Paloma Lecheta | Brazil's First Free City

Timothy Allen: So Paloma, why don’t you start? Great name, by the way. Where I come from, you never meet anyone called Paloma.

Paloma Lecheta: In Brazil, it’s not as common either, so I’m one of the few.

Timothy Allen: Where’s that name from? Is it Italian?

Paloma Lecheta: No, it’s Spanish. It means dove.

Timothy Allen: Dove. Oh, okay. Fair enough. So Paloma, let’s hear a little bit about you first. You look quite young to be in the startup city, Free City space. I have to say, I don’t know whether you were watching Patri Friedman’s talk earlier. He said most people in this space making cities are 40 years old plus.

Paloma Lecheta: Yeah, he said he had learned a lesson from the investments he has made so far, that older founders are more of a fit profile for building startup societies, which I agree with.

Timothy Allen: Can I ask how old you are, just out of interest? You look quite young.

Paloma Lecheta: I’m 34.

Timothy Allen: Oh wow, you look great for 34. So you haven’t quite hit 40. You’re underage for a founder.

Paloma Lecheta: I’m underage for a founder. But I did start early.

Timothy Allen: Okay, so tell me about Brazil. Give us a quick 101 on your life story up until this point.

Paloma Lecheta: Awesome. So, as a Brazilian, when you’re growing up in Brazil, one of the things that’s very normal is the desire to move abroad.

I think it comes a lot from Brazil having been a colony of Portugal. It’s a very interesting thing. As a Brazilian, when you go to a grocery store and you’re choosing a product, if there are two olive oils, one from outside and one from Brazil, it’s very natural for Brazilians to understand that whatever is from outside is better than what we have inside. So you would just automatically pick the Italian one.

Then when you see other countries and the way they behave, they really value what’s from their own country. That is generally true across Brazil.

When I was very young and studying at university, just like all my friends, the desire was to find a better place to live abroad. So I lived in Canada for a while during university. I think that was the first time I started seeing people’s reaction when I said I was from Brazil. They would say, “Wow, amazing. What’s it like? We love Brazil.” Brazil has a very good reputation with people. It’s very hard to find someone who doesn’t like Brazil.

I would think, why are you guys so excited? Brazil is not that great. Then you start hearing people, meeting people, going to places and understanding that actually, we have a pretty good country. We have a lot of resources. Life is good.

I think a lot of the brain drain from Brazil is just the stories we tell ourselves about how the grass is greener outside. I lived abroad for three years and started thinking, why am I here, and why did I leave Brazil?

Most of it was this illusion that it’s better outside. But there are also real problems in our country, and it is the easy way out to go and find a better place to live. That solves your problem, but what about everybody else? You still have your parents, your grandparents, your family, and not everybody wants to relocate.

That was where I got more involved in thinking about myself individually, looking for a better jurisdiction or a more free world, but also about the selfishness that comes with making the easy decision and not the hard one, which is, can we solve this and create a better place for ourselves in Brazil?

So I came back to Brazil in 2012. I was still very young, and together with my business partner now, we started thinking, how do we make Brazil the place we want to live in, instead of just going somewhere else that is already good?

For the past ten years, a little bit more, we have been trying to support entrepreneurs in Brazil who want to make Brazil a better place. And I am also trying to retain myself, because sometimes I still question whether I should stay there. There are better places to set up shop, especially as an entrepreneur. Brazil is not the most favourable place to build a business. But why not solve that?

Timothy Allen: Funnily enough, I was telling you last night about a colleague and friend of ours, Francisco Litvay. He runs a company that does geo-arbitrage for people, and he said exactly the same thing about Brazil, that the movement out of Brazil is huge. Most people want to go somewhere.

But he said that in recent times, they have really started coming back. When I asked him for his top five places in the world, he was saying somewhere in Brazil a lot. Florianópolis was one of their hot places to come back to, to raise children, have a family and do that kind of stuff.

So I’m with you on that one. I think that’s probably a bit of a meme of this age: people leaving their own country, getting out into the rest of the world and then thinking, actually, I’ve got it good where I am already. Especially because people are looking for a certain quality of living now, and you see many places losing residents in favour of these kinds of places.

Brazil is an absolutely ginormous place though. I don’t think people understand just how big it is. It’s a large, large country. So tell us about your founder story, your businesses and where you are now. You’ve got a really interesting project.

Paloma Lecheta: When I was young, I was very passionate about seeing other people in Brazil, maybe not as privileged as me. I come from a middle-class family in Brazil. I didn’t have all the opportunities in life, but I had it pretty good.

When you live in a country that has so many gaps, financial instability and a lot of poverty, it’s very hard to drive around or move around the city and see that some people are not as fortunate as you.

Still at university, even in high school, I started doing a lot of social work. I started two nonprofits before I even finished university, just raising money from whoever I could. If you came around me, I would try to help other people by fundraising for causes I believed in.

That’s how I got into entrepreneurship. A lot of our efforts in nonprofits and philanthropy are not actually solving the problem. I raised money. I did a lot of projects that felt good and looked good. But as I started learning more about how the world works, I began to understand that I could gather resources, but maybe I wasn’t putting them into things that actually solved people’s problems. Maybe it was just very nice to take pictures.

So I learned about social entrepreneurship, that you could actually find problems and solve them through business, not necessarily just through philanthropy. I learned about impact startups.

That’s how I came to business. I came from more of a philanthropy, young university vibe of, let’s solve everybody’s problems, to learning that maybe these people don’t even have the problem you think they have. Philanthropy does not necessarily help. Sometimes it makes things worse. But maybe there are business opportunities within many of the social challenges we face, and we can solve them through business opportunities.

That’s how I got into startups.

My business partner, who is now also my life partner, already had experience with startups. He’s Iranian-Canadian, and he was actually the one who wanted to come back to Brazil when I was living in Canada. We moved to Brazil 15 years ago now. He had a lot of experience with tech, and I started learning a lot from the mindset of startup people, who are fundamentally solving real issues.

We could leverage business opportunities to make financially viable solutions for Brazil’s problems. So I slowly started leaving the philanthropy world, the nonprofit world, to think about businesses that could solve problems.

A lot of Brazilian founders solve problems while doing a lot of positive good. We brought a bunch of programmes from the U.S., like acceleration programmes and hackathons. Back in 2017 we had a physical hub in Curitiba, my home city, and we started doing a lot of Ethereum meetups.

We started bringing a lot of things that were already happening outside Brazil, but most of them were in English or in Europe, and Brazil still has a barrier to entry because of language. So we translated a bunch of programmes into our reality in Brazil and started accelerating startups, supporting other entrepreneurs, and being entrepreneurs ourselves while trying to help others too.

It has been a journey of figuring out that maybe business is the best way. A free market helping entrepreneurs is actually maybe the best way to help the country.

Timothy Allen: It’s funny that this is an important lesson that a lot of people don’t really understand their whole lives. It has a real onus attached to it, making money out of a so-called philanthropic process. People think of that as quite negative, as if you’re taking advantage of people.

