Armond Davis, Founder & Managing Partner, The Paragon Group

Erik  00:07

We want to welcome all of our listeners to another episode of Minority Report Podcast with Erik and Kerel. Each episode we talk with leaders in business, tech and media. And joining us today is Armond Davis, who is the Founder & Managing Partner at The Paragon Group. Let's jump in and get to know Armond. How're you doing Armond?

Armond Davis  00:25

I'm doing very well. Thank you guys for having me on.

Erik  00:28

Yeah, we're pumped to have you and can't wait to get to know you a little bit better and learn about everything you're up to these days. So Armond, for those who may not know you and may not know The Paragon Group, tell us a little bit about what's going on with The Paragon Group these days.

Armond Davis  00:43

Well, The Paragon Group just kind of came out of a blending of my two loves, right, which are investments and operating businesses. My background, my education was in finance, MBA in finance, another MBA in commercial real estate investment. I've worked at top tier investment banks, asset managers, commercial banks. And then, I'm not gonna say I got bit by the entrepreneur bug because I've always wanted to be an entrepreneur, but around 2005, 2006, I really started to make a commitment towards entrepreneurship. So I did my first M&A deal back in 2006. Bought a business, it was a small construction business in Atlanta. And as they say, your first deal is your worst deal. I overpaid and I bought a business in an industry that I had no prior knowledge or experience in. The guy that I bought the business from said, "Hey, you pay me this much for the business, I'll stay on for a couple of years, I'll teach you the business and you'll be good to go," and he quit after two months. And so I paid this guy over six figures and after two months, I got basically two months of training and the construction business, which I had never, like I said, coming from banking and investments, got two months of training in construction business and the guy quit and I had to figure it out. And that was in spring of 2007, winter of 2007, actually February 2007 and I had to figure it out. I had to sink or swim. And I chose to swim. And so 2007 actually ended up being a really great year. And by the end of that year, I really thought that I was on to something. I thought I might have actually been the smartest guy on the planet from jumping out of banking, and into this business, because I have seen, before I left banking, that there was some fault lines up here in the economy. And so then 2008 happened and everybody knows what happened then. And then I was no longer the smartest guy on the planet.

Kerel  02:44

Well, Armond, I think what I'm hearing there in your intro, right, there's education and there's entrepreneurship right? And I'm curious to hear from you - where did that come from? Where did that love come from? Or how was that instilled in you? Is that like an early age thing from your upbringing from your parents?

Armond Davis  03:04

Well, yeah, that's a very interesting question. I come from a family of educators. My great grandfather had a PhD in education. My aunt was a co founder of a University in St. Louis. My grandparents, all their brothers and sisters were all educators in St. Louis public school system. And they literally educated, that was back in time when you had segregation, and they literally educated three generations of black students in St. Louis. And so education was instilled in me, a thirst for knowledge, a love for reading, intellectual curiosity was instilled in me from the very beginning in terms of childhood. As far as entrepreneurship, interesting, we did take a child to work day, my mother worked for IBM for over 40 years. She worked in this giant, tall, black glass leaning building in downtown St. Louis. My father worked for the Department of Natural Resources and he drove out in the woods every day checking air quality, water quality. And when I was seven, eight years old, I wanted to be the guy in the tall glass building with the suit on. And so I knew that I wanted to be a business owner from that age. I didn't necessarily know exactly what business but I knew I wanted to be a business owner from that age. So yes, they were instilled in me from a very early age.

Erik  04:22

Fascinating, it's amazing those early influences, you mentioned business, and I want to ask you a little bit about some of the work you're doing and really focused around black owned businesses too. I want to ask you a little bit about some of your thoughts, and I've heard you talk about mindset and I think you could have some really, really insightful sort of thoughts on that. So can you talk to us a little bit about mindset and what mindset a business owner can have to create a successful business?

