Season 4, #5- Be Curiously Different
What happens when you're tasked with reinventing an economy—and later find yourself building investment systems in countries where the rulebook doesn't exist? That's the story of Thomas Nastas, this month's guest on the Founder's Sandbox. His journey from Michigan's automotive belt to the front lines of the former USSR is a masterclass in resilience, creativity, and leadership under pressure. In this episode, host Brenda McCabe interviews Thomas Nastas, a seasoned board director with over 30 years of experience in international markets. They discuss Thomas's journey from Michigan to various emerging markets, his innovative approaches, and the differences in governance roles between the U.S. and international markets. They also touch on the importance of scaling businesses through customer revenue, the concept of resilience in entrepreneurship, and the significance of purpose-driven enterprises. Transcript: 00:04 Welcome back to the Founder's Sandbox. I am Brenda McCabe, the host of this monthly podcast where we are now in our fourth season. And the podcast is really oriented towards 00:33 growth scale companies, board directors, and VCs that work in the typically the scaling um of companies and the ecosystem. And I am absolutely delighted to bring a guest in this to this month, these podcasts, Thomas Nastas, who has been serving in international boards of directors and US boards of directors. 01:02 for over 30 years. um His international background is quite um pioneering. And we're going to get into the material here, but we're going to learn about his experience out in Russia and Katastrofgan, um Africa. And Thomas and I met through um board prospects. We are both um 01:30 quite unusual candidates for boards of directors in the uh common way of recruiting board directors in the United States, prior CEOs. We do have an extensive background in international governance. And when I got to speak with Thomas um over the last couple of months and learning how he brought the board governance oh practices 01:59 from the United States to Emerging Marcus just fascinated me and I ask him to be a guest here. So Thomas, I want to thank you for joining me today in the Founder's Sandbox. Well, thank you. Appreciate the invitation. So um I briefly touched on you are uh a board director with uh lots of international experience. um 02:29 You also have a lot of em experience at emerging markets. um So Russia, Kazakhstan, Africa, and think it's East Africa, and some South American markets. um You've served on over, I want to say, is it 50? As companies, right? And em for my listeners, independent board directors is a term that we use here in the United States. 02:56 whereas in other markets, they're called non-executive directors. So, NED. So, Thomas has been in an NED role in over 50 companies. And we're gonna get into how that's kind of different em to what you have traditionally here in the United States. You are a midwesterner, just like me. My family. You're from Michigan, um big automobile industry. em 03:25 beachhead here in the United States. I'm from Ohio, so we've heard a lot of us, I think some of the experiences of being uh born and raised and educated in the Midwest, uh bringing in uh that Midwestern spirit, as I say, kindred spirits from the Midwest. And finally, um the em other area that Thomas is particularly experienced in, um and we share this 03:55 as well as you work in SMEs, small and medium-sized enterprises, but in the international markets, which is, again, it's fascinating. So we have a lot to unpack and unpeel today in today's podcast. So Thomas, could you just talk about your origin story? mean, what, you were really young, you were in Michigan. What made you pack up and actually go off to Russia? 04:24 Give us a little bit of your origin story. Well, I didn't go directly from Michigan to Russia. uh From Michigan to Canada, to Europe, to Africa, and then to Russia, and then to Kazakhstan. oh So it little bit, it was kind of like baby steps. A little bit of background on how I ever got involved in this is I'm a mechanical engineer. oh 04:52 by training, you know, I got an MBA and worked in, you know, Ford Motor Company and automotive suppliers. And, um, and then many decades ago, um, we had a new governor in Michigan and, um, he, like all other governors, even, even still now today said that, you know, the Michigan economy is dominated by the auto industry, you know, and 05:21 And it goes up and down and up and down and up and down. And we need to diversify the economy. Right? Right. So this governor, name was Bob Blanchard. He put together a program uh in the sort of the mid eighties on how to go about diversifying the Michigan economy. And he put together a bunch of blue ribbon boards of CEOs of, you know, Ford and GM and 05:51 Chrysler and you know, the major automotive suppliers and energy suppliers and utility companies, et cetera, et cetera. And I was part of a lesser like, um, I guess sort of like a sort of like foot soldiers of looking at what are the problems of companies of developing their second generation products. they're all established companies. Okay. They want to establish, they want to, you know, they want to create their 06:20 sort of like their second major, second generation product. And we started to look at it, what are the problems that these companies experience? And many of them were serving the auto industry and the auto industry historically has grown like two or 3 % per year. So if you're a traditional automotive supplier