We know this very well because of one of the other big projects in Free Cities in Honduras, Ciudad Morazán. It’s a business, but it’s a blue-collar Free City. When you first hear about that, you think, is it really? The guy who set it up is a very wealthy libertarian, Massimo Mazzone. He made a lot of money and decided to create this place.

Inside the city, everything is better than outside the city, which is one of the most dangerous parts of Honduras. It’s cheaper, better built, has better services, is safer, everything. But when you talk to Massimo, he says, look, I’m a libertarian, but it’s also important to me that this is a business, not just some philanthropic thing. It has to run like a business and make money. It needs to be a viable product as well.

That’s very much part of his mindset. That way, it’s a win-win situation. But on the surface, it’s easy to think, hold on a minute, are you taking advantage of poor people here? Shouldn’t this be charitable rather than a business?

I agree with you 100 percent that to create things in a free market that benefit everyone is what we’re trying to do. You don’t even need to think of it in ideological terms. We’re just offering a better service for everyone, and people choose to come and use it. That’s the whole point of Free Cities.

I’m so happy you went down that route. I had a similar journey myself, but for me it was just in my own mind. I wasn’t running businesses. I noticed my opinion change on what real charity or real philanthropy is, and what it can be. I think you’ve come to the perfect conclusion. Anyway, I butted in. Sorry.

Paloma Lecheta: No, it’s a very personal experience, and I’m so happy I had it so early in life because it set me on the path of helping other people who work with me come to that same realisation.

I work with a lot of nonprofits, and one of the things that was really mind-changing for me was a TED Talk I watched about ten years ago. The guy was saying that one of the main problems with philanthropy is that you’re not supposed to pay people well, because the money should go to the cause. So you have these organisations that feel guilty about paying good salaries, and therefore they don’t attract the best talent.

We’re literally trying to solve some of the most complex problems, usually through nonprofits, because we haven’t been able to figure them out. If you don’t have the best talent working on those issues, how are you going to solve them?

I think the main problem with the incentive system of nonprofits is the guilt around spending well, especially on talent. As an individual, if you want to provide for your family and create wealth for yourself, why would you work for a nonprofit? You can just work for a big multinational, make tons of money, donate to a nonprofit and sit on the board. You’re going to feel great because you’re a philanthropist. But you’re not actually getting your hands dirty and focusing on solving the problem.

So now you’re giving your energy and your life to a corporation that may add no value to society other than extraction, but you feel good because you give your money and you’re a reputable donor. The incentive is wrong.

Most people who work with nonprofits, and I’m not judging them, either did not have opportunities for good paychecks, or they are sacrificing themselves for a cause, which in my opinion is even worse. You should be rewarded for taking on the challenge of solving something.

We should be paying more to people who work on the biggest issues of humanity, not less. People feel guilty about it. In a good business, nobody feels guilty about paying employees more because they perform more and solve bigger problems.

So the wrong thing about philanthropy today is that you can’t attract good talent because the incentives are wrong.

I don’t think the future of companies is nonprofits, or even just limited companies, because limited companies also don’t always have the right incentives. Their incentive is to give back to shareholders, which is also not the full answer.

We’re seeing more and more experiments with new ways of governance, even around what it means to be a founder. We are Founder Haus, and when people hear the word founder, they think of a limited company or a corporation. But in our mind, the concept of being a founder is not necessarily that you own a limited company. There are all these new experiments: DAOs, decentralised autonomous organisations, protocols. You’re not necessarily the founder, shareholder and controller of a company. It’s about creating new ways of organising humans and rewarding them for good work.

We support a lot of founders who are not actually owners of a company. When you think of owners, you think of an incorporated company, a cap table and control. But there are these new ways of governance that gather a group of people, which is a company, create value, solve a problem and reward whoever is contributing.

Those are the ideal founders we have been trying to support: people experimenting with how to create these new so-called companies, or the new wave of companies that probably will not even be called companies anymore. That’s what we’re really excited about.

Timothy Allen: So what’s the connection between Founder Haus and Ipê City?

Paloma Lecheta: Ipê City is founded by Jean Hansen, a Brazilian founder. We met Jean back in those Ethereum meetups in one of our first hubs in Brazil. He’s a brilliant, very smart individual. We followed his work and really liked the way he was building things.

About two or three years ago, he launched Ipê City, which is the first network state of Brazil. He’s trying to rethink governance for the internet era. If a government could be built from scratch today with the internet, how would that look? How would public services work? How would interactions between citizens work?

It’s a social experiment, thinking about what it would be like if we could start a city from zero with the internet. It’s a launchpad to build the next city in Brazil for the internet era.

He brings together techno-optimists. He has been building this movement in Brazil for a long time, and he’s one of the founders who is part of Founder Haus. We are a group of founders organising ourselves to create the place we want to live, work and foster.

We’re almost like an accelerator for Ipê City. But because it’s such a young project, we also participate as part of the core team, because we want to see it flourish.

Timothy Allen: But it’s also a physical place, right?

Paloma Lecheta: Ipê City right now is a digital community that manifests itself in our physical node. Their physical hub is within Founder Haus, but they are not limited to that physical location. They are a community, not just a physical hub.

Timothy Allen: Last night you were talking about the place in Florianópolis. What’s the connection there? The way I saw it was that there is a physical location. I come from the building side. When I look at our ecosystem, I see the network state people at one end and the Free Cities people at the other end. The Free Cities people build things in the real world and then people come. The network state people build on the internet and then try to manifest it in real life. So I come from this side. Tell me about the buildings.

Paloma Lecheta: Perfect. Ipê City is here. Founder Haus is not necessarily, but it is in this area of actually being able to host these communities and give them a place to manifest.

One of the issues with building companies is that yourself as a founder is usually not a priority asset. When you’re building anything of value and really want to take it to the next level, you usually don’t sleep well. You don’t eat well. You prioritise employees, shareholders and the business itself. Many times, you neglect your own health and priorities for the sake of whatever you’re building.

That works usually for a first time, for a few years. But if a founder succeeds, they usually succeed financially, while paying the cost of all those years of sacrifice with family and the other areas of their life. If a founder fails, then they pay the toll of building the business financially, personally and in their health.

As a founder, and also observing my business partners, friends and portfolio companies, and having accelerated 1,800 founders already in Brazil, we know a lot of founders. For more mature founders, this became a common thing we started to realise.

I have one business partner who got cancer very early in life, one who had very serious burnout, and I myself was not in a good place after my first company. There was just nobody caring for us.

Founder Haus came a lot from that. Back in 2019 and 2020, when my business partners and I were not doing well health-wise, we started thinking that there had to be a better way for founders to build companies without killing themselves in the process. So we started rethinking healthy entrepreneurship.

That’s when we moved to Florianópolis. I had operated startup and tech programmes all across Brazil. I’m not from Florianópolis, but as we operated companies across Brazil and visited many places across the globe, Florianópolis stood out. It has a vocation in nature and health. It’s this beautiful island in the south of Brazil, with great air and water quality. It’s a paradise island.

The crazy thing is that, because it’s an island and it’s preserved, the government was very smart a few decades ago. They couldn’t farm, which is where a lot of the money is in Brazil, and they couldn’t have factories like other big cities. So they invested a lot in good schools, engineering schools and infrastructure. It became the startup capital of Brazil.

