, it was cheap. It was free. It was not free.
00:41:54:13 - 00:42:18:05
Jim Stallings
Free, but relatively less expensive. And they didn't have the they didn't have the incumbency. We went into some I remember going to the Social Security Administration in Ghana. They ran the Social Security Administration on paper. So we said as you buy our systems, it's a great web systems with Linux. They said, great, you know, this is this is a great price.
00:42:18:08 - 00:42:41:06
Jim Stallings
It's great. And by the way, they had because it was open source, they had they had a familiarity with these, you know, leading edge things that, you know, you just didn't have in the in New York. It would have been less receptive to it. So anyway, that was the other part of the strategy. So I learned early on it's not just the invention, it's where you plan it.
00:42:41:06 - 00:42:50:24
Jim Stallings
First you have to think quickly through where do I launch it. And and it's sort of an outside in strategy, that you have to deploy.
00:42:50:27 - 00:43:10:10
Ian Bergman
So let's, let's fast forward a bit like, why this this is fascinating. And we could talk, I think, forever about some of the dynamics that exist in the large enterprises and that we could learn from. But let's fast forward a bit. You're, you know, you're running a, venture fund now. You're working with founders, with early stage entrepreneurs.
00:43:10:13 - 00:43:22:00
Ian Bergman
How does this inform your work and how does this inform the conversations that you have with entrepreneurs and founders every day?
00:43:22:03 - 00:43:51:14
Jim Stallings
Yeah. Well, we have a process where we vet founders, and, and we vet the founder before we vet really the technology. We tend to start with the what is the problem set that they're trying to solve. I mean we talk about the quality of the problem and the quality of their leadership. I mean, so if they're solving a an urgent big problem that's high on the, you know, scoring.
00:43:51:20 - 00:44:15:14
Jim Stallings
Right. But if it's a, you know, low level problem for a small customer, there's way on the scoring. So we tend to be looking at that. We look at the quality of the business model, you know does it have you know is it sticky is a recurring revenue. Is it a platform that could evolve out of this where it could do more than a feature, but thousands of features?
00:44:15:17 - 00:44:33:29
Jim Stallings
And of course, we look at the quality of founder, and that's key to me. That's 90% of it for us. Do they have a plan? Do they have a vision for how this could play out? It doesn't mean doesn't mean this is how it's going to play out. But do they know how it could play out.
00:44:34:01 - 00:44:34:21
Ian Bergman
Yeah.
00:44:34:24 - 00:45:05:04
Jim Stallings
Right. And it doesn't have to be true. I'm just looking for have they thought about the next five years. You know you get funded. You what what does that do to the company this year and next year. Then you get funded maybe again what does that do? I mean, haven't even thought about that. Are they a leader? Do they have the style, the temperament, the emotional intelligence to attract people in?
00:45:05:06 - 00:45:41:10
Jim Stallings
Because you won't grow without people that are really good. And the war for talent is ferocious in technology, and people leave toxic environments and toxic leaders. Yes, for less reasons than money. It's because they want to work in places where. So I look hard for for that. And then a lot of it is are they adaptable? Can we can they change with the environment, with the speed and pace of change?
00:45:41:10 - 00:45:58:29
Jim Stallings
And sometimes, as I mentioned early on, technology leaders in many cases are very they're engineers, a lot of them, and they're very disciplined and structured and they resist visions, you know, to their not theirs. So so I look for that.
00:45:59:02 - 00:46:18:24
Ian Bergman
Well and that's, that's like I mean that's really interesting because that feels more important than ever. Today I wanted to ask you, you know, as you've been doing you know, you've been doing this for a little while and you've been in and around the world of technology and innovation longer. What has been like at a macro level, what's been changing?
00:46:19:01 - 00:46:25:11
Ian Bergman
And then how does that impact these attributes that you look for in, in your investments?
00:46:25:14 - 00:46:53:24
Jim Stallings
Yeah, no, I think the attributes are still, still relevant. I think the only other attribute I think has emerged is, it's financial acumen for these these founders need to have that. They just need to because these investments require particularly around an enormous amount of new capital and multiple raises. So they need to have, depth, the financial depth to be able to work with investors.
00:46:53:27 - 00:47:26:00
Jim Stallings
We're early stage, but the next set of stages, the people are very sophisticated when it comes to understand the capitalization of these companies. The other thing that I would say has changed is speed. I was speaking yesterday with the head of AI from Microsoft and he said, you know, they, they now on GitHub, which is which is copilot, which does coding, you know, for with and for developers.
00:47:26:03 - 00:47:34:25
Jim Stallings
And they're saying in their customer set, 30% of the coding is being done with Copilot.
