From Banking Profitability to ScienceTech Innovation: An Investor’s Journey with Konstantin Shvarts

What drives an accomplished physicist with expertise in international banking to pivot toward healthcare, finance, and other science investments? For Konstantin Shvvarts,  of Nordvik Investments, the answer is refreshingly straightforward: profitability. In this revealing conversation, Shvarts explains how declining bank valuations following the 2008 financial crisis prompted him to shift his focus to more promising sectors, including fintech, wellness technology, and artificial intelligence.

Shvarts offers a nuanced perspective on portfolio diversification that challenges conventional wisdom. While acknowledging the importance of stability for traditional investors, he suggests that younger, more active investors might benefit from concentrating their investments in areas they thoroughly understand. Drawing from his own experience leveraging dual expertise in physics and finance, Shvarts shares how this approach led him to successful investments in payment solutions before expanding into health technology platforms like EatBeat.

The conversation takes a fascinating turn as it explores global innovation trends. Shvarts maintains that, despite increasing global tensions, the United States and China remain the primary centers for technological advancement, particularly in the field of artificial intelligence. He expresses concern that Europe, including Estonia, once a pioneer in e-government, has lost momentum as political attention shifts from fostering innovation to addressing security concerns. Looking ahead, he envisions a fragmented global marketplace divided into distinct trade zones, yet remains firmly committed to investing in Western markets despite the turbulence.

Perhaps most revealing are Shvarts's investment boundaries. Despite acknowledging the explosive growth and profit potential in military technology driven by ongoing conflicts, he avoids this sector. Similarly, he steers clear of Chinese investments due to concerns over transparency and intellectual property risks. These principles underscore a thoughtful approach to global investing that balances opportunity with personal ethics and risk assessment.

Transcript

Introduction to Konstantin Schwartz

Alex 0:26

Hi , this is Alex Romanovich , and welcome to . Global Edge Talk . Today , our guest is Konstantin Schwartz . Welcome to our studio , Konstantin .

Konstantin 0:35

Hi Alex . Thank you for your invitation .

Alex 0:37

Absolutely . Konstantin is a prominent figure in the global investment circles .

Konstantin 0:43

Very impressive background and journey from banking and finance international banking and finance to some of the investments in the healthcare , science and wellness sectors he is not only an investor .

Alex 0:55

He also helps run companies . He helps operate companies as well , and welcome to our studio directly from talin , estonia .

Konstantin 1:04

We're very happy to have you thank you , thank you , thank you again constantine first all beautiful sky behind you and it's probably cold .

Alex 1:12

Tallinn right , it's still a little chilly . I know it's chilly in New York , but we're getting there . The spring is getting there eventually .

Konstantin 1:19

Today is plus 24 , right now .

Alex 1:24

Oh , the spring came early to Tallinn . Wonderful For those who are trying to figure out geographically where Tallinn , estonia , is . It's in the Baltics region , next to the Baltic Sea , right across the pond , as the Brits would say , from Finland , and Estonia is a beautiful country . I visited it a couple of times . It's absolutely clean , pristine , beautiful , affordable , all of those things , and we'll talk more about that as well . Let me jump right into some of the questions .

Konstantin 1:54

I think it's going to be a fascinating discussion .

Alex 1:55

You transitioned from a career in banking and finance internationally , Countries including Russia , some of the European countries , obviously Estonia , Baltics and a few others , and then you as a man of science .

Konstantin 2:08

you have a physics degree , You're a physicist and a PhD in physics from some of the leading universities published papers and so forth .

Alex 2:20

And then you switched from the world of finance to the world of health , tech , artificial intelligence , science . What inspired you to do so ? Why such a shift ?

Konstantin 2:30

Profitability is the main reason for any hard turns in my life , because when I started in the banking sector , it was the beginning of the 2000s , before the crisis of 2008, . The banking sector itself the valuation of all banks was very , very high . That's why it's

From Banking to Health Tech

Konstantin 2:56

very interesting and profitable to make some business concerning banks . Later , after this crisis , and in later evaluations of banks coming down For example , 2007 , it was close to 5 or 6 multiplied to own capital , and now it's coming down less than 1 .