I had 13 physical operations in Brazil, in different cities, mostly capitals. In many places, things move very slowly. But for some reason, on this island, there is something in the water. Things just flow. People are very eager to work. There is ambition. We call Florianópolis the magic island. There’s all this magic stuff that happens there.

When we realised how important it was to nurture ourselves as founders, we said, let’s move there and heal everyone. Initially, we just moved there ourselves. It wasn’t, “Let’s turn this into the main hub of startups in Latin America.” We wanted a better life. We didn’t want to retire and move somewhere just to do nothing. We wanted to keep building tech businesses and improving humans with technology, but not at the cost of our own health.

We learned that if we’re playing the long run and want to continue to be high performance, just like someone training for the Olympics, we need to sleep well and eat well. Otherwise, we won’t get the gold medal. It’s not even about the gold medal. We’re ambitious about other things. But if we don’t see ourselves as individuals who need high performance over the long run, and if we think it’s just about building a business, selling it and getting rich, then we’re missing the point.

If we’re playing the long run of building companies that last and actually help people, we need to take care of ourselves. That’s a business decision. I can’t afford to have two business partners sick. It’s just not good for business.

So we moved to Floripa looking for that. We found this neighbourhood in the north of the island called Jurerê Internacional. It’s one of the most valuable square metre areas in Brazil. It’s this perfect neighbourhood, super safe, and it has been privately developed.

This guy, 45 years ago, saw bare land in the north of the island. Imagine him learning all about charter cities. He probably never even had access to the idea that this existed elsewhere. He was just a very good pioneer. His name was Péricles de Freitas Druck. He passed away last year in his eighties.

He bought this land and dreamed of the city he wanted to live in, privately developed. It became a very successful private development in Brazil. I think the total area was about 600 hectares.

He was a banker from a wealthy family. They bought this land and made a close partnership with the government because the government couldn’t get there. It was an undeveloped area of the region. So this company committed to building infrastructure: the water supply, the sewage, the roads, the parks. It was all privatised, which is not normal in Brazil. There’s no other neighbourhood that can provide those services because they are supposed to be public services.

But because the city couldn’t do it, he found a loophole. Since he was doing the private development, they had to provide the services. There was no option. So the city allowed it, and they were smart enough to protect themselves with loopholes.

Timothy Allen: Can I ask a quick question? Back 45 years ago, were they selling properties there?

Paloma Lecheta: Yeah. It was privately built and run privately, but they were also selling into the market.

What they did is privately develop a neighbourhood. They didn’t gate it, which in my opinion is one of the most innovative things. Usually when you develop a private neighbourhood, you gate it and control whatever goes in it. He created an open neighbourhood. Most people who go there don’t even know it’s a private development. It just feels like a city neighbourhood that you walk into. There are no gates. All the houses have no fences.

He created a layer of contract on top of the city contract, where everybody who bought a piece of land that he developed agreed to different rules and committed to this new layer of governance. So private security, private water and a new way of doing things.

He created his dream city within Brazilian law. He didn’t change laws. He just created a new way of doing a city of their own in coexistence with the government. The government actually supported it, and there was nothing illegal about it. They prioritised taking care of the nature around them and following rules, but they figured out how to do things in a way that gave them more freedom.

We still pay municipal taxes, but the city does not provide the public services in that area because they are privatised. So the city actually likes it because it doesn’t need to worry about it.

Timothy Allen: Before he died, did he hear about this movement that we’re in?

Paloma Lecheta: Yeah.

Timothy Allen: Because it sounds like he was 45 years early. What you’re describing is, in a sense, Próspera without the legal autonomy. It’s amazing.

Paloma Lecheta: It is amazing. The fact that he was able to imagine this in the 1970s in Brazil, with crime rates, corruption and a lot of uncertainty, while bringing in investment from abroad, it’s literally like our original startup society in Brazil.

This one individual saw an opportunity, convinced the municipality, the state and the government to allow him to experiment, probably with very little or no information from any other experiment happening outside. Legally, they were able to create the place where he wanted his family and friends to live.

They created this 30,000-resident neighbourhood with two resorts and five beach clubs. It’s a whole infrastructure with top-of-the-world quality, which is very rare in Brazil, especially in the 1980s and 1990s. They had architects like Oscar Niemeyer helping them think it through.

He literally did what Próspera has been trying to do. When Erick Brimen, founder of Próspera, came to visit during the city-first pop-up last year, he met Péricles’s daughter, Andrea Druck, and they really synced. A lot of the challenges Próspera is going through today, she observed her dad dealing with for 45 years. Now they have taken over the company.

The company that developed it was institutionalised as Grupo Habitasul, which is a publicly listed company, and the family sits on the board. They institutionalised a lot, and it’s a listed company. But it’s amazing to hear Andrea’s stories of growing up while her dad was literally building a city for them. Now his children have taken over that dream.

This past Sunday was the city birthday, Florianópolis’s birthday. To celebrate, the company and the family donated 15 hectares of land to create a Central Park named after Péricles as a tribute and memorial to the guy who literally built this city.

It was beautiful. I was there with the family. His grandkids were celebrating. The mayor was there. There was full support for the company. It’s a brilliant thing.

Andrea said something very cool at the ceremony for the delivery of the park. They donated the park to the city. That’s how they have done a lot of things there. They build it and then donate it to the public. So now the park is no longer private land. It’s public. But they still manage it because it would be expensive for the city to manage 15 hectares of land that it did not have to manage before. They donate the property to the city, but still operate it.

Timothy Allen: Can I ask a quick question about how the city operates? Do residents pay an amount of money each year to the operating company?

Paloma Lecheta: Because they own the water source, the water and sewage, we pay for those services to them instead of to the city.

In Brazil, there is a land tax called IPTU. You pay that to the city, not to the private company. But for your water bill, in that neighbourhood you pay the private company instead of the public company.

Timothy Allen: And does the private company make a profit?

Paloma Lecheta: It’s a listed company, so their books are public. It’s a very well-known successful case. The family is behind a billion-dollar successful company. They can run the city on the back of the money they make from giving services.

Timothy Allen: That’s great. With no tax at all. It proves you don’t need tax to run a city.

Paloma Lecheta: They are doing it in a different way. It’s not about creating a new jurisdiction. That’s the layer we are now coming at, and we’re trying to leverage what already exists to take this project to another level in this modern era.

What they were able to do is understand that it is very hard for a big city or even a country to manage security, because there are so many different demands. Imagine Brazil. The Northeast has a completely different scenario from the south of Brazil. Even within Florianópolis itself, different parts of the city have different demands.

Take something simple like lifeguards at the beach. Florianópolis has limited resources. Some beaches are wavier and more dangerous. Other parts of the city have calmer waters. As a city, you have to prioritise resources. You put more lifeguards where there are more incidents, and fewer lifeguards where there are fewer incidents.

But if you’re a resident of a neighbourhood without the most aggressive waves, you may not get lifeguards. You still want them. Because of public service constraints, the city can’t provide them. So how do we solve that? We privately build the lifeguard stations, put private volunteers there to support them, and talk with the city about how to work within the infrastructure.