Armond Davis  04:53

Absolutely. I'll start with my investment thesis. It's very straightforward. My investment thesis is that when given access to adequate funding, and proper guidance, that minority and female entrepreneurs will outperform every time. That's my thesis, right. So part of that, the guidance part, really what separates what we do at The Paragon group, with a lot of other VC firms, is that our approach is not just about X's and O's, PnL's and balance sheets. We do that, we look at that. And certainly you can't have one that's completely terrible and expect to get funded. But what we really are looking for is a certain profile of a founder in terms of the mindset. And what I mean by that is, we have to be able to see that you either already have, or at least have the potential to quickly develop a mindset of abundance. And that is the antithesis of a lack mindset. And through no fault of our own, a lot of us, we don't come from money. And if you think about it, you remember, you're 10 years old and you got your birthday card, and your grandmother put $10 in the card, what they tell you? "Oh, hey, hold on to that now, go put that away," right? That's what they told you. Every time you got some money when you were a kid, the person that gave it to you told you to hold on to it, put it away, hide it, right? And when you think about it, this is the complete opposite of what the wealthiest people in the world do with their money. It's the complete opposite.

Erik  06:30

Yeah, tell us about that.

Armond Davis  06:30

Well, what that means is that money is a tool, just like a hammer. And if you're going to have a mindset of abundance, then you really have to be a vessel for the money. The money comes through you, it doesn't stop with you. We said we could talk about sports and I'll give you a basketball analogy. You know the guys that call balls stoppers, right. And it's like we got the teams moving, they're passing the ball, passing the ball and then they get it to this guy, and the ball stops and everybody ends up just stopping and staring. You don't want to be that person with money. You want to be the person that keeps the money moving. I always say "I work very hard. I want my money to get up and go to work every day just like I do." And so you have to be a vessel for your abundance, that when the money does come in, you're able to disperse it and deploy it in ways that allow both yourself and your business and your employees, your contractors to be able to grow. And that is an actual mindset. It's not just a process. It's a way of life, a way of thinking. And that mindset is completely different when you've got a half a million dollar business versus when you got $5 million business versus when you have a $50 million business. And so what I'm looking for is people who have a half a million dollar business, who have a mindset that can run a $50 million business.

Kerel  06:31

Expand on that.

Erik  07:52

Fascinating. That makes sense. If there was someone listening, who is trying to figure out how to bring that mindset to the table, what are a couple helpful ways that you've had experience with coaching folks that you mentioned, it's like a mindset, right? You mentioned it's like a lifestyle. What are two or three ways that are helpful for someone to be able to activate that in their life?

Armond Davis  08:15

Well, I would say the first thing is try to get still. Try to get still, some way, someplace where you can kind of slow your mind, slow your heart rate. And understand that just because you're thinking and moving fast does not mean you're thinking and moving effectively. And so the first step is get still, turn inward, really kind of look at where you want to go with things. The second thing is, once you've turned inward - it's almost like a slingshot, right, you pull back and pull inward, and then you move forward with force. So once you recognize where it is that you won't move, then move with purpose, and understand not just what you're doing, but why you're doing it. When you understand why you're doing something, then it's much more difficult to get knocked off your path. And once you've identified what your purpose is, what your reason for being here is, then you can commit to that. And when you move within that purpose, the universe rewards you. I'm a huge believer that you manifest things, you speak things into existence and when you're walking in your purpose, the universe sends rewards to you to say, "Keep walking this direction," right. Now, it will also occasionally put something in your path to say, "Are you sure you're committed to this?" Right? We've all had that, right? Where you're like "Oh man I kind of figured it out and think I'm really going there" and then this opportunity that you thought you wanted, like five years ago pops up. And it's like, "Well is this a distraction? Or is this really, do I need to change directions?" So you have to be able to analyze those things and be able to make those decisions. You have to be able to think at the speed of business, while simultaneously taking the time to contemplate.

Kerel  10:05

Armond, speaking of passion and purpose, why this for you? Why are you so passionate about the business that you're in now? You talked earlier about maybe a misstep that you made with your first business, construction, now you've pivoted to what you're doing now. I can tell as we're talking, this is your passion, this is your purpose, right? Why this? Why are you so passionate about what you're doing now?

