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