Konstantin 3:24

If you have in your bank capital , 1 billion your real price from your business is less than one billion . That's why banking itself and regulations also . That's why banking itself in one time started to be not so interesting like other new possibilities like fintech or wellness or AI and other things which I will start to invest approximately in 2012 . Yeah , the main reason is profitability . You asked me about .

Alex 3:58

Spoken like a true finance person profitability- and that's a very interesting . It's a very predictable approach . I guess For somebody who has invested in various industry sectors . What would be your advice or your sort of comments to some of the investors who are considering to diversify their portfolios , For example ? There are many investors out there , from angels to more institutional investors that want to run towards tech artificial intelligence . Some concentrate on health care , some concentrate on military tech or fintech and so forth and so on . What are the advantages ?

Konstantin 4:37

and disadvantages of the diversifying and should the investors diversify ? In general , it depends from the profile of the investor and the main aim of this investment . If you are a classical investor , of course most of your investment must be very , very stable , like bonds , and only some part of your investment must be in high risk fields like

Investment Strategy and Portfolio Diversification

Konstantin 5:10

startups , cryptocurrencies and other things . But if you are still young and active , you may have another approach and invest all your assets , or most of them to the things which you understand .

Konstantin 5:25

For example , for me , because I had not only education in physics , I have the second master's degree of finance . The next step after banking has been FinTech , because FinTech rises very , very fast . In the beginning of 2000 , we made a couple of things like new payment solutions and companies which made new payment solutions and peer-to-peer companies , for example , yes , and you may have good success if you understand very well what you are invested in . That's why , as I said , if you are a classical investor yes , you must have a classical portfolio .

Konstantin 6:20

If you are a strong young man , you may go directly to a strong business .

Alex 6:24

Well , we can hardly call Warren Buffett a strong young man . But yet Berkshire Hathaway is fairly diverse , right ?

Konstantin 6:32

He's just an insider , nothing more .

Alex 6:34

So you think that he's more of an insider ? I got it .

Konstantin 6:38

He has good connections with different people Got it , so you're going to tell us a few secrets about the you know secrets of the trade , so to speak .

Alex 6:50

Now let's pick one of the investments that you made a company like EatBeat . You're one of the early investors in EatBeat , which is a health and tech science platform . It's an app , artificial intelligence enabled for health and wellness and diet and predictable outcomes or predicting outcomes and so forth . What attracted you first of ?

Konstantin 7:11

all to the sector and second of all , how did you spot that ?

Alex 7:14

to be a successful company , in other words , how do you spot those ? How do you spot those things ? Is it more of a gut feel , is it ? You really have to sit down and look at the finance , look at the financial model , you have to look at the team and so forth Kind of a traditional approach , or how much of a gut feel , how much of an intuition plays into it as well . Or is it because you like the company and because it was related to your background ?

Alex 7:41

The situation with Eatbit is not a classical financial approach .

Konstantin 7:50

I think that , first of all , I like this idea which is inside the Eatbit , because it is a solution not application . It is a solution which

EatBit: Investing in Health Solutions

Konstantin 8:06

can make solution , not application , is the solution which can make firstly in the world , people to have next choice of most healthy food , without any restrictions , without any specific diets and other typical for diet behavior things and it did itself a unique , unique solution which based on a scientific approach which is close for me like a physician .

Konstantin 8:35

It based on nordic diet , which is on the one scientific , scientific diet in the world which is officially died here , in nothing in baltic countries . And yes , these two things , it's science and it's uh , it's a new , absolutely new solution which gives , uh , I think , very , very big future for the company but there must be some kind of a criteria that you apply which is immediate .

Alex 9:04

You've invested into companies in the fintech sector . You've invested into a company in the health tech sector . Fundamentally they're different , but they share similar things like they're in regulatory environments or public opinion matters greatly , the risks involved , and so forth . What are some of the common traits of those companies that you immediately spot . Is it the team ? Is it the financial model ? Is it the financial model ? Is it the product itself ? Your first reaction what is it ?