The city has to prioritise other things, but can we provide additional help where they don’t necessarily have to pay more, while creating businesses around it that feed that infrastructure? It’s a very interesting experiment.

Going back to our story, we were looking to stay in Brazil and have more life. I wasn’t even living in Brazil when we moved to Floripa, because it was also during the pandemic. We chose Florianópolis specifically for that, and we chose this neighbourhood because it is so strategic and safe. You also somehow have more freedom there within Brazil.

We were just there as residents, and people kept coming to visit. They would say, you guys can live here? What is this place? This is amazing.

We kept meeting the neighbours. Initially, they had built it to be a second or third residence destination. It wasn’t intended as a place where you live all year long, because it is a more isolated area of Brazil. But since we work remotely and can work from anywhere, and the city has grown to 500,000 people, other areas of the city are now a full-on city, so there is a lot to do. You can actually live there all year long.

It has an international airport that is much better now. The airport was there before, but it wasn’t that good. Now it has direct flights to Panama. In six hours, you can be in Panama and fly anywhere in North America. In 40 minutes, you’re in São Paulo. You can literally go on Monday and come back on Friday if you want. We have a lot of neighbours doing that. They prefer to have their family live there and go every week to work in São Paulo, then come back.

You can walk your kids to school with no worry that someone is going to mug you on the way. There’s a great lifestyle. You can fly to São Paulo in 40 minutes, sometimes faster than driving around São Paulo. We’re two hours from Buenos Aires and two hours from Santiago by flight. So it’s very well positioned in the south of Brazil for access if you need meetings or flights.

We moved there and thought, why haven’t we done this earlier? Our friends came to visit and asked, can I do that too? How does this work? The neighbourhood developers were very interested to learn that there were more people like us. They would say, what do you mean, you live here all year long? You don’t just come for holidays or summer?

Two and a half years ago, we sat down in this experiment and asked, can you guys bring more people? Is this actually a thing, or is it just some people who want to come here?

So we opened Founder Haus. Initially, we literally put a clubhouse, a villa, as a showcase of what it is to live in the city as a tech founder, with good internet, good quality of life and easy access. We started inviting friends from across Brazil and the world. Come check it out. Spend a week.

We started doing community events and bringing people over. So far, we have brought 1,800 founders and friends to come check it out. A lot of them come and spend one or two days for a conference. They say, wow, I’m going to bring my wife or husband next time. Because it is very family friendly. Next time, instead of coming for a two-day conference, they spend a month with their family. Then they start checking out schools and lifestyle. Then they are buying property and starting to have a physical node.

If you’re Brazilian already, it’s a very good year-long physical node where you can have a base, have a family and go to São Paulo whenever you want. We like the beach house vibe, and the neighbourhood is very good for that.

If you are a foreigner, you can go there and stay up to 184 days a year. That doesn’t make you a Brazilian fiscal resident. If you stay all year, you have to figure out paperwork and may become a Brazilian fiscal resident. But if you have the visas and permits and stay up to six months, you don’t need to pay Brazilian taxes or go into the Brazilian system.

Most of our international founders stay up to that limit and then have two or three other nodes they go to afterward. They often have a property there, rent it out in summer, and the rent can pay for the property because rentals are very good in summer. In winter, it’s not cold. You can still enjoy the beach. It gets colder, but it’s still very nice.

In the past three and a half years, we have become one of the main physical nodes in Latin America, specifically for people looking for healthy entrepreneurship. That is what we believe is the vocation of the place and what we can build as a community.

We say founders who build and builders who found. There is now this weird intersection where a lot of companies are just one solo founder building something from a computer. We are creating this very special neighbourhood we want to live in.

It started very organically. Now we have a community of neighbours who live there. A lot of them want to stay, but they need not just a great place to live, which Jurerê Internacional already is, and Florianópolis already is. The next challenge is what is missing. It’s not only about great beach houses, hotels, nice restaurants and security, which is one of the main things we already have. It’s also about what our companies need for us to operate from a place.

We have been creating a few assets in the neighbourhood that are missing. And now we are trying to figure out the jurisdiction. In Brazil, we were able to capture the individual, but their business is still staying abroad, even for Brazilians. We were trained not to operate from Brazil. We’re either in the cloud or in other jurisdictions.

So the challenge now is to talk with local government, educate them on what they are already missing by not having this, and show how we can feel better by living there and also bringing our businesses down there. Not just as people living there, but contributing to the country by bringing back our businesses.

Timothy Allen: I don’t know whether you’ve seen it, but have you seen the documentary we made called Zones of Progress?

Paloma Lecheta: I have not.

Timothy Allen: We made it specifically to show to governments. It shows the evolution of Special Economic Zones from the 1960s to Próspera and how it works. We made it so that when you visit a government, you can give them a 15-minute video with lots of important people talking about how Special Economic Zones work and what this new iteration is. That is what you’re trying to achieve, I take it. Like Próspera, to create regulatory autonomy so that businesses stay in the country.

At the moment, as you say, it’s very easy to go there physically, but you probably don’t want to found your business in the country. Once governments understand that, they’d be crazy not to want to create a special zone.

When we were talking last night, you showed me that you have an actual physical location in mind as well.

Paloma Lecheta: Before we jump to the physical location, just so people understand the challenge, the government is simply not aware this is happening.

As I’m speaking with officials at all levels of government, let’s just say the city of Floripa, they report that there are 2,000 startups in the city, which is already cool. For the size of the population, that’s a very high-density ecosystem.

What they don’t know is that most of our founders do not incorporate in the city. So they don’t even know how many founders are there. We laugh when they say 2,000, because out of all the founders coming to Founder Haus, almost none have incorporated a company in this jurisdiction.

In fact, we have many more. These founders are doing Delaware, Cayman, Switzerland, or some of them are just operating on chain. They don’t even need a company.

Even ACATE, the Association of Technology of Santa Catarina, deserves thanks for building this ecosystem. It is an amazing association that was able to take Florianópolis to where it is today in tech positioning and support the infrastructure we have on the island: great innovation hubs, centres, incentives and support for founders. But they support founders that are incorporated in the state.

For many months, Founder Haus itself didn’t open an incorporated company because we didn’t need it. So when I sat with the president of the association, I kept telling them, guys, I can’t even become an associated company because my company is abroad. You are ignoring that there are already founders here building the best companies in the world. You are just not able to see them because they are not incorporated here.

From what I’ve been able to collect, around 6,000 Brazilian startup founders are incorporated in other jurisdictions. There is also an estimate that last year 1,200 millionaires exited Brazil. A lot of them are founders.

That’s a lot of what we’re trying to solve by creating a digital economic zone in Floripa. We call it Floripa 10, 10 in Portuguese.

Timothy Allen: Did you say digital economic zone?

Paloma Lecheta: Yeah.

Timothy Allen: I’ve never heard that one before.

Paloma Lecheta: It’s like what Próspera is. Próspera was able to create a physical zone. To start, we are going to create a layer of a digital economic zone, which is a special jurisdiction. It’s a bit different.

Timothy Allen: Próspera itself doesn’t necessarily have to be physically here. Próspera is like a platform and a set of rules and regulations. In that sense, it’s very similar.