in that particular marketplace, that's what your growth is limited to. And if that's what your growth is, 06:49 It's difficult to raise outside capital. Got it. So we started looking at what are the problems of companies financing this particular area. And we, myself and I know there's probably half a dozen dozen other folks who were part of this, um, this sort of foot soldiers committee. We looked at the marketplace. We took sort of a market approach rather than a technical or engineering approach. What is, what's, what is. 07:18 What specifically is issue? And what we learned, and I'll sort of fast forward, is that there are a lot of medium growth companies at this time in Michigan, but also throughout the United States, that will never be big enough, fast enough ever to go public. Got it. And at that time, the epicenter of venture capital was in Route 128, which is in the Boston area, and Silicon Valley was developing, but it was small compared to what was going on in Boston. 07:48 So if you had that kind of a growth rate, you couldn't raise any capital, all right? Number one. Number two is there's a lot of family-held businesses that might be fast growth, but they don't want any outside. They don't want any non-family members involved in the business. And third is there's what we call sort of technology-rich companies that have a lot of IP. 08:17 So they're IP rich, but they're asset poor. So those companies in turn had difficulty of raising either equity capital because again, in the Midwest there was one venture fund in Michigan at that particular time. And it'd be difficult to be able to access debt financing because again, you don't have assets that you can collateralize. So we looked at saying, how could we solve these three particular problems? 08:47 Um, and we sort of stumbled upon the use and application of royalty based structures. Okay. Actually finance these companies because royalty based structures, which have been used for decades in the creative industries, being music, movies, uh, the book business, and to a large extent also in a pharmaceutical industry. um 09:15 Was potentially a solution because you could put money into a company. You're not, you don't have an equity position in a company. 09:24 If there, you've got a higher rate of return than debt. So you can get sort of equity like returns and you're generating cash flow, you're generating returns that you can distribute back to your investors pretty quick. eh So my, so another friend, another guy who was on this committee, we said we ought to create a fund to do this. And we created a royalty based fund, um, to, um 09:51 To do this, we raised $2 million in the state of Michigan, raised $2 million. At that time, there was no word of angel investing. was just rich, rich guys. Okay. And we started making investments in, family held businesses and companies that had raised some venture capital. Uh, but they wanted to embark on developing their second generation products. That was your thesis then, right? Yeah. 10:21 And also companies, again, that were sort of tied to the auto industry. So we started making investments and in some cases we were investing in a specific product. Yeah. Some cases, a line of products. In some cases, you know, we had royalties on the company's entire, you know, revenue. So it was just depend on situation, on situational. And we did this for a couple of years and we were making investments anywhere between a hundred K and up to 700 K, which was big. 10:50 for a $4 million fund. Yeah, yeah, quite big. And it was interesting that sometimes when you make investments, you sort of hit the bullseye. And what I mean by that is a couple of the companies that we invested in sort of hit the bullseye on their products and they started to grow exponentially. 11:19 And they said, Hey, look, we're sending you guys, you know, quite a bit of cash. We'd like to reinvest this cash back into the business. So we would like to do is we would like to buy out your role of the claim. And one point I want to make is when we were doing these transactions, we were investing in perpetuity. was no, you know, like you get too money back or turn it was in, it was in perpetuity because we wanted it to look like. 11:49 in some ways, equity, which is not limiting the upside. And if you, you know, if you say two times or three times, you're limiting, you're limiting your upside and you know, could have a whole mess of failures and you you accomplish not very much anyway. So we said, yeah, you guys could buy us out, but we don't cash. We want to sell you our royalty claim for equity. They went, oh, well, that's kind of interesting. 12:18 Or in these states, like kind of a warrant? Sorry? Like a warrant? Well, not really a Because again, none of this was pre-planned. was spontaneous. Serendipity. So, you know, we looked at potentially, you know, there's a number of different inputs into figuring out how much equity we were going to basically buy for a royalty claim. it went, again, different companies. It was different amounts. And so. 12:48 We were then on the cap table as an equity investor. And some of these investments either went public on NASDAQ or they were acquired by a much bigger entity. So we sort of learned that, ah, gee, know, this is not only a way to finance underserved and underfinance entrepreneurs that 13:17 the venture capital model can't serve, which it still doesn't do even now. Okay. uh It's also a way to sort of manage the risk return relationship because when you make an investment, you never know what's going to happen. So it was a way to sort of manage that risk return relationship. I start writing articles on this particular financing technique saying, here's a way to finance niches that the venture capital industry um 13:48 can't serve. wrote an article for the Canadian Venture Capital Journal, which at that time was part of a guy by the name of Stan Pratt, who had a company called Venture Economics in Boston. They published, you know, the U.S. Venture Capital Journal, the Canadian, the European, the Asian, the Latin American. I wrote it for the Canadian Venture Capital Journal. And then I got a call from the Devolk Bank of Canada. 