Emerging Markets VC & Startups: How Charter Cities Can Create Opportunities for Startups

When building a startup, some of the most critical success variables involve the local ecosystem, access to capital and resources, and local regulations governing new ventures. Not all localities make it easy or flexible for entrepreneurs to start businesses and receive venture capital investment; that’s why in the U.S., most venture-backed companies incorporate in business-friendly Delaware. This reality is a worldwide issue, giving the concept of a charter city an advantage for entrepreneurship in emerging markets.

So what is a charter city in the first place? It’s a municipality granted the right to create a new governing system defined by the city’s charter, not by general law. This governing charter gives the city much more flexibility and allows its officials to place global best practices for commercial regulation.

By implementing best practices, charter cities create a regulatory infrastructure that paves the way for sustained economic prosperity. These trends lift residents out of poverty, attract foreign investment, and empower local entrepreneurs to create new ventures. Some examples of the charter initiative worldwide are Hong Kong, Dubai, Shenzhen, and Singapore, altogether estimated to have brought 800 million people out of poverty in only two to three generations and become financial or technology hubs.

A standout example of a charter city’s success is Shenzhen, known as China’s Silicon Valley. Although Shenzhen is currently a top business hub, as recently as the 1970s, it was a rural fishing town. In the late 70s, China began the “Opening of China,” implemented in two stages to reduce state ownership and central planning. First, the country opened itself up to foreign investment and permitted entrepreneurs to start businesses. Second, after about a decade, these state-owned businesses were allowed to take themselves private or contract themselves out. Shenzhen was China’s first “special economic zone” and became one of the fastest-growing cities in the world through the 1990s and 2000s. These economic reforms and independent city governance lifted millions out of poverty, expanded the middle class, and gave rise to China’s top businesses. More can be read about this transformation in the book “ The Shenzhen Experiment” by Juan Du.

Many emerging markets can benefit from charter cities. Rapid economic development provides the tools and resources necessary to increase education, income, and foreign business relations. Most importantly, these trends create an opportunity for entrepreneurs and access to investment, which compounds growth for the local ecosystem. Cities can only accomplish these goals if the underlying regulations can support them, giving charter cities a leg up on traditional municipal setups.

If you’d like to learn more about this initiative, Charter Cities Institute is a great resource to browse. Also, this TED Talk by Paul Romer gives an excellent overview of the benefits.

Regional News

Africa

• South African real estate startup Roundr has received an undisclosed investment amount from Scottish VC firm i7V. The company’s app allows real estate agents to work on scheduled viewings, client interactions, and collaborative sales on their smart devices. Link
• South African AI startup DataProphet has raised a USD 6M Series A funding round led by Knife Capital. Their AI-as-a-Service platform helps manufacturing plants optimize production. Link

Asia-Pacific

• Indian VC firm Inflexor Ventures has announced the close of its first early-stage VC fund. The USD 30M fund will invest in deep-technology focused startups in India. Link
• Vietnamese VC firm Do Ventures has launched a USD 50M fund focused on local startups. The firm’s first fund, dubbed Do Ventures Fund I, is backed by prominent LPs and will invest in early-stage companies from Seed to Series B rounds. Link
• San Fransico and Tokyo-based DNX Ventures launched a new USD 315M fund. The firm focuses on Japanese B2B startups from Seed+ to Series A. Link

Europe

• Finland-based Superhero Capital has launched a new USD 30M fund. The firm invests in Baltic startups focused on insight-driven data. Link
• Dawn Capital, a VC firm based in London, has announced the closing of a USD 400M fund. The fund is the firm’s fourth and largest to date and will focus on investments in European early-stage startups. Link

Latin America

• Startup Mexico, a LATAM accelerator program, has announced plans to expand operations to Costa Rica. The firm will be partnering with local ParqueTec, an incubator in San José. Link
• Mexico-based FinTech Oyster Financial announced it has raised USD 14M in Seed funding led by Monasheesand SV Latam Capital. The neobank startup has launched a core banking technology platform for sole proprietors and SMBs. Link

Middle East

• Founder Institute, an accelerator program, has announced the launch of an accelerator program in Kazakhstan for central Asian startups. The program will launch in November and provide online resources for 20 startups in each cohort. Link
• Last week I wrote about the potential for VC and startups from the UAE-Israeli peace deal. It looks like we are already seeing some forward movement as Israeli FinTech Solaryo is the first to receive funding from KEN Investments with an office in Dubai. Link

Originally published at https://vagabondvc.substack.com.