Paloma Lecheta: Last year, 1,200 millionaires left Brazil, and most of them were founders. What happens is you build your company with this silent partner in Brazil. If you’re a global entrepreneur, it’s very hard to be competitive when you have a 30 percent tax on your company, because the other founder in another jurisdiction has that jurisdictional advantage.

Jurisdictional arbitrage is one of the things that can make a company succeed or not, depending on the market. It’s not that founders want to leave. All my friends would be happy to stay in Brazil. They love it. But if your company is going to die from that toll of taxes, legislation or regulation that doesn’t comply with what you need, you have to relocate, and you really don’t want to.

A lot of the people physically exiting Brazil are not doing it because they want to. It’s a requirement of their business or whatever they are building. Brazil is not realising it, but it is forcing the best out. As a startup founder, you have to do what you have to do. If relocating makes your business more viable because you can increase margins and do more, you’re going to have to relocate to a country you don’t even want to be in, just because it gives you that edge.

Timothy Allen: Can you briefly describe the current political landscape in Brazil? What does it look like? What’s it come from? Where’s it going? That’s what you’re dealing with, right? I want people to understand what you’re up against. For example, we’ve just seen in Honduras that the socialists tried to shut Próspera down. It didn’t work, and then they got kicked out of power as well. So that’s good.

Paloma Lecheta: This is an election year, so elections are coming at the end of the year. It’s a very tricky scenario. We have Lula in power right now, which is not as favourable. But it’s very interesting because in the past year they have been approving new zonings.

Intuitively, you would think they are not as supportive of experiments like this or international relations, but last year a lot of new zonings came up. They are not necessarily as ideal as the Próspera legislation, but they do allow for experiments to bring international investors and create more.

I’m not saying it’s the best scenario, but within every government there is always an opportunity to collaborate. You just have to understand their concerns at the moment and navigate them.

What we’re building is not for this government or the next government. It’s something long lasting. A lot of what Próspera has taught us is that you have to create something secured. When changes happen, it doesn’t affect you. Of course it will affect you, but that’s what we’re doing.

We’re not in a rush. I don’t need the zoning to be done this year. We are already moving there. We are already creating ways to have this independent of the zoning. A lot of the work now is to collect and prove to the government that if they allow us to experiment, we can bring back a lot of the capital that is leaving, or convince people to set up shop here.

They don’t see it right now, so we need to make it tangible. I’m not in a rush. It doesn’t matter for me what the current situation is. Of course it does, but I’m more worried about what I can control than what I cannot. Within what’s available, how are we going to make it happen?

That’s something you learn as a founder. You’re never going to have the perfect scenario to build what you need. You have to figure it out based on your current cards. It’s a poker game. You don’t choose the cards. You just figure out how to make the game work with the resources available.

We could do the easy way out, which Patri was saying yesterday, don’t put all your eggs in the same basket. You should diversify and talk with different jurisdictions. I agree that for a lot of founders, that should be the strategy. But it is looking for the easy way out. I’m committing that I will make it work in this jurisdiction, and we will figure out how.

It is maybe a more risky thing to do, and it might not work out, but it’s an experiment.

Timothy Allen: In a way, it’s already worked out. It’s not what you want yet, but it already sounds pretty good.

Paloma Lecheta: We are doing it without their permission, and we will continue to do it. But it would be much better if we had permission. It would be better not just for us, because we would feel better as founders contributing more, but it would be much better for the country to collect even more value from what we’re doing.

It would give us more ability to bring investment and create more wealth for the country. It limits us today. If people can only stay 184 days a year, they can only spend 184 days. They are only interested in buying so much property.

I don’t even mean just international investment. I mean Brazilians who want to stay. They would stop thinking about going out or creating these magic ways of avoiding things. I think it is inevitable that Brazil will create something like this. It is inevitable for all nations that at some point they have to become more competitive. When the time comes for Brazil, we will be ready. We will have built a foundation that makes it inevitable that this is the special zone they should be doing.

At the end of the day, when people ask why we are doing all this work, we’re just trying to create the neighbourhood we want to live in. That is the fundamental thing that brings us all together.

We want to be part of this. We believe Brazil is amazing. We believe Florianópolis is amazing. We want to share that message with as many great people as we can. We want to make sure the government understands that we are there with them. We’re not extracting things from there. We want to bring more things there.

We didn’t come with a ready proposal and say approve it or not. We want to create something they also want.

So back to the land question. As a founder, I’m always trying to figure out the better way to move forward with the resources we have. So far, we haven’t been raising capital. We’ve been doing this largely with our own resources, and we’re very creative in that sense. Now we are at a stage where it makes sense to bring investors, and we are currently fundraising.

For two and a half years, we’ve been building through partnerships. This partner, Grupo Habitasul, is very strategic. One of the challenges we saw here in Próspera is creating the capability to build infrastructure in the real world. It’s hard. We’re right now in the Duna building. We saw how hard it was for them to import materials and literally build the building on an island in Honduras.

It is a very unique thing that startup founders like me don’t know how to do. How do you build roads to Duna? How do you build sewage and water? How do you actually create the physical infrastructure to support us?

There is definitely money to be made in that. They’re not naive. It’s a very good opportunity. But should we become good at that? Or can we leverage something that already exists?

Figuring out partnerships with other people who are already doing something you can stack on top of lets you focus on what you’re good at. Startup founders understand that. You don’t need to be good at everything. You need to find the core thing you are good at and then stack on top of each other.

Grupo Habitasul already figured that out. They built a city from scratch over 45 years. Who am I to think I should build roads, parks, housing, water and electricity? If we have a partner aligned with our goals who can take that over, and we can share more with them, why not?

It’s the same thing with Ipê City, going back to Jean. If there is a Brazilian already experimenting with governance tools and creating what could become the tech stack of the future city, maybe we just empower him, invest in him and join missions.

If Hugo Mathecowitsch from Tools for the Commons is already developing this digital layer for incorporating companies, why would I create that? I can add that to the stack.

One of the assets we created at Founder Haus is called Founder Desk, where a founder can literally incorporate a company within the Founder Haus ecosystem and open their business. We’re doing dual incorporation now, Próspera and Florianópolis, Brazil. Instead of me creating that, if there is a founder already building a solution for it, let’s stack it.

We’re crowdsourcing a lot of the issues and finding the best of the world at what they do, then bringing it together. We invested in Tools for the Commons initially because we want to support founders like Hugo and Jean. We’re investors in the company, and they are building the stack.

That’s how we support. We’re not just trying to build our own little experiment. We’re figuring out who else is doing experiments that can stack on top of it.

When we first thought about this, this neighbourhood specifically made sense because they already know what they’re doing. They are probably among the best in the world at doing that. Then you need to understand what their problem is today and why it would make sense for them.

Their issue today is that they built one of the most successful cases of private neighbourhoods in the region, but it has plateaued. They have other regions they developed in Brazil too, but this one has way more potential. It actually has double the land that they haven’t even developed yet. But what are they going to do? Build more big houses on the beach that people don’t necessarily want to live in? It’s a nice real estate development, but what’s the next thing they can build?