Armond Davis  10:28

Well, my purpose is to help people to achieve their fullest potential. I've chosen to focus that work amongst entrepreneurs. It's something that's in my blood. It's something that I care about tremendously. And I think that entrepreneurship is the lifeblood of any community. And this is particularly so, I think in minority communities. And I also believe that minority communities are the nest of innovation in our society. And so when you talk about areas such as FinTech, which is you know, you start talking about deregulated finance, well, we are the people who are most disadvantaged by the current system of finance. So, necessity being the mother of invention, we are going to be the innovators in terms of the new way of doing things, the new way of developing things. You talk about health care, we suffer the most disparities when it comes to our treatment and healthcare. Necessity, again, it's the mother of invention. We are poised to be the innovators in terms of advancement in healthcare technology, when giving proper funding and proper guidance. To me, this is like a no brainer thing. If you look at it and apply it in other arenas, throughout history, this has always been the case.

Kerel  11:56

Yeah, absolutely. And what I find very fascinating about the point in time that we're in now, and the attention that's being paid to black owned companies, minority led companies, there's been a lot of talk over the last couple of years, because of the unfortunate events that have happened, you know, the racial events, the social events that have happened in the US, I think something that's come out of that is more attention being paid to supporting black owned businesses, supporting minority led businesses. And where's the funding coming from and how much money from venture capitals is being put into fuel this and other places as well, too. And I'm curious as you have started this company, and you're out and you're speaking to minority led businesses, and you're coaching them, have you seen sort of a shift in the mindset from the investment side, in minority businesses over the last couple of years? I'm just curious to hear from you. if you feel like the last couple of years have been different than years before and your outlook on investment going into minority led businesses moving forward?

Armond Davis  13:10

The timing of the question, I always believe that you're exactly where you're supposed to be in the moment. So, I would've had a different answer if we'd have been having this conversation three, six months ago. Right? And what has happened with the economy over the past couple of months, with the rising gas prices, with the S&P dropping with crypto going into greater, are we allowed to curse? We're not allowed to curse on this right?

Kerel  13:38

You absolutely are. Go for it.

Armond Davis  13:42

Yeah, okay, so with crypto going to shit, right, with all that stuff happening, what you have seen particularly from the investment pools that have the most capital is a reversion to the norm. So the past couple of years, sure, they were great in terms of businesses and investment firms, institutional investors making efforts and concerted efforts to invest in minority owned businesses, a lot of that you have to attribute directly to the George Floyd situation, and how poorly that was handled, right? But I have seen and I don't think that many of my other investment colleagues would disagree, that there was a fatigue that was happening around that. And it became kind of like, "Okay, well, we put $20 million aside in 2021 and so there's a reparations. You know, we've done our job." And it's a lot harder today to walk into a building of an institutional investment firm of a Fortune 100 company and say, "You should give me $10 million to invest in black owned businesses just because we've been disadvantaged and you haven't treated us fairly for the past 60 years that you've been in business." That argument is starting to fall on deaf ears. And so part of the reason why I developed the thesis that I did is because if you really want to have long lasting, sustainable change, you gonna have to make a strong business case. Yes, there's always a social case and an emotional case for investing in black owned businesses, right. But if you're going to get sustained dollars, you have to make a business case. A business case is that "You give me $10 million and I put it in black and women owned businesses, and that those founders will outperform. So effectively, if you aren't doing that, then you're underperforming relative to your peers who aren't, as an asset manager." And so that's what gets people to sit up. That's what gets people's attention because they're gonna get paid based on how they perform in relation to their peers. And if their peers are investing in black owned businesses, and seeing outsized returns, they must follow suit. And so I think that you're correct, and that there was a shift back in 2020, but I think that the system in itself is designed to be resistant to long term change.

Kerel  16:20

Gotcha.