14:17 which is based in Montreal. And, um, this is getting sort of how things go. And again, I'm coming from outside the industry. Okay. I'm going outside the venture capital industry. never had any, you know, I was not a finance major. You know, I was mechanical engineering at an MBA in marketing. So I was not a finance guy. You know, never had a finance background, never had a finance. 14:45 You know, upbringing never worked in finance and operations. And so the guys at the Devol and Baker of Jamaica and Devol and Baker of Canada said, Hey, look, you know, this sort of this niche that you're financing, um, we've got this niche too in Canada. And we have got probably even a bigger problem than you do in the States because the Canadian public markets. 15:13 are less efficient than they are in the United States. Meaning, if a company wants to go public, it's got to be bigger in terms of revenues and profits than in the States. And we think this might be a way to help bridge companies so they could get bigger faster. And the bank was actually called the Federal Business Development Bank of Canada. Now it's called just the Business Development Bank of Canada. 15:39 And they were doing venture capital, they were doing asset-based lending, were doing cashflow lending, they were doing leasing, they were doing every single vertical within sort of the finance chain, but they weren't doing this. So I went at the Montreal and I talked to them, the CEO and the people on the board of directors and operations people and blah, blah, blah. And it was interesting. this is part of what one question which you asked about resilience is that 16:08 They said to me, you know, this is quite interesting, but you know, you're from Michigan, you know, you're, you know, I mean, we're in Montreal. Okay. I mean, this was a big international city and you're from Detroit. Okay. And you're sort of like a little cowboy. Yeah, you're an outsider. And I said, well, yeah, I said, well, you know, maybe that's true. Maybe it isn't true. And I said, you know, how about if we just create a fund? And they said, well, no, we don't think so. And blah, blah, blah. 16:36 And I said, well, I tell you what, how about we do this? I said, how about we put together, I put together a, say a three or four day training program for your investment officers. Because typically an investment officer, he's he or she sees sort of a business plan, you know, where the growth is like, like this and not like this, they take it and they throw it in the trash can. Okay. 17:04 And they recognize that they said, yeah, our guys, they're women. just take it. throw in a trash can. So I said, how about put together a training program over, you know, like a three day period or five day period and go through, you know, how you go about doing diligence. Cause the due diligence is different. I organize structure, the investment, you know, how you, um, establish at least some measures of covenants and protection, et cetera, et cetera. 17:33 And they said, okay. So, you know, like six months later, I went up to Montreal, put together this three day program, stayed in Montreal. And after this, said, well, gee, we think you got half of a brain. And they said, yeah, we'd like to create a fund. do it. We created a hundred million dollar Canadian dollar, which at that time was 80 million bucks. Okay. Fun to do this. Okay. 18:02 And it was focused on mainly just, you know, sort of like factory automation, logistics companies and transportation companies. And again, this is sort of before. So, mean, there was, you know, computer software, there's computer peripherals, there was machine vision, but there wasn't really very much, you know, what we call sort of hard tech or deep tech that exists now. Okay. Right. And I see it in series A. 18:27 and be financing, right? Yeah, we would call that a little bit. actually didn't call it at that particular time. So I had an office in Detroit and I created, you know, three offices, one in Montreal, one in Toronto and one in Vancouver. And I'll fast forward and the guys in the Canadian venture capital journal said to their editors in the UK and then also to the ones in Asia and in Europe. 18:56 And they published it and the editor at the UK venture capital journal said, Hey, I think, know, this thing would really resonate because at that time in Europe, the financing structure was mainly management buyouts and management buy ins. There was a little bit of venture capital, but not very much. Okay. Yeah. And this is like in the eighties, the early eighties. This is in the eighties and nineties. Correct. So, um, you know, and I finance out of my own pocket. 19:26 You know, didn't know anybody in Europe or UK. went over there at my own pocket, talked to people, met a lot of variety of people and fast forward, created two funds in Europe. One, where the lead investor was a European commission, which is quite unusual for being an American fund manager. And two, with a French group called Financer Saint Dominique, which at that time was part of Canada Nationale. And now they, they were bought out. They are now part of what's called a bank called Bank Nexus. 