We have been part of that conversation, and they have been doing this as a community too. They had hearings with the church priest, entrepreneurs in the neighbourhood, the residents’ association and all these groups in Jurerê, to understand what the next development should be. It is 217 acres of land they have had for decades that didn’t yet have zoning permits.

What could we ask the city to build here? We were part of those conversations. We know founders. If they’re going to live on the island, they need data centres, for example. We need better schools. There are already two international schools in this neighbourhood, but we need the best schools in the world. We want to raise the bar for our kids. We need a better hospital.

It was a very cool experiment, bringing the whole community together and thinking things through. They created a proposal for what they want to build in this new zone, and last year it went through approvals in the mayor’s office. It is getting approved.

It is 217 acres. Ideally, we want to create residential development plus a lot of preservation, because the island needs to be preserved in all its nature. I think it will be a total of 64 hectares of construction, with most of it preserved, including a school and potentially a hospital.

The vision the community brought, and that they fostered, collected and put together in this public document, is a place where you live, work, go to school and interact with your neighbours. A lot like a university campus. That is the concept of this region.

That makes it the perfect place for our economic zone. That’s what we’re working towards now. This development is going to happen either way. Can we use it as a sandbox? Would the government be willing to continue working with this credible partner that has already been working locally for decades, with our startup people already living there and committing to bring more people to the area? Would they allow us to experiment?

Last year we launched a petition called Floripa 10, Floripa Digital Economic Zone. It got about 4,000 signatures on change.org. We’ve been bugging everybody in government and telling them the narrative and the story. We’ve been getting some support letters, some informal confirmations and some verbal confirmations of support that are now becoming more formal.

Potentially, we now have the land with this partner, the approvals for this new development that will happen independently of us, and the people committing that if we create this favourable jurisdiction, they will bring more resources and support. They are already flying in and setting up shop, because even if the jurisdiction doesn’t happen, it’s still amazing.

Last year, we hosted Coinbase. We flew in 15 of the best Coinbase founders to spend a week with us for Base Founder Haus. We’re tapping into all these communities. Bitcoin++ came last month. It’s the second time they came to the island to make their main conference in Latin America there.

Right now, we are partnering with all these pop-up cities and network states to manifest themselves in person there, with the intention of showcasing this possible physical node in Brazil where people could set up shop.

I speak a lot, so I’m going to take a break. If you let me speak, I will speak all day.

Timothy Allen: It makes total sense to me. I know this game plan. We’ve seen it play out before.

The great thing you’ve got is the infrastructure already there and a reason to be there. When you look at Próspera, because they came from nothing, they have different issues to solve. One of them is the community. It’s great to be here, but what you really crave in Próspera is more places to go, walkability and so on. It sounds like Florianópolis already has that.

So you’ve got that bit. It sounds like a bureaucratic problem, and unfortunately what matters most there is the government. Are they forward-thinking? Are they free-market oriented? Do they understand this stuff? Do they actually understand economics?

These are really simple and stupid things that we shouldn’t have to deal with. When you look at the problem you have, the solution is very simple. But something is in the way. Unfortunately, it’s the most annoying part of the puzzle, which is that the state gets to decide things like that.

Paloma Lecheta: What I’ve been listening to at this event is amazing to me. You guys have been doing this for a long time. We’re not total newbies. My business partner has been a seasteading ambassador for a decade now. We had a group in Brazil called Seasteading Institute Brazil 2020, which, imagine, already passed. The idea was that by then we would have a seastead in front of Brazil. It was a small group of people in Brazil who were excited and thought things would move much faster.

It’s not that we haven’t been trying to experiment with this before, but never in this scenario. It is coming together, and it might just be timing.

When you say that now it’s all about government, we put it in a big black box. But what I’ve learned from talking with other founders who have built things like this before, and also just from business, is that in the end it is just people.

When we say government, we forget that it is individuals who live in our country and decided to join the government for a reason. They put their lives into creating a career within public service. There is also the layer that is not politicians. Government includes people who are there for the long run. Some people change every four years, but most of government does not.

Those government employees are there for the long run. I’m not naive enough to think everyone has the best intentions at heart, but within the word government we have people, and within people we have incentives.

If you are able to listen, learn, share and expose people to these ideas, it is just a logical thing to do.

That’s why I’m loving this event here. I want to watch the documentary and probably share it. I think a lot of countries are not doing this today because they don’t know better. I didn’t know better. A lot of people don’t know this is even a possibility.

Cases like Próspera show something tangible. It isn’t just theoretical. Once one person runs that fast in the 100 metres at the Olympics, then the next person does it, and then everybody does it. That’s how humanity is. We have to allow more experiments, because sometimes something looks very stupid, but someone does it, and then we say, wow, that works. We should do it.

Of course, that allows for a bunch of random, ridiculous attempts that do nothing. But that is what building technology is. You try things that sound very bad.

The founder of Jurerê Internacional apparently had a famous saying, and his daughter quoted him at the city park ceremony. He used to say that the difference between crazy and visionary is execution. If you deliver, you’re not crazy anymore. If you don’t, you’re just crazy.

It’s a very thin line between what’s possible and what’s not. There is fear from a government perspective, and I would be fearful too. If I’m managing a country with 200 million people and I screw it up, that affects a lot of people. So I’m happy they don’t take every idea on board too easily.

Timothy Allen: Yes, but one of the beauties of a Special Economic Zone is that it is a sandbox. That’s the point. You don’t have to risk a lot. If you’re a government, you’re saying, let’s try this in a small area. If it works, great, we spread it around. If it doesn’t, we’ve learned our lesson. That’s literally one of the selling points of Special Economic Zones.

Paloma Lecheta: So we just have to tell them that, right? Show real cases, take them to observe. The person who starts understanding something starts being less afraid of it.

It’s challenging even for me, now that I’m deeply immersed in this. I still learn new things every day that I didn’t even know existed, like the documentary you just mentioned. It feels like an obvious thing, but it’s within our bubble, and our bubble is very small.

I think it’s inevitable this will happen. I don’t even know if we’re going to be the ones to figure it out, but someone will. Probably the only way to make it happen is for a lot of us to try.

Any founder trying to do experiments like this should go for it. Whenever we find the Hugos, the Jeans or the founders here, if we can create ways to support each other, we should. You might not be the one who figures it out, but if one of us does, we are already going to a better place.

That’s why I’m excited to find groups like this. It’s not easy. I’m not naive enough to think it is. But we just have to go.

Timothy Allen: If it’s any consolation, don’t underestimate how important Próspera’s recent experiences have been. What you just described, not having a working model, has been something we’ve all been grappling with for a long time.

From experience and from talking to most people in this ecosystem, we have just got over a hump. We’ve reached a new plateau in many ways across the board. You’ve come at a good time. There are now plenty of people who understand the process much better. There are working models.

The great thing about Próspera, from a geopolitical perspective, is that the government was really against them. The socialist government was kind of like the final boss of all these projects. If you can show that the way Próspera was set up, the legal framework, the community and everything else, enabled them to resist that final boss, which was a very authoritarian government saying, we don’t want you here, we’re going to shut you down, and they didn’t shut them down, that’s significant.