00:47:34:27 - 00:47:35:07
Ian Bergman
Yep.
00:47:35:08 - 00:47:55:09
Jim Stallings
30%. They think in less than one year it'll be 60%. And in less than 18 months it'll be 80%. Now that speed, I grew up in a world where people would wrap around the block to wait on windows in a box, a CD rom, right?
00:47:55:10 - 00:47:58:03
Ian Bergman
Windows 95 beta in there.
00:47:58:06 - 00:48:21:08
Jim Stallings
And then it would be three years later for the next, you know, windows 98, right? I mean, I remember that and and so these are six months hurdles in terms of penetration, in terms of features and capability. Yeah. Right. Listen two years ago chat was out. We're on chat five ChatGPT five. Yeah. In six months there will be different versions.
00:48:21:10 - 00:48:50:00
Jim Stallings
When it first came out, it was a cute little query machine. You ask a question and it was so cute. You get an answer. Yeah. Now, just a couple of weeks ago, Chad announces we've got embedded finance with Walmart, meaning you can go to chat to their browser, you can search Walmart.com, you go to Walmart.com, and within it you can ask you the question.
00:48:50:03 - 00:49:15:04
Jim Stallings
You know, I'm doing a Halloween party for 30 kids on my block. What are all the things I need to buy? This is the kind of question I would ask because I'm a long ways away anyway. It would create that list and you now can purchase it. So the financial function is right. So to search the list, the answer to my question, the pricing you get, you know the schedule almost.
00:49:15:04 - 00:49:17:25
Ian Bergman
It's almost full agency or full assistance.
00:49:18:00 - 00:49:51:21
Jim Stallings
Exactly. So now think about that. It was 18 months ago when we were doing little innocent queries. Now. Yeah. E-Comm today is change. So and they'll be they'll go beyond Walmart. They'll, you know, take on these others and every other platform will have to do the same or they won't be relevant. So speed I would say is the other, you know, it's like when I open, I said it's like running of the bulls, you know, you're getting chased down the street and and if you don't keep up pace you'll get trampled.
00:49:51:24 - 00:50:28:16
Ian Bergman
Yeah. It's I think I think this speed thing, is so is so interesting. I completely agree with you that it's, it's a challenge for founders. It's a challenge for enterprises. But one of the things that I see, and I gotta say, I'm still trying to figure out, like, what to do about this. Like, we do lots of things I'm still trying to figure out, like, what to do about this, because I don't think the I don't think the industry writ large really has any idea is that in order to keep up with the change in the world, incumbent organizations that could be enterprises, could be government organizations, could be basically anything that's
00:50:28:16 - 00:50:33:00
Ian Bergman
been around for a while. It feels like they have to know what's going on with startups.
00:50:33:02 - 00:50:35:00
Jim Stallings
Not yeah, not from a.
00:50:35:00 - 00:50:49:00
Ian Bergman
Procurement perspective necessarily, just to get a sense of what might be possible, what is coming out of those R&D labs that I have to react to. Is is is this something that you spend time on with your portfolio companies?
00:50:49:03 - 00:51:14:23
Jim Stallings
Oh, absolutely. Yeah. We so one of the one of the challenges we before we even invest with the company, we you know, we used to ask the question, you know, who's your full stack engineer. Right. Who's your solution architect. Right. Our questions now with AI is how much of this are you building and how much is AI building.
00:51:14:25 - 00:51:37:19
Jim Stallings
And if the answer is oh no no no we don't do that. We, we're sort of old school. We, you know, we do it by hand. That's a part. Yeah. Right now. And there's a lot of reasons for the biggest reason is cost for us. Right. So there's so many tools out there and they're getting better by the day to do work in the stack.
00:51:37:22 - 00:52:01:16
Jim Stallings
So and they are tools and solutions that can replace what you could ever build, you know, in the stack in days not months and weeks and quarters. Right. So so we're looking for it from an efficiency standpoint. So what tools are you using for your developers for your engineers. And they should be familiar with them. So we're we're looking for that.
00:52:01:18 - 00:52:01:27
Jim Stallings
Well and.
00:52:01:27 - 00:52:24:12
Ian Bergman
It's not just like cost matters. Right. But it's also the mentality of embracing these things. So because otherwise you are just going to get left behind. So we have one of our portfolio companies, like this is $1 billion company. And I was talking to the CEO and he said something really interesting. It's like, we don't have H.R.
00:52:24:15 - 00:52:51:08
Ian Bergman
Like they don't they have billion dollar company without a single HR person because they are AI native. And we're able to operationalize everything that they needed for their organization in tech. And I'm not I would never say that this is the right pattern for every company. But what it tells me is that that is a founder and a CEO who understands the art of the possible and how to apply it to what he needs in that company.