19:55 And we created two funds, one for all one patent European fund, which at that time was just West Europe is for, you know, central and East Europe. And also one for France and Germany. And so I set up offices that are going to have teams of people that worked for me in Detroit, Montreal, Toronto, Vancouver, Paris, Luxembourg. And I lived in those two cities and, and, and it was good kick. And I kept on writing more more articles about this financing technique. 20:23 And I started to tailor them a little bit to the emerging world. Um, and, um, the folks at IFC, which is the international finance corporation, which is the investment arm of the world bank. Right about it. It contacted me. said, Hey, look, we think some of these things might work in Africa. And I said, well, you know, why do you think that? I said, well, you're right. That is as good for countries where. 20:51 They have the capital markets are less efficient than in the States. In Africa that time, there ain't no capital markets. So ultimately we created three funds in Africa, a $285 million fund for all sub-Saturn Africa. Uh, and then sort of move more in sort of traditional venture financing of fund to funds in East Africa, Uganda, Kenya, Tanzania. 21:18 And then a $30 million private equity fund uh in, South Africa. So I created offices, you know, hired people, trained people, learn to make investments in, you know, these African countries and offices in Nairobi, Kampala, which is a capital of Uganda, Cape Town and in, uh, Johannesburg and, uh, the South Africa, they're all interesting. South African was quite interesting because during the days of apartheid. 21:47 South African companies were basically shut off from the world markets. We couldn't invest their cashflow into, know, external to basically Africa. Okay. So they were buying companies like a beer company, SAB would buy up or create a line of pizza restaurants, for example, or, you know, you know, different kinds of restaurants or logistics companies or transportation companies or dry cleaners or other beverage companies, et cetera, et cetera. 22:16 Because they had this cash and they wanted to reinvest it. had to deploy. And then when apartheid ended and they could now start to export capital, they wanted to spin off all these sort of like these tangential businesses. So we created a fund, a $30 million fund in South Africa to buy these assets, number one. And two is I raised a $5 million TA fund from the World Bank to help 22:46 develop and groom sort of black middle managers so they could learn to run the business as a CEO or a CFO or a CMO or head of production, whatever, blah, blah, blah. And we sent them, you know, like the executive education programs, like for example, at NCAD or, you know, Stanford or at Wharton or at Harvard, et cetera, et cetera. And we put them through again, a training program. 23:15 And, you know, they did some internship at like PWC and KPMG and Ernst & Young and the accounting firms and also consulting firms like Bain, Valen, et cetera, et cetera. And that was really quite cool. then a lot of people don't know this, but after the Berlin Wall, you know, basically went down. And the 23:41 And the, know, the central European and later on Eastern European countries, um, you know, dissolved and then Yeltsin signed a decree in 92 or 91 to, to basically dissolve the, you know, the Soviet, you know, the Soviet Republic. The U S government passed what was called the enterprise CEDAC enterprise. Yeah. That enabled the U S government to set up funds in. 24:09 Central and East Europe. First one was the Polish American Enterprise Fund, $80 million right off the balance sheet of the US Treasury. Yes. Created the Slovak American Enterprise Fund. That was a $30 million fund. Then the Hungarian fund. that was, think, if I remember, was 50 or 60 million, the Romanian Enterprise Fund, Bulgaria, Albania, the Baltics. And that was about a $30 million fund. 24:38 And then when the Soviet Republics all went public, the U S government created the, you know, U S. Ukrainian fund. was a 80 million in fund. I remember that two falls in Russia and then one for central Asia. And they had a fund in the lower Volga region, which is the Volga grads, some are Saratov regions and Volga grad. It's sort of. 25:06 you know, claim to fame is that we used to call it Stalingrad where the Russians pushed back to Germans in World War II. And they had a fund oh in that particular region that was experiencing quite a bit of struggles. And they asked me if I could go and manage it. said, hey man, look, got offices. I got four offices in Africa, two in Europe, three in Canada, one in Michigan. 