Paloma Lecheta: It didn’t work. Last January I came here for the first time. We had been following this for a while. We know friends who live here. The first person to buy an apartment in the building was actually Brazilian.

So we have been following this from abroad. But even I was concerned about coming. I thought, should I go there? That month there was a lot of media and attacks from the outside. When you look from the outside in, you don’t know what’s going on. Until the week before coming, I was still considering whether I should even go. It was very hostile for a while. We were all trying to understand what was happening.

So definitely, it shows. But even this morning, right before we got coffee, I was messaging a lot of entrepreneurs back in Brazil saying, this happened yesterday, we presented Floripa to all these amazing founders and investors. We were talking about the questions they had and what we should work on next to solve the questions people are bringing.

One of them said, “Oh, you’re in Próspera? So it actually exists?”

So I made a little video of me and Luna saying, guys, here I am. It’s real. You can touch the walls. Because even if we send them documentaries and show them the case, until you have been there it is still this cloud in your head.

Having tangible experiments that you can show people is so helpful. That’s why I’m so impressed that this guy 45 years ago started this in Brazil, because he had no reference. Today we have so many references of other cool things. Yesterday you saw all these amazing, brilliant angles, like Liberland. It may be hard to replicate that one, but there are tangible things you can show local government and use to educate them.

I’m very optimistic, as a founder should be. But I have a lot of sceptical people around me who have been supporting me. We’re just starting. This is a long run. We’re not going anywhere. Hopefully we can get the right investors, the right founders and the right government representatives to help us figure out a better way.

Nothing is set in stone. People should help us figure that out.

Timothy Allen: The great thing is that the lessons learned by Próspera are really quite simple. They have basically faced all the major problems you will face.

My perspective is that you need to focus on three things when you start a new place like that. Number one is the legal framework. Really important. If you can get a constitutional change like Honduras did, phenomenal. But your legal framework to protect your zone is very important.

Then there are two other protection mechanisms. One is your local community. If you get them on board, they become a protection model, because the government doesn’t want to annoy them. You need to offer something to them. In your case, it might be slightly different, but you mentioned a hospital. A hospital everyone can use is great. Then the neighbours see something valuable. Then businesses start. That is a second layer of protection, local people fighting for you.

The third one is the government making money. If you create a place that brings in money, is legally protected and has the backing of the community, there you go.

Paloma Lecheta: I think we can rely on all these experiments that came before us. I really don’t think we need to create anything completely new. There has already been so much experimentation within the legal aspect of zones. That’s the beauty of open source.

Someone mentioned yesterday that you don’t need to create a new legal system. If Próspera worked, what worked, and how can we bring that down? Of course, we have to adapt many things to the region we’re in. But I don’t need to create the most innovative legal framework, because someone already made a very new and good thing. Can we implement that there?

The fact that we have this partnership with zoning already adds so much value. You can build on top of it, especially because it comes with resources. You don’t need to figure things out from zero.

The beauty of open source is that you can build on top of what people are already building. Innovation doesn’t always need to be something completely different. Sometimes it is putting all the pieces together and having the best people in the world help you with that.

What we’re looking for now is people who have been doing this and know how it works, to support and educate us. As Brazilian citizens, how can we make it happen?

It would be easy for me to move to Próspera. I could do that as a Brazilian. I could live here. It’s very nice. It’s a beautiful island in the Caribbean. It’s safe. But then I am leaving my country and not helping to fix it.

Temporarily, yes, I might incorporate in Próspera until we figure things out. I might come here more often than I otherwise would. But because I have the privilege of being able to afford to come here as a Brazilian, and because it’s expensive and hard to get here, I have to think about my whole family. Is my mom going to want to come? It would be much better if we fixed home, and then over 200 million people could benefit.

When the government understands that this is where they can experiment and avoid the risks of experimenting nationally, and when they see tangible examples, I think it becomes easier.

Timothy Allen: You seriously have to watch our documentary. I have a feeling that when we released it a couple of years ago, somebody asked for Portuguese subtitles, and I think we put Portuguese subtitles on it. It lays out the whole process, tracking the history of Special Economic Zones, what they were used for historically and how this new evolution is happening now.

That new evolution includes individuals, families and living. Historically they were business-oriented things, but Próspera, as you can see, says: bring your business here, but also bring yourself here. Bring your family here and benefit from what happens here, whether it’s the tax regime, the regulatory regime or just the lovely place that it is.

From my perspective, having heard about your project for the last hour, it is a perfect project for this space. Eventually it will happen because it makes no sense for it not to happen. You have all the correct elements. That is why I picked up on the political side of it. There is a political problem in our business.

Not everyone wants to work with governments. Personally, I think this is the way to do it, to work with your host government. Some people want to go full screw-you and start their own place. But most of us want to work with governments, and the political process is complicated. Often, it goes against us.

People are career politicians for a reason. Some are there for the good of the many, but a lot of them are just looking out for themselves. Things like Special Economic Zones, on face value, appear to be a threat. They are a threat, because they make governments have to be more competitive, and governments don’t tend to like that.

If your Free Zone is doing really well and elsewhere is doing badly, the government has to say, we need to do better because people can see this thing over here doing really well and they’re going to want it. I think that’s a good thing. We want competition. But in my experience, governments in the current world would rather stop it than compete with it.

So the problem is convincing the government that it’s a win-win for everyone. You would think that shouldn’t be difficult, but it turns out it is quite difficult because governments are some of the slowest-moving organisations in the world. Not only that, but within four years they can suddenly disappear and be replaced by people who think in a completely opposite way.

You’re right to think long term, but I also think you have to strike while the iron is hot. If you have the opportunity, you really need to go for it. We’ve known projects in the past that have been happening for years, and then right at the last minute the government changes, forgets about it and has no interest in what you’re doing. You’ve got land, agreements, everything, and then it’s gone.

Fortunately, you’ve got something to fall back on. That’s why I call it the perfect project. It’s already good, but you and I know it can be a lot better. You’ve also noticed a way for the company that owns the space to evolve. They’re not necessarily looking just to build more houses. They want a new thing to do. They want to attract people there in a different way now. This is how you do it.

This is how you attract people to those places. That’s why I really like what Patri said yesterday, that founders who have built businesses before should maybe be thinking about this new era of building cities.

Paloma Lecheta: It’s a lot like any market. Timing is one of the main things. If you miss the window, it’s gone.

We’re here for the long term, but there is no waiting because it is an opportunity window. It matters too much to let it pass by. That is how we feel. It’s too important to ignore.

I don’t think I ever set my life up to deal with the government. It wasn’t like, this is the dream job. We could be chilling on the beach, playing soccer, enjoying Carnival and doing what everybody is supposed to do. But why not give it a try? If that makes our country better, if it means we don’t have to relocate, if it brings more prosperity to the island and the country, you just have to give it a go.

Then you need to make sure you know the right people who can back it legally and help move the agenda forward.

It’s hard because a place like this, this week at the Libertarian Accelerator, is very rare. Everybody here understands. But most people don’t even know what Bitcoin is yet. A lot of Brazil doesn’t even know what we’re doing.