Konstantin 9:34

Here I'm not unique I think it's well-known rules like the project must have a strong team first of all . Then of course the idea must be interesting and something new which is not in the market . And on the third place , of course , you must have some space for the future market . I think there are three things , but it's very well known . That's why my approach is not some unique thing .

Alex 10:06

Well , thank you for validating that , because everybody thinks there's a magic formula , right . Everybody thinks there's some kind of a magic involved and so forth , and , just like startups and early stage companies , they get together on conferences and so forth and so on . They share common things . They even copy each other . Investors probably exhibit the same behavior , so you're validating something that's kind of well-known and it's interesting . Speaking of conferences now , I met you at a couple of different conferences , some of the regional ones , like Slush in Helsinki , tech .

Konstantin 10:40

Arena in Sweden . You're a member of .

Alex 10:42

E-BAN , which is the European Business Angel Network Association . What can you say about those investor conferences , investor startup conferences , pitching sessions ? Do you think there's value ? Do you think that it's important for the industry , it's important for folks to get together , I mean , you know ?

Konstantin 10:59

on the surface it seems .

Alex 11:00

Yeah , of course you know what a stupid question , but what has been your experience ?

Konstantin 11:05

This kind of conferences gives you mainly two possibilities . First of all , context , of course . When you touch hands of your potential partners , you may understand more about him or her and make more right solution on future . And maybe more important thing is to feel the smell of investment behavior of the people , because you may see the main trends what is most popular now , what is not popular now , and this is also very , very

Global Innovation and Market Dynamics

Konstantin 11:46

important for making the right solution .

Alex 11:50

Yeah , good answer . I like that answer . Now , some of these conferences were global , they were international , and you've taken companies global as well . To talk about an example again of the same eBit , you first tested the company and team tested the company locally , regionally , and then you took it to the United States and then tested it in the United States with a good level of success . What is the approach that one should take to scale the company international ? What are some of the criteria ? What are some of the sort of warning signs or green lights that one should pay attention to when they're scaling companies internationally ?

Konstantin 12:27

The main thing that your solution or your plan which you show on the global market must be interesting to the people in different markets . For example , this situation with IDBIT . It's a problem which is interesting for all population of the world , many countries United States and China and in other countries . It's the main thing when you start to think about to go to another market . Like United States and because Eatbit company had it , we had good success in the US market .

Alex 13:10

Well , congratulations on that , and obviously here in America we hope to see more and more of this solution , so looking forward to that , what can you say about global in general ?

Alex 13:20

global and innovation Do you actually track and see that innovation is taking place faster , let's say , in your part of the world , maybe in Asia , maybe in Global South ? Or do you think that the United States is still leading in innovation , and how long is that going to continue for Do you think that it will balance itself out ? I mean , I know , we all know , that China has done a tremendous amount of innovative solutions in infrastructure , in transportation , in even quantum computing and physics and space and so forth .

Konstantin 13:55

So there's quite a bit of competition for innovation that's taking place right now .

Alex 14:00

Where do you place your finger , so to speak , and say , okay , that's the hub of innovation ? This is where we should be paying attention to .

Konstantin 14:09

Or maybe it's an industry sector , or maybe it's a specific solution . First of all , about innovation . I think yes . The States and China remain two places with the most innovations concerning AI and IT sector . Also I think in other sectors too . Here in Europe and in Estonia , what I see we started became a little bit slower than before , because Estonia has been one of the first , maybe even first , it government solution in the world . One of the first , maybe even first , yeah .

Alex 14:42

But after very strong start maybe more than 10 years before .

Konstantin 14:49

I see that here in Europe , our politicians concentrate more on his attention , not on innovation , on helping , on the business , unfortunately , unfortunately but mostly for foreign policy , the situation with the war and other things , and the situation with the war and other things , and that's why I think innovation itself will remain mostly in states and China , and it's important that , yes , china has good success in different areas , but we don't know the situation , how to explain under the cover , how they make it , what is the quality of these solutions how many people ?