Erik  16:21

Armond, I want to ask you, you mentioned about peers and you've talked about sort of minority led sort of businesses and business owners, the importance of community and mentorship there, can you talk a little bit about community and mentorship and why that's important for black business owners and minority led business owners? That's great. I want to ask you about some of those experiences you had where somebody, like you said, sat you down or just took a little bit of time just to work with you and sort of pass those things on, right? I'm curious about your experience, you know, as an asset manager or being in the finance world where, quite honestly, not a lot of people look like us. I'm curious about your experiences, both positive and negative there. I have to imagine at some point, you just had a different experience from other people there. Can you talk about what that's like, just for a moment, to be in environments where you can feel being different?

Armond Davis  16:40

Well, I think particularly when you start talking about venture capital, private equity, it's an industry that was designed to keep us out. It was actually designed so that wealthy people and their families could make investment deals outside of general regulation. That was what private equity was created to be able to do. It has become, especially over the past decade, the single largest driver of wealth. Most of the universities that have huge and massive endowments, their endowment grows significantly through investment in private equity and art. But the reason for that is because if you look across all the businesses you just think about in your head, maybe the first two or three businesses that popped in your mind. At one point, they were all funded by venture capital and private equity. Those investors made the greatest return. You make most of your money as an investor before the company ever even goes public. But we, as African Americans, as other minority groups, we typically don't start to invest until after a company has gone public. And so we are already limited in terms of the growth potential there. And so I think that when you start talking to founders about mentorship, this is something that we don't have. I don't have an uncle at the country club who started a business 30 years ago, sold it for $200 million and now he's gonna give me $10 million to start my own. And so it makes the place, the role of the mentor, the role of the investor, even more significant in terms of really helping the minority founders on a pathway to grow. And so it's integral, in fact, it's so integral that I require any founder that I invest in, to in turn mentor another founder, in either the geographic area or in their industry. Like if you don't, I'm gonna pull your funding,. It's that serious, it's that important. And what we hope to do in doing this is to create what I call an ecosystem of exchange, right, where we're helping founders to grow their business and then we hope to have at some point, a liquidity event that creates generational wealth for that founder. But through the course of that process, that founder has been mentoring other entrepreneurs that have been coming up behind them. So now not only have we created this wealthy bed for that founder, but now they can then go and invest in the founders that have been coming up behind. And we can also be introduced to and invest in the founders that are coming up behind. And we continue to repeat that process. And what we hope is that over the next few years, what we'll be developing is an entire ecosystem across a wide variety of industries of founders, that one, all will have a mindset of abundance and of similar mindsets. You may not have the same product or service, but you have the same mindset, the same approach to it and you're passing it down, you're passing information down. I didn't get to where I was without some people taking me to the side, taking the time to pour into me and invest in me. And so I require that for anybody that I'm going to be invested in. Well, I think that going into this, I have to give credit to my alma mater Florida A&M University, because the cradle that it provided for being in terms of building confidence and learning who you are, being around people who look like you, who are just as smart as you, but come from different places all over the country of different backgrounds. It established in me a resilience that allowed me then to go out into an overwhelmingly white industry, and absolutely get hand slapped, put down, overlooked, denigrated. I'll give you a small story. I had a managing director at a firm that I worked for, early in my career, take me to lunch one day, and tell me directly to my face, that my education was inferior. Told me that "You'll never be able to compete to work on the level of the Harvard MBA, of an Emory MBA, you're just not on their level in terms of the education that you have. And so you can only work here at the analyst level."

Erik  21:51

How did that make you feel?

Kerel  21:53

Yeah, I was gonna ask, how did that make you feel, because I've got a very, very similar story early on in my career, when I was actually looking for my first job. And I was interviewing at a large financial institution right out of college and was basically told "Go back to school, go to business school, your degree will not measure up to the Ivy League candidates that I'm interviewing." And so I know how that made me feel, so I would love to understand, both Erik and I want to understand from you, how did that make you feel?