25:35 I'm pretty busy right now and I'm managing these teams and we had a staff of about 70, people. You had a 75 person organization and 18 international offices and managing funds up to like $500 million in managed assets. anyway, the long story is they kept on asking me to go and ultimately 26:01 I was able to find sort of like a two month window to go to Volgograd, Russia. Yes. And I've stayed in Russia for 15 years. And so they created several other funds in Russia. And I lived in Volgograd, Vladivostok, which is on the sea of Japan. And that's where met my wife. My wife is Russian and met her. 26:29 Uh, in the, early two thousands, but then lived in, Moscow and had offices, you know, like, you know, several multiple offices in Russia. And then my last fund was a $75 million deep tech fund in Kazakhstan and offices and in both Almaty and Astana. And so that's how I got involved in, in emerging markets. it wasn't planned. Can I just stop here for my listeners and put you on hold because what 26:58 What originated out of um your being a foot soldier, right? Foot soldier. As an engineer, mechanical engineer, oh MBA, um helping the governor at that time of Michigan diversify the ebbs and flows of the local economy to grow beyond the 3 % growth that the automotive industry was really capped at. And looking at 27:27 underserved and underfinanced companies that either were SMEs um that had a medium growth, oh technology rich, but asset poor, summarizing, right? Some family held SMEs too, that did kind of rejected having outsiders involved, right? And those that were domiciled in countries with capital markets that are less efficient. So 27:56 Your secret sauce was then to really start creating an alternative financing product, so royalty-based. And with that started writing articles on how to get finance for these SMEs. uh Canada uh asked you to create a similar type fund and from there, the collusion went off to many. 28:25 emerging markets. It's a fascinating story. Would you call it today, soft politics? Oh, define for me soft politics. Soft politics is the working with foreign countries with US money and US know-how because our markets are much more, right, liquid. Bringing that know-how to help other countries rise, right? 28:55 That's what I call soft politics. All the lead investors and all my funds were either a government, government agency, the US federal government or USAID. Because some of the money came from the Russia funds and the African funds. Some of the money came from both the balance sheet of the US government, US treasury, and also USAID. And also like government industries. 29:23 Or what we call DFI, Development for Institution, like IFC, like the World Bank, like European Bank for Reconstruction and Development. um You're correct. Now, one question that your viewers, your viewers listen may say is, well, gee, if you're doing all this stuff in Michigan and the United States, how come you didn't raise a fund in Michigan? Let's get into, um I think I asked you to what would be your tagline? And you said, be curiously different. 29:53 You've so, so you're, you're in rat, you're in a lot of stock and, and Volga. What brought you back to the United States? That's. Well, you're curiously different and there was something that brought you back here to create or you already had innovation, innovative ventures, Inc. Did you say? Yeah, I created a company back in like 1982. Yeah. Yeah. 30:20 And what brought me back is, again, you know, I've used this tagline is be curiously different because, uh, and I'll explain that in moments. in 2013, May of 2013, my wife, again, my wife is Russian. We're living in, in Moscow, which is, which was a cool place. And, um, the politics started to change. can start to feel politics was changing. 30:49 Politics was starting to get more heavily involved in the economy and even in small and medium sized enterprise where before that it was critically involved as one would expect in oil and gas and mining and minerals or real estate. And of course, you know, other sectors like the defense industry, et cetera, et cetera. But you can start to feel some, some fingers sort of going in. 31:19 to the small and medium sized sort of sector. And so the politics was changing. I didn't really need to be in Russia full time anymore. And plus my wife and I wanted to get basically her on the immigration path. So we moved to Michigan in May of 2013 to start that process, okay? And, um 31:49 I didn't know anybody in Michigan. I do really, I do. I really knew speed keep. knew my two brothers. Okay. And one, one guy that I met in about 2010 who worked for the venture creation unit at in tech transfer at the university of Michigan. And when I moved, when we moved in 2013 to Michigan, I'm originally from Michigan. Um, 32:19 And my last fund finished up in 2015. This was kind of interesting what the dog's insight was. He said, well, now that you're back in Michigan, know, what are you going to do? I said, well, our fund is finished up at 2015 and you know, I'm now flying to Kazakhstan, you know, four or five times a year for, you know, like a month or so, blah, blah. He said, well, look, and he moved from the University of Michigan to Michigan State in tech transfer, although he wasn't doing venture creation, he was managing. 32:48 grant program, um, in the agricultural space. And he said, look, Michigan state has just created an organization called Spartan innovations. That's the create startups for universe technology. said, um, I they're looking for people like you. think you ought to apply. And I said, well, wait a minute, know, tech trial, you know, I don't know about that. He said, look, Tom, you know, you're an entrepreneur. Although people, to your business, people. 33:18 People don't think of venture capitalists as entrepreneurs, but I was an entrepreneur, number one. He said, you you've scaled the organization from two people in Detroit, Michigan, to like 18 global offices, hundred people. You you navigated for racks and all these legal regimes and different economic regimes and cultural, and you train these different cultures and venture capital and blah, blah, blah. 33:47 You're making both, you know, sort of non-tech investments, but technology investments. I think you'd be great. I said, Oh, I never really thought about that. He had to said that. I don't know what would happen. So, um, he was quite instrumental. His name is uh Andrew McCallum. He's a very good friend of mine. Okay. He's the Ann Arbor area. And, um, so he introduced me to the guy who was running, you know, Sparkly innovations. 