Konstantin 15:35

what is the price of this and other things , because information about China's solutions sometimes is very close and we have not real , very good information to understand the real situation . I have been in China many , many times , but five years ago and before 10 years ago , 15 years ago , and what I have seen ? I have seen that a lot of businesses which have been supported by the government in reality are not profitable and the real situation not official is scaled of GDP figures and other things , but real situation , real place is not so beautiful like on the official picture of .

Konstantin 16:24

China , that's why for me , for example , I didn't invest in China anytime , and I will not , because I can't calculate all risks , including this strange situation , with statistics and other things that characterized China .

Alex 16:46

Yeah , so the reality of the financial modeling for some of the . Chinese businesses is you're saying it's very risky . The risk is heightened , obviously , and unless you have some really good insights and some really good connections there , it is still a risky market to invest into .

Konstantin 17:04

That's your opinion . Yeah , very fast , and they may hack your idea very , very , very , very fast without yourself in the future , right ?

Alex 17:15

So on the surface , it seems that America is , you know , in the midst of the , obviously various wars in the . Middle East and , you know , russian-ukrainian war , and now we have a trade war on our hands between America and , it seems like , the rest of the world especially China .

Konstantin 17:31

But what does that mean to you ? What does it mean for you ? What does it mean for an investor like you ?

Alex 17:36

Is that going to somehow impact . Where are you going to invest ? Into how much you're going to invest , you know , maybe even not invest for a certain amount of time . How does it impact your decisions to continue on the investment path , if you will ?

Konstantin 17:54

For me personally , nothing changes because , as I said to you , before I didn't invest to China and for different reasons I also didn't invest last eight or seven years to Russia , which is closed now for foreign investment also . That's why , geographically for me nothing changes . Anyway , I will invest to Europe , to the United States first of all . Despite a full trade war , I think

Geopolitics and Investment Geography

Konstantin 18:20

the global situation will not change . Globally Anyway , western Europe , europe itself , northeastern , also Western , like Estonia , will be one part of the world , together with states . It's a problem which we will have now , some problem of balance sheet of United States , where Dutch deficit is very big and , as I understood , mr Trump tried to close this deficit and make it less with different ways , like tariffs .

Konstantin 18:55

We will see , but I hope that nothing dramatically changes in the future will be and my investment position will remain the same . I will invest in Europe and the United States .

Alex 19:08

So you're still bullish on the Europe and the United States , although , I'll be honest with you , it almost seems like we're becoming a lot more isolated .

Konstantin 19:18

I'm sorry , I asked you . You said isolated , you mean United States isolated .

Alex 19:24

Well , not only United States . I think it seems like a lot of folks are becoming more isolated . For example , look at Canadians , right . Look at Mexicans All of a sudden they're being singled out . Look at some of the countries in Europe you know , and so forth . Maybe the entire European Union . Look at China , right . So , as we're moving towards either perceived isolationism , or real , do you ?

Alex 19:46

think that the strategy for the investors like yourself and others obviously you know even some of the larger investors out there will be more regional than global . I mean , look , you're a risk taker , you decided to go and invest early on in the United States market . Many people have .

Konstantin 20:04

A lot of the .

Alex 20:04

American investors invested into European markets , asian markets .

Konstantin 20:09

Global South . That's also true , but with what's going on right now ?

Alex 20:13

do you think that the strategy is going to be more regional and more local ? Almost .

Konstantin 20:17

You know , local food producers or local construction companies or local infrastructure builders ?

Alex 20:24

or local innovators that can apply tech like AI and so forth to local businesses . Or do you think there's still going to be some appetite for global investments ? Hey let's go across the ocean and try our luck there . If we have the support , if we have the connections and so forth .