Armond Davis  22:27

The truth is, one, I was young enough and so I probably don't think in the moment that I recognized it for it being as racist of a comment as it was. I knew that it stunk, right, because I worked very hard, and Florida A&M, we're very proud of our business school. I'm very proud of the students that it turns out, and we've got a great history. I mean, John Thompson, is an alum of Florida A&M and he's a former chairman of Microsoft. And so we got great, illustrious alums and so it stung. But for me, it also was fuel. It also made me more determined. So I'm a [inaudible], for whatever reason, chosen to do things in a more difficult manner. It's like I didn't go and move out to Silicon Valley and work in VC firms for a decade plus, 15 years, and then decide I was going to start out. No, I actually went, bought a business, ran a business, learn a bunch of hard lessons, was on the verge of bankruptcy in 2009, 2010, pulled myself up. I was sitting outside the Bankruptcy Attorneys Office with all my paperwork filled out and just couldn't get out of my truck to go in the office and hand them the paperwork, went back home, bowed to figure it out and I did so. Turned that business around, survived the recession, grew the business, and then realized along that journey, and along with owning some other businesses, that all of this was in preparation for me to return to the investment field from this perspective. I always thought that if I returned back to investments it would be more kind of a trading hedge fund capacity. Didn't realize the universe was preparing me for 15 plus years as an operator to work in venture capital, to work as a private equity manager because I'm able to view things from the perspective of an investor but with the empathy of an operator.

Kerel  24:32

Love that. Love that, as you said, investor, empathy of an operator. And I feel like that is so important when you're running a business whether you know it's five people or 10 people or 1000 people or plus, right? Like, that's a great way for businesses to operate efficiently and effectively when leadership and others there have empathy for other roles within an organization as well, too. That's what I thought of when you said that 'investor, empathy of an operator."

Armond Davis  25:05

Absolutely. Empathy is a superpower. It really is. There's a tremendous shortage of it in modern society. I think it's a necessary quality to be successful, particularly at venture capital. I think it's absolutely necessary to be able to have empathy for what this founder is going through, for what they've put into this business. You can't really start in terms of developing that mindset that we talked about earlier, if you don't have the empathy, to really be able to look at things and view the world, through their lens and understand how they got to where they are, and the things that they have the fears that they bring to the table that they have to overcome. You can't just be like "Well you just gotta get over that shit."

Kerel  25:51

There is so much of that and I agree. And I think a large portion of that is because people have never walked in the shoes of an entrepreneur, a founder, or whatever it may be. And I think, like, you have done that so you understand that perspective. But I think it is super important as well to, yeah, I agree with you in terms of there needs to be more empathy, specifically in the business world, as you stated. Where do you draw inspiration from? I mean, again, this has been a great conversation and like I said earlier, you are super passionate about what you're doing and you're very driven. And I'm always curious to understand from folks like you, like, where does that inspiration come from? Where does that drive come from?

Armond Davis  26:41

Well, I think that, in that sense, we almost have to be like cactus. The cactus plant, right? Where, the cactus plant can drop moisture from the smallest thing and use it without having and receiving significant amounts of moisture and use the little bit that it gets to be able to thrive. So I can draw inspiration from anything. I watch, a lot of people will say this is the antithesis of an overachiever, I watch a ton of television. I watch a ton of shows. At any given time I'm DVRing and watching 20 to 30 shows on TV. And I watched them while I work, right. And so I can gain inspiration from anything from the last episode of Queen Sugar to the lady walking the dog down the street, I can pull inspiration from anything. You have to develop that as a skill set, you have to develop the ability to pull inspiration. I pulled inspiration from the guy who told me that my education was inferior. And so as an entrepreneur, you have to be able to find inspiration in dark places because it's not all sunshine and rainbows. And so you have to be able to be in those places, not lose yourself, not lose sight of who you are, keep your mind on your goal and remember why you're here.

Kerel  28:04

Gotcha. Gotta ask what's your favorite TV show right now? What do you watch?