00:52:51:10 - 00:53:09:01
Ian Bergman
And, so I get where you're coming from, and I think, I think that's a skill that more and more all of us need to have these days. And I got to tell you, I personally struggle with it. I don't know if you do, but, like, I, you know, I struggle with. What does it mean to be AI native and everything I do day to day.
00:53:09:03 - 00:53:29:06
Ian Bergman
Yeah. And, you know, I talked about how we earlier like, I'm trying tools. I have, you know, I have vibe coded a whole lot of BS, to be perfectly honest. But, you know, but like, it feels like something that is actually not only do we need to look for in our investments, but we need to look for in ourselves as innovators.
00:53:29:08 - 00:53:54:01
Jim Stallings
Yeah, yeah, we've started an exercise in our company. And really, this is to help the founder. You know, what are the what are the high quality tools that we would recommend to you to use to do work? I mean, another example along the lines of some of the some of what you just describing is Harvey. Harvey is a legal agent basically.
00:53:54:02 - 00:54:28:09
Jim Stallings
Yeah. That can, you know, write documents, create documents, you know, import documents, populate forms for a company. Right. What does that do for startup? It saves a lot of money. Okay. And it gets you a level of legitimacy with your investors and others and customers quickly without sort of have an employee. So the starter set is, is there a tool or an agent that performs because he, you know, performs the work that you're trying to do?
00:54:28:09 - 00:54:53:14
Jim Stallings
Because the thing that we've learned is for the higher class tools, the accuracy is better than humans. And the speed and efficiency in terms of cost savings is better. And it flows to the bottom line. You need a lot less capital. You know your runway is longer. So now you know, the other thing I'm witnessing is that the AI pricing is going up.
00:54:53:16 - 00:54:55:28
Jim Stallings
But but it.
00:54:55:28 - 00:55:00:29
Ian Bergman
Is. There's only there's only so long VC capital can buy Nvidia GPUs for all of us.
00:55:01:05 - 00:55:18:06
Jim Stallings
Yeah. Exactly. Yeah. So it's it's going up. You know a lot of the large enterprises, they're renewing these contracts. You know, you started copilot a year ago. When you go up for renewal, the prices are going up. So so that's that's the other wave here that's coming Jim.
00:55:18:06 - 00:55:39:03
Layne Fawns
We're kind of coming up on time here. But you said something earlier that really struck something with me. So I want to ask you a final hypothetical question for some of the founders that might be listening to this episode. So you talked about the two things that you're looking for when you invest in the company and that's that they're solving a big problem and that they're a strong leader.
00:55:39:05 - 00:56:05:28
Layne Fawns
So let's say two companies come to you and they both are solving the same big problem. And one of the leaders has a great plan. They're not the greatest leader. One of the other leaders doesn't have a solid plan. But he's amazing with his people. They're running their team. Well, what matters more to you? Strong, personable leadership or logistics?
00:56:06:00 - 00:56:40:10
Jim Stallings
Yeah. I mean, the leaders that leadership matters the most. I mean, we, you know, it, we talk about this a lot when we when we decompose these, these companies, and I've said it somewhere, maybe in another podcast somewhere that I would rather have a, you know, strong, passionate leader solving, an important problem more so than a, really big problem, you know, price, right?
00:56:40:14 - 00:57:03:02
Jim Stallings
You know, and all the dynamics, but a poor leader, right? So it is stats on average is the way we tend to look at it. And what I've learned to, to do. I'll give you a quick example. One of the best investments we ever made was in a company. This was one of the first investments we made about 5 or 6 years ago with, with our Raya fund.
00:57:03:05 - 00:57:22:14
Jim Stallings
And it was a, a company that came to us. It was a consumer products company, and it was a new version of coffee. And, you know, the analyst call me said, Jim, hey, we've got this company. We're in the middle of the pandemic. And I was at home. We weren't at the office. And I remember being in the backyard.
00:57:22:14 - 00:57:41:21
Jim Stallings
I was on zoom and, he said, we're going to bring the founders on. And, and I said, look, I really don't want to I don't think we should invest in coffee. This is a commodity everybody's got at Starbucks. I mean, I gave them ten reasons why we shouldn't do it. He said, Jim, you really ought to talk to these guys because they're great.
00:57:41:27 - 00:58:18:09
Jim Stallings
I said, I don't care what degree this is. It's just this market is over. It's done. You know, we're we're VCs, damn it. You know, we were tech guys and he said, no, just listen. So we got them on and they were describing this new market for wellness and coffee. And they had invented a technique to extract out of mushrooms, some capabilities that help in 4 or 5 different areas in your, your, your health in and infuse it in coffee.
