What Pronomos Looks for in Founders

Venture capital funds make a point of investing in excellent founders with good ideas, rather than good founders with excellent ideas.

Pronomos aims to invest in the charter cities of the future using a venture capital model, and so the question arises:

“What kind of founders create charter cities? What kind of traits should a good charter city founder have?"

Charter cities are extremely time and capital-intensive projects. Decades may separate the planning stage from the break-even point. These are projects designed by visionary entrepreneurs, whose time-preference is low to a fault, who are willing to maneuver financial, political, and industrial waters to achieve their dream. 

Charter City Founders

The process of setting up a charter city is arduous and attracts only the most tenacious entrepreneurs.

Charter city founders are those individuals who plan, develop, and execute on an idea for a charter city. They aren’t necessarily the ones who plan and perform the macroeconomic, political, environmental, or social aspects of the enterprise. They are, however, the person whose responsibility it is for their experts and partners to perform at their highest level.

Nobody expects a charter city founder to be an expert architect, lawyer, city planner, investor, logistician, ecologist, or politician. However, it is necessary for the founder to identify where their weaknesses and strengths lie. 

A single person can't have all the abilities necessary to create a charter city, as well as the time to develop all these areas, but they can have the foundational skills required to create a successful charter city organization. 

The founder may not know anything about urban planning, but if he is skilled in recruiting and fundraising, he can attract the best urban planners and have the budget to hire them. Such founders can create powerful and adaptive teams to tackle the complex and ever-growing set of challenges they will face when building a city.

Government decision-makers who create the legal frameworks for charter cities are necessary, but cannot found a city alone. Even if they lead a government-financed project personally, unless they have a direct political or financial incentive to see the project succeed, they cannot be considered true founders, as they lack “skin in the game”.

Similarly, the investors financing a charter city may be exposed to the risk of its success and failure, but are not founders. Likewise, those who manage the everyday functioning of an established charter city may be founders, but are often just employees doing their job. It is this combination of “skin in the game”, vision, and leadership which makes a true founder.

How do Charter City Founders differ from other Founders?

Tenacity, stick-to-itness, and vision are cliches in VC circles. Similarly, so is the “talent sense”, that ability to spot talented individuals. These are obvious prerequisites, but other traits are necessary for a chance at success in this sphere. Charter city founders must, in addition to the standard entrepreneurial traits, exhibit the following characteristics:

• An awareness of the macroeconomic fit of their charter city
• A sense of the political currents in the host country and region
• Understand urbanization, digitalization, and other megatrends
• Comprehension of citizen (user) needs at the highest and lowest level

Macroeconomic fit is what makes or breaks a charter city. It can have the best governance model on the planet, but if it doesn’t make sense for people to do business there, because it is, say, in Antarctica, it will not succeed. Conversely, the city need not have the world’s deepest regulatory reform to succeed initially if it has a good market fit. The Coyol Free Zone in Costa Rica operates in a Free Zone regime that is similar to that of its neighboring country, but was able to find real success in the niche of Medical Equipment production. Understanding this requires studying Geoeconomics, a topic for another post.

Political ebb and flow determines whether charter cities get created. Host government support is the difference between a charter city, like those in Honduras, and a separatist movement, like Abkhazia, in Georgia. Elections and regime change must be taken into account for the long-term viability of a charter city, as must individual relationships with government decision-makers. 

Megatrends like urbanization, digitalization, climate change, global pandemics, and others influence what role charter cities will play in future societies. Current indications point toward charter cities being a long-term direction for human cohabitation. Globally zoomed-out thinking is necessary to understand how to capture these megatrends. A Charter City in a country projected to double its population in the coming decades has a much stronger baseline for bootstrapping its initial population than a city in a country facing demographic collapse.

Finally, user experience is what the charter city lives on. Being at the right place at the right time is great, but without providing continuous, real value to users, a charter city can only remain relevant for a couple of market cycles. Furthermore, with the ephemeralization of governance coming and changing traditional governance into a service, user experience will take an ever-expanding role. Improving aspects such as simplicity, ease of use, and transparency of governmental systems is already being taken as a top priority by governments such as that of Estonia, which have been attracting talent and capital worldwide.

Can I be a Charter City Founder?

Founding a Charter City is serious business. It should only be undertaken by those who are prepared, disciplined, and discerning. However, diverse opportunities for Charter Cities exist, and there is no single mold for a Founder that guarantees success or failure.

If you are a founder who is building a charter city, contact us here.