34:16 And lo and behold, they hired me and it is a part-time gig. It's like halftime is what it is, like 20 hours a week. So I could manage it in addition to the funded Kazakhstan. So I started doing that and for a little over almost six years did it at both Michigan State and Western Michigan and created four different companies, at Michigan State and two at Western Michigan. 34:46 in 3D printing, in materials, in orthopedics and in healthcare. it was a cool gig. Background, then I got involved in other activities of raising a $6 million fund with the managing director of Hard Tech Deep Tech Accelerator called Citroen at Lawrence Tech University, which is in Selfield, Michigan. Dan and I raised a $6 million seed fund. 35:16 that he's making royalty based investments in. And, original product. Yeah. And then I've done, you know, there's, there's a sort of like a five, one C three company called spark, which is in Ann Arbor, Michigan, whose focus is to drive forward more innovation investment and entrepreneurship, uh, in sort of the Ann Arbor and Southeast Michigan area. 35:45 And I'm an advisor, you know, to startups and helping them start up and scale up their business. then interestingly, in, in certainly January, February of 2024 through some contacts in Europe that I have, I was appointed as a transaction advisor to the European Innovation Council. A little bit of background. So the EU created 36:12 you know, long time ago in Europe, which is a hundred billion euro uh program to fund R &D and universities, institutes, know, small companies, big companies, you know, collaborative arrangements, et cetera, et cetera. And they created a number of years ago. remember like, but not that many years ago, the innovation, the European innovation. Kind of like our SBIR program here in the States. Well, different. Exactly. That's where we're going to go to the difference. 36:41 That's very, very different. And I'll show you what makes it so different. it sounds glamorous. I'm just evaluating deals. I'm doing due diligence. So it's not glamorous. But it's a way to make a contribution and also way to be able to understand what's happening in the tech sector in Europe. 37:07 And I was evaluating transactions of what we call the C3 space, clean tech, climate tech and... The C3 space, the clean tech, circular space and climate tech. And what makes it interesting is companies, these are startups, some are stores, they've got a legal entity, but they're still housed in an institute or university, but they're going to spin out into the private sector, in the commercial sector. Or they're scale-ups, the companies that have already got revenue. 37:36 But a company could get up to 2.5 million euro in grants, 15 million euro in equity. And here's what makes it so interesting that nobody else is doing it. They can make this money simultaneous. So they can use the grant money to advance themselves, say from TRL, technology, or essay level, from say three to six, which is basically development, prototyping, et cetera, et cetera. 38:04 simultaneously get money for TRL seven through nine, which is commercialization. My opinion is that this is a solution to financing the value of the death, which nobody is willing to figure it out. Royalty based financing does some of it, but this is the finance technique, which is really quite interesting. And nobody in the States that I know of does this. SBIR doesn't do this. 38:31 And the stuff doesn't. You have the phase ones and the phase B's that phase twos, but it's it's not, it's all non dilutive. There's nothing. It's all grand. There's eight governments that do this. None of the DFI's do this that I know. I don't think that there's an untold story that needs to be told on this. I love it. Yeah. We switch gears and go to the governance roles. you have a right. Because we talked about. 39:01 your entrepreneurial journey, m alternative uh financial uh financing for SMEs that had three characteristics. And then you oftentimes served on the board of directors or as a non-executive director. what would be the major differences between an independent director position and a corporate board in the United States, be it public or private versus what you experienced in the international markets? 39:31 There's a big difference. There's some very, very fundamental differences. And let me just clarify, the 50 companies, some of those were, was, you you're the investor and I was, you know, as an investor, have a, you know, you have a board seat. Okay. So some of were that, some of them were again, NEDs. Okay. But sort of the biggest difference, that's sort of like the big thing is, that in the States, and again, it's changing somewhat. 40:00 Okay. But sort of in the developed world, like in U S Canada, to some extent, probably even more so in Europe, the board, yeah, they had governance responsibilities and helping develop strategy. Um, but the boards were intended or desire not to be what we call supportive. 40:28 or had any fingers in operations or help support operations. Okay. And the emerging world, you know, founders, even, well, I wouldn't say state-owned enterprise, but founders of small companies, mid-sized companies, even companies that are doing like a hundred million dollars in revenue. Okay. They wanted board directors who were going to really make a contribution. 