00:58:18:09 - 00:58:41:04
Jim Stallings
And there was a big market for it. And I remember listening to them, you know, the whole time I'm thinking, I don't, you know, we shouldn't do this, we shouldn't do this. But I close my eyes, you know, thinking, My God, how do I get out of this? But I was listening to them describe it, and I was thinking, these guys could sell anything.
00:58:41:06 - 00:59:07:08
Jim Stallings
I mean, they were eloquent. They were factual. They were determined. They were passionate, they were smart. They were young. And I just didn't listen to my eyes closed. I was saying, great. So any damn thing so, so, so we made a decision to go with the team because of the team, not the market. They're now the number one company in the category.
00:59:07:08 - 00:59:29:06
Jim Stallings
They went from, you know, at the time less than $1 million. They'll do half $1 billion this year. So an amazing, you know, growth. But it was it was a founders. And by the way, from that moment, they surprised me, like every year with some new capability. I didn't know what. No, they had in terms of leadership.
00:59:29:06 - 00:59:48:14
Jim Stallings
And at the time, I think they were 29 years old. And I thought, I, I had to overcome every leadership challenge. They were they demonstrated. How do you go from two people to 600 people in 18 months and not miss a beat? Wow. You know, that's,
00:59:48:17 - 00:59:49:01
Layne Fawns
That's so.
00:59:49:04 - 01:00:12:04
Jim Stallings
Aggressive. It was scale. I mean, they learned how to. And they showed me some things, about scaling the business and brand. And but anyway, it was this is one of those where great founder big market Hypergrowth market. We thought it was a small problem. We were I was wrong at the outset and it was probably one of our best investments.
01:00:12:07 - 01:00:40:27
Ian Bergman
Amazing. I love I love those stories. Okay. Like for what it's worth, we talk all the time, internally at Alchemist about the fact that most of our biggest winners have surprised us, right? Not not not because, you know, not in, like, oh, we thought they were awful and and therefore, you know, shouldn't have invested. But, like, they surprised us, like it's the non-obvious bets.
01:00:40:27 - 01:00:45:02
Ian Bergman
And I love I love hearing stories like that. Yeah. Yeah.
01:00:45:04 - 01:00:52:20
Jim Stallings
That'll be a legend in the company, you know, years from now. You know, when they when they exit. But yeah, they.
01:00:52:23 - 01:00:54:28
Ian Bergman
Those guys almost passed on us. But. Yeah.
01:00:54:29 - 01:01:11:19
Jim Stallings
Well guys. Yeah I mean it's very far even said they said we got a better offer. They said we really want to work with you Jim. And we got a better offer from the guys in New York. I said, you ought to take it. I was thinking, that's my way to get off the hook here. Right. So you want to take it as a no?
01:01:11:19 - 01:01:22:14
Jim Stallings
We want it. So they took it. They took a list and, you know, lesser number. Because we have a price number system to work with it. Yeah. It was, it was. Yeah. They were also persistent.
01:01:22:14 - 01:01:46:14
Ian Bergman
So I love it. Well, this has been a really fun conversation. Jim, I thank you for coming on innovators inside. It's it's been a pleasure. As we wrap here, you know, for folks in our audience who want to, get in touch, stay in touch. What's the best way to, to follow your work? Head to your website or you on LinkedIn?
01:01:46:14 - 01:01:47:07
Ian Bergman
What? Where should they.
01:01:47:07 - 01:02:09:09
Jim Stallings
Go? No, I'm on LinkedIn. I mean, the best way to see what we're doing is on LinkedIn. We we do quite a bit of work. Outside of our venture fund, we've created a foundation, the 27 Foundation, to work with entrepreneurs to not only educate them, train and bring them information like what we've talked about directly to them, connect them with other investors.
01:02:09:11 - 01:02:24:10
Jim Stallings
So we we we've done that for ten years. So they should follow the 27 Foundation board or follow 27 ventures or, you know, find me on LinkedIn, find the company on LinkedIn. That's the fastest, best way to to keep up.
01:02:24:13 - 01:02:38:21
Ian Bergman
Amazing. And we'll have all that linked in the show notes, of course. But thank you so much, Jim. Yeah, Jim, it's been a real pleasure. Thank you for coming on Innovators Inside. And, good luck in your race to the weekend.
01:02:38:23 - 01:02:42:29
Jim Stallings
Yep. Great. Thank you so much. Why don't you want to be with you?