Armond Davis  28:09

I've just finished the Yellowstone - streaming that. And so Yellowstone is very interesting, because I love the storytelling from a, you know, western, Great Western perspective. But at the end of the day, the story is really about a white family, who for five generations has amassed 50,000 acres of land. They said the ranch is actually the size of the state of Rhode Island. And is effectively killing anybody who tries to develop the land, or take the land from them when we understand that it was not originally that families land. So there does have to be some detachment there in order to watch the story and still be entertained. But I think it's a well written story. I'm really looking forward to The Chi coming back. I believe it comes back this Sunday. And I'm really looking forward to that. I think Lena does a fantastic job in the storytelling in there of lower middle class families in the Southside of Chicago. I gained tremendous inspiration from that show. I was a big Game of Thrones person until the last few episodes of that show, as well. But I love all kinds of 30 minute shows comedies, dramas, sci fi, historic fantasy, Harry Potter.

Kerel  29:28

(laughs) Love it. Love it. What's next for the business? What are you looking forward to?

Armond Davis  29:32

Well, what I'm looking forward to is rolling up my sleeves and getting to work with founders, more founders. I'm very founder driven. And making these investment decisions is just the beginning. I'm not that guy who's gonna write that check and say "Wall me every three months with your quarterly update and three years, five years, I spent 10x return please." And so I'm really rolling my sleeves up, getting involved, learning a lot, a tremendous amount, because I'm agnostic, actually, in terms of the industry. So I invest in businesses and healthcare, invest in FinTech, invest in CPG. It's really, like I said, looking at a founder, and the mindset, the approach of the founder. And then from there if fundamentals of the business are solid and work well, we see that there's potential to grow and scale, then we're on board. And so that's what I'm really looking forward to. Yes, I'm still on that hamster wheel of continuing to also raise capital on the institutional side, but I'm a huge believer in focusing on being the best at what you do. What I do is help people to realize their maximum potential. If I continue to work with founders and do that, money will come.

Kerel  30:47

Gotcha. Yeah. Love it. Love it. All right, fun question I love asking every guest that we have on the podcast, which is to give us the top three apps that you use on your phone, but you can't name email or calendar or text messaging. Those are boring.

Armond Davis  31:03

Ahh so no WhatsApp?

Kerel  31:06

Erik, can we let that one slide?

Erik  31:08

We can, I think. (laughs)

Armond Davis  31:11

The thing about WhatsApp that's cool is that it has effectively flattened the earth. And then you can have a text conversation just as easily and readily with somebody in Europe and Asia and Africa, as you can with your neighbor. And so that I appreciate it and I do that a lot. Other than I probably will say The Athletic is probably one. Their insight on sports is my kind of sports insight. It's looking at it from the perspective of the business, how the business works, also, from a cultural impact perspective, as well. So I spend a lot of time, most of my sports reading and absorption comes from The Athletic. I would say, after that, I do read, I'm a voyeur on Twitter, especially VC Twitter. VC Twitter is a fascinating kind of culture. VCs tend to do Twitter more than Instagram. So I'm a voyeur on there but I'm not an extremely active participant. And then other than that it's like Marriott and Delta because I'm traveling so much. Constantly looking at my points...

Erik  32:22

Watching the meters go up?

Armond Davis  32:25

Yeah, I hit ambassador with Marriott. We hit that last year and joined them. And I'm hoping to hit Platinum with Delta later this summer. I don't, I mean, Diamond on Delta is just ridiculous. It's almost impossible.

Erik  32:42

Well, Armond, it's been great hanging out with you and thanks for sharing so much. Our audience loves to stay in touch. What are some ways that our listeners can stay in touch with you or follow?

Armond Davis  32:52

Twitter like I said, if people reach out, I will reply. It's @ArmondDavis at Twitter. Instagram is @IAmArmond. And you guys could email me too, which is easy because I'm old and email is just fine. And it's just armond@paragoninvestmentfund.com.

Erik  33:11

Excellent. Thanks for spending some time with us and sharing your story and sharing everything you're up to. Everyone, thanks again for listening to another episode. You can find more episodes where you find all of your audio and video, just search Minority Report podcast and look for the logo. Thanks everyone.

Armond Davis  33:26

Thanks you guys for having me. Really enjoyed it.

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