40:57 And we had KPIs. uh I don't think most boards have KPIs for their board members. Unless, unless maybe I'm not, maybe I'm mistaken. Okay. So for example, in several companies, you know, we established a board, established policies and procedures, you know, governance, requirements, you know, things that are sort of standard in boards. And then board members. 41:27 depending on what their expertise was, et cetera, et cetera, would be seconded to either the CFO, the chief operating officer, the chief sort of business development person in these companies to help them grow in some particular way. So let me give you two examples. So when I was on the board uh of a Russia bank. 41:57 Okay. For a long time, it had been a pocket bank of a construction company. And the founders of both the construction company and the bank, know, during sort of, you know, when, when sort of the Russian market opened up for, you know, like 20 years or so. Okay. Uh, there's tremendous growth. mean, the economy has grown like seven, eight, nine percent per year. I mean, 42:25 products were literally flying off the shelves. So the bank wanted to create an SME lending program. And so I worked with both the person who was appointed sort of like, you know, the head of SME lending, their business development person, their CFO, we created, you know, their whole SME lending program, you know, the policies and procedures. 42:54 risk management, know, auditing, you know, how we were going to go about attracting clients, you know, criteria to evaluate clients, blah, blah, blah. We put that together and we implemented it. Initially in, and this was a, it was based in Moscow. we're, we were implementing first initially in what we call sort of the Moscow Oblast or the Moscow region, which, you know, was a population of like about. 43:22 all 13 million people. And then we started expanding to, you know, nearby regions and then, then, you know, later on into, uh, you know, what we call Siberia and then sort of North and South parts of Russia. And, um, it was a big success. And, and, and my brief was, you know, we were working, myself, I was working like 60 days a year working with this company. Okay. You don't typically see that in US companies. 43:52 Very operational. Very social. Yeah. And another company was a beverage company in a tea and coffee business. They had been around for, I don't know, 10, 15, 20 years. What was interesting is they were selling predominantly to what we, the Russian word would be babushkas or dadushkas, which is grandfathers and grandmothers. Okay. Their product line was very, very sort of stale. 44:22 Okay. And I was appointed because the company wanted to grow and develop and they raised money from the European, the, the European bank for reconstruction and development, was set up by seven countries. Okay. Yep. And Tata global, Tata beverages, which is part of Tata, you know, the big Indian. That the global is based in London. 44:49 And they wanted an independent director in Cape because there were three directors on the Russian side, three directors on the Tata side, and they wanted independent in case there was any conflict or et cetera, blah, blah, blah. Okay. And, and so, you know, I was appointed as an NED, um, and, um, we looked at the product line and said, Hey, look, the economy is really growing. I mean, now there are, there are Starbucks clones in Russia. 45:19 They are attracting young guys and women to hang out and have coffee and tea and get acquainted and meet partners and have fun with their buddies and their girlfriends and blah, blah, blah. And we're not in the segment at all. We don't even serve these folks. Grandmothers and granddads. And all their coffee was all ground coffee. And their food was all sort of black 45:49 tea or green tea, new flavors. That was it. So we revamped the whole product line. All the packaging started developing. Again, we didn't really call it that time social media, but started to communicate through. Again, Russian clones of Facebook, the Russian clone of Google, other ones were propping up. are other things that are doing it. It started to appeal to them. Okay. 46:19 Not for our products in those outlets, those retail outlets, but in supermarkets, okay? And then, know, stores and stuff. oh my gosh, know, sales increased over about a three-year period from 45 million to over 80 million. Profits from like 2 million, 8 million, or distributed, you know, 20 million in dividends. 46:50 It was a cool gig. again, I was working with the, we call the commercial director. Now they would call me like the chief marketing officer, the, okay. Uh, the production people, we were having to buy, you know, beans from typically at that time, the beans were coming from, um, Africa and we diversified in terms of, know, getting beans from, you know, Southeast Asia and Latin America, but your own places. 47:19 to advertise with different flavor profiles. And it was a cool gig. I enjoyed it. But again, the brief for me as an independent director was, hey, Tom, we really want to help us develop some more robust product lines. And then the bang going back to that, not only in terms of developing the SME lending program, but again, the interface between 47:46 raising capital from international investors. And this is a Russian entity. And it was a Russian entity, but we also created up a, all the investments flowed an entity of Cyprus because there was a dual nation treaty between Russia and Cyprus. 