Konstantin 20:42

Yes , maybe , if we will say globally at all . Of course , it seems that the world will not be more at one . We will have two or maybe three different trade and currency zones which will include one China zone , one States plus Europe . Maybe it will be some third zone like India plus somebody from that region . And from this point of view , the global approach is not more relevant in the future , but because for me personally , I don't invest , for example to building companies , which is located here in Estonia .

Konstantin 21:28

I didn't invest in industry companies in any countries . That's why my personal approach remains the same , because the market for these kind of companies which I invested in , like EBIT , the market for them anyway , as I said before remains here in Europe and the United States mostly . Maybe in other countries like Brazil or I don't know . We have now we have . We didn't do any advertising to India , but we have some customers from India . They just go with themselves to our solution .

Alex 22:03

Yeah , what's interesting , India is becoming a tremendous consumer market globally , as well as well as China obviously and as well you know , as well as the United States . Let's talk about military tech for a second Defense industries military tech , cybersecurity , security , data security , you know , and so forth . You know you have to be from a different planet not to see what's happening right now with a variety of different developments , whether it's . Middle East or Russia , ukraine , or even heightened risks of conflict in Asia and Global South .

Konstantin 22:40

You know Middle .

Alex 22:40

East , obviously , and further south Do you ?

Alex 22:43

think that that is going to jolt innovation in that direction ? Do you think that companies , even some of the more traditional sectors like healthcare and fintech do you think there is some kind of an intersection that's going to take place between the more traditional sectors that we're used to seeing and some of the other ones that have not even existed or have not been paid attention to in the past few years and all of a sudden it is heightened . The attention is heightened . Folks are flocking in . They're investing into miltech , they're investing into data security . We're seeing all kinds of obviously continuing hacking attacks and attacks on the infrastructure , you know , and so forth . What ?

Konstantin 23:26

are your thoughts on that ?

Alex 23:27

What are your thoughts on ? When is it going to sort of plateau

Military Tech and Future Investment Trends

Alex 23:31

or peak ? How many wars do we have to have , unfortunately , for this to dominate ? I mean , some countries even dominate with these industries , because that's , let's face it , that's a good moneymaker .

Konstantin 23:45

Unfortunately , we're in the beginning of the process of changing the world , the changing of global processes . That's why , unfortunately , I expect that Ukrainian war or Middle East situation is not the last situation . It's not the last war which we will expect in the future . Yes , activity in the military sector is mainstream now . If you ask me about these conferences , if you visit , conferences concerning different investment solutions here in Europe you can see that military way is one of the bigger part of these conferences , and this is reality .

Konstantin 24:38

But for my personal reasons I also didn't invest and will not invest in this kind of activity like in China . That's why yes , it's a good possibility for some companies , for some people to go very fast to have good success and good profit . Unfortunately , the sector will rise in the future very fast , but for me personally , I will not invest for , as I said , my personal reasons . For any investment , political risk is one thing which we must consider before investing and , classically or conservatively , you must invest in countries with a stable regime .

Alex 25:30

It doesn't matter .

Konstantin 25:30

Sometimes it's based on dictatorship or democracy or other things . The main thing will be stable For this kind of approach . We have another time , another period , the period of big changes , of some turbulence political turbulence , world changing and other things .

Alex 25:53

But I believe that democracy itself , which is the base of the United .

Konstantin 25:58

States and here in Europe remains and finally , after this turbulence , we will have a stable situation again . Maybe it will take three years , five years , I don't know 10 years . That's why my personal is the same , which I said before .

Alex 26:14

Invest in Europe and the United States I think it's the most stable and most perspective markets in the world anyway , Konstantin , it's been a pleasure speaking with you and get your insights on the global , insights on the global scene for the investments , for your path , your journey .

Konstantin 26:35

I'd love to continue this conversation .

Alex 26:37

I'd love to talk more about you , about your decision-making . You know , follow your investments , follow your path , if you will . So I think our listeners are going to be very happy to hear that as well .

Konstantin 26:49

Thank you so much . Thank you for your invitation .

Alex 26:51

Alex .