48:08 So um let's go back to the sandbox. And I am passionate in my own work, um and that is to really uh scale companies. So what's scaling mean? And I like to ask my guests, what does that mean for you, particularly scaling? Yeah, I think scaling means where customers pay the bills increasingly, not investors. I love it. That's very unique definition. 48:36 Yeah, that's what I'm saying because the best source of money to financial company is customers. Absolutely. Right? Yeah. Yeah. Not investors. Investors are like a water faucet. They go hot and cold. That's right. And you got to pay those dividends and dilution is important. Yeah, exactly. Yeah. Right. Right. What about resilience? 49:02 Um, you clearly have been resilient and your own professional journey and how would you define resilience in today's world? Right? How I characterize it is, is the openness and confidence, um, just to keep going. Even when you don't see clarity. Um, you know, I told the story about, you know, this very experienced for a very large fund set. Oh, you were lucky with your fun. You just go. 49:30 just go get a job and flip hamburgers out of McDonald's. That's a true story. It's really true story. Okay. Keep going. ah And sometimes that requires the promoter, which is the entrepreneur or me or others, okay. To figure out how you're going to finance the activity to do what you want to do or what you believe in. And I think that's, that's the characteristic of resilience. That's my definition of how it characterizes it. um 49:59 and it served you very well. What about purpose driven? Purpose driven enterprises? it purpose driven is. 50:10 Um, to walk the talk, not just talk the talk. Yeah, you got to make money. Yes. You have to make profits. Okay. Either for your shareholders, your stakeholders. Um, but in, but if you're purpose driven, you've got to figure out a way to have those benefits flow into, um, 50:39 the community have impact on social side, the environmental side, uh, to make planet earth and its citizens, you know, try to make it up in your own particular way, even if it's a small, but, but, but meaningful contribution to make it make things better. Okay. Um, to look at the world and to say yes, rather than no. 51:07 Right. It'd be open then to, um, to, to, to, say no and, and, and, communicating that to your employees, how it flows through operations, know, customers, suppliers, and, uh, the community that the community of communities that it serves. Right. Well, um, last question, Thomas, um, did you have fun in the sandbox today? Yeah. Thank you for. 51:37 letting me speak it as spouse. Yeah, it was, I don't get many opportunities like that. Yes. And my listeners don't get many opportunities to listen to a pioneer um who went um to uh emerging markets and uh many, many, many years ago before the VC uh market is what it is today and developing uh a very valid uh proposition for financing of 52:07 small and medium-sized enterprises. Fascinating. uh So, you. me leave you and your viewers with two final comments, okay? Thank you. Two comments. One is um when my wife and I moved from Moscow to Michigan, ah people heard what I did and how I did it. Again, typically people go overseas. They work for Ford Motor Company. They got a salary. got a 52:37 support staff in a country, they got a driver, et cetera, said, I went no place. said, they looked at me like I was a man from Mars. Right. And, um, and that's really a true story. Okay. Uh, because it was just so different. And lastly, to pick up on your final comment is, that in, this was like in, um, probably in the late nineties, early 2000. 53:07 I was given a talk at a private equity conference in London. And there was a guy that I met years ago who moderated it. His name was Doug Miller. He worked as a placement agent for one of the big investment banks, US investment, but he was in their London office. He's from the states, Missouri or Kansas. don't know where he's from. 53:34 And he introduced me as this is the venture capitalist who goes where no other venture capitalists go. Sort of like the start, check out where a man never has been before. Okay. So I want to read those two final thoughts. I love it because had you not reached out to me through Board Prospects and then we, we are kind of kindred souls in the fact that we we've done a lot more in the international markets than we have in the United States. it's, this is done differently as well as raising money. It has made us a whole lot richer. 54:04 Uh-huh. Not financially. Uh-huh. Not financially. It's made us a whole lot richer in terms of our experience. Yeah, exactly. I might cut this out, but you're being considered a man from Mars, right? My neighbors, when I moved to, I'm in Los Angeles, they thought I was like a CIA agent because I have a lot of international, I speak languages and it's- 54:33 I said, I think you're a CIA agent. I said, no, it's just the United of Israelis, Greeks, Turks, Moroccans. it was, you know, because we've lived a very plentiful life, right? We did those relationships. So to my listeners, if you liked this episode with Thomas Nastas here in the Founder's Sandbox on early stage international venture, 55:03 in very interesting markets, please sign up for the Founder Sandbox. Again, we release an episode monthly and Thomas brought us some amazing insights on board governance in these markets and soft politics. So thank you and signing off for this month. Thank you. you. Bye bye.