Timothy Allen: It doesn’t matter. I’ve been through this before with other things. It doesn’t matter.

Paloma Lecheta: It matters in the sense that we have to identify who we need to educate and help. But it is often something so far outside their understanding. Whenever we go into meetings with the mayor’s office or governor’s office, they say, you guys are using words we don’t understand. It’s a whole new vocabulary. We need to bring it down to basics.

I get it. It’s different from what people usually discuss in their normal day. A lot of the government officials I talk to love it because it’s so unique and different from what they usually deal with. They get excited to educate themselves and ask what is going on around the globe.

Imagine having a country with 200 million people. Depending on what you do, you don’t have much time to go shopping around and see what’s out there. A lot of officials are just focused on trying to figure out the mess they stepped into and maybe leave things a little better than they found them.

But there is a lot of legacy that is very hard even to comprehend in the first terms of a government. They usually love our meetings because it’s a refresher. We are going toward something that makes more sense than what we have built so far, in a world changing so fast.

It looks a lot like a big company seeing AI and saying, I don’t know if I can use it because there are security issues, but everybody else is using it, so I can’t just not use it.

As a government, you may not have competition within your territory, but if everybody is leaving, you already have competition. Zones like Próspera are creating competition not just for Honduras, but for every other nation. Brazil might not be aware of the competition. I’m showing them that it is already there. We either adapt and stay competitive or we don’t.

I’m not creating the competition. I’m trying to make us more competitive, because otherwise people are going to Singapore, Dubai, Próspera or wherever they end up going. The problems will not leave Brazil.

I think it’s not that we are creating a competitive landscape internally. It’s more about whether we can become more competitive internationally so people do not leave.

Florianópolis has a very big inflow of nomads. You’re probably going to go there and not want to leave. That’s usually what happens. I have a very easy job in that sense. Do you want to come? Yes. It’s not a hard conversation.

So how do we deal with incoming people, and how many? There is also that discussion. Is this for reversing the brain drain? Is this for the Brazilian diaspora? Or is this for new incoming people? I think it goes both ways.

That’s why we’re talking so much with local government, because I don’t think it should be a one-sided decision. It’s also about what the country wants and how we can work in a way that makes sense for everybody. Again, sandbox and prototype.

Timothy Allen: I think this is another lesson from Próspera. You invite everyone. You don’t focus on one group of people. Lots of Free City projects have gone through this. They say, we don’t want digital nomads because they’re great when they come, but they leave. So let’s focus on local people.

What you realise is that the evolution of your zone involves everyone at different stages. I’ve flip-flopped between a few ideas on this, but now with regard to digital nomads, I say get them in. Get everyone in. See who stays. Digital nomads are great at promoting a place.

If you look at the history of some popular digital nomad hubs, they are not necessarily just digital nomad hubs anymore. They are places that people go because they saw them on Instagram or social media. It’s true that the funnel of digital nomads who actually stay long term is probably quite small, but it doesn’t matter. You’re creating a place and inviting everyone to opt into it. That’s the whole point of these zones.

They are not run as top-down as people are used to. They are more collaborative. You can run it top down if you want and say, we’re going to be the tech hub, or whatever. But if you don’t adapt to what actually happens, you might die as a result.

Paloma Lecheta: I disagree a little bit. Thinking about the adoption curve of any technology, you have early adopters. If you build Facebook for everybody from day one, nobody would probably understand what it does.

There is a place for looking for your ambassadors and the people who are your primary target in the early days. It doesn’t mean the zone is going to be only for them. Facebook starting with university kids doesn’t mean it can’t grow into a platform for everyone. We tend to think things are fixed, but the only certainty in life is that things change.

When you set an intention for who you want your neighbours to be, it is also good for communication. If you say it’s for everyone, chances are nobody comes.

Timothy Allen: I suppose in your case it’s a special example because you already have a city. When I’m saying that, I’m thinking of places like this.

Paloma Lecheta: By all means, I want everybody to come, because we don’t need just founders. We focus on the founder as the persona, but the founder has a family. The family needs school. It’s about the way you invite people in the early days.

As a startup, everything is limited capital. Sometimes it is not even financial capital. Your team has limited time resources. You have limited time. You cannot speak to the whole world. You only have 24 hours in a day. Maybe with OpenAI, Claude and automation you can speak with a few more people, but it’s still a very small core team with limited capability to put the word out, reach people and invite them.

It’s not that we want to create something just for that category, but who are the first 100 people you invite? The first 300? How do you communicate? What do you invite them to? Which channels do you use?

By all means, you want to create something for everyone. But in the early days, communicating to a bubble of people helps you test. If that bubble doesn’t engage, try another bubble and another bubble.

It’s probably better to have ten people who are a little bit more similar to each other as first-hand residents, then find another ten who look like that, and then another ten. Then you start expanding the bubble, rather than having one of each kind from the beginning.

If everyone is too different, it becomes hard. The way my mom uses her phone is very different from the way I use mine, which is probably very different from how a 15-year-old uses hers. If I build a web app, the interface is going to be very different for me, for a 15-year-old and for my mom. Different products, different ways of selling and different ways of interacting.

So it is better to have ten 15-year-olds using your product, then find another ten 15-year-olds and expand on that in the early days because you have limited resources. By all means, if another user who is not a 15-year-old wants to use it, you should learn from it. Why did they come? What do they need? What caught their interest? Does it make sense to go find 15 more of those people?

It’s better than spreading your resources too thin and introducing too many variables. Then you don’t even know what is working for whom. You can end up with 100 paying clients and very little comparable data.

There is a point where you need to build something that welcomes everyone. But once you start finding this ideal persona, which we tested for two and a half years with many profiles of individuals, you ask: who is this adding the most value to? Why are they coming? Who is coming? It’s all about knowing your customer.

From the 1,800 people we brought in to experience that lifestyle and understand what we’re doing, a subset of people looked like they got the most benefit from it. For that reason, they came back. Then we ask, why do they come back? What are their problems?

Not knowing your client may be a challenge of a lot of other pitches I saw yesterday. People talk a lot about the innovation of the jurisdiction, but who is it for? Good products and companies are built by identifying a problem of an individual, then identifying that there are more individuals like that, and then serving them.

We are serving people who actually have a problem. We’re not saying, we had a cool idea, here it is, do you want it? The “build it and they will come” approach is one way, but we are asking, who are they, what do they need, can we make that, and if not, what else can we make that solves the problem?

We are going from another perspective, trying to figure out why people actually want to come, and whether we can help them through it. Because we are also the clients, we have that perspective of why we would want it. Maybe our friends will want it, and their friends will want it. It’s a different way of seeing it.

Timothy Allen: In the Free Cities ecosystem, it’s a really unique example because you have most of the ingredients already. If you look at a proper startup like Próspera, which was a patch of jungle to begin with, they had to think about many different elements that you won’t necessarily need to think about.

Your primary objective is to bring founders or capital into that place, and have them stay there, not just use it as a place to have a good life while all the business is done in the cloud. That is quite an easy thing conceptually. The process of getting there is difficult, but the solutions are easy. You give people a place and a protocol or network that they want to reside on, where they want to place their business.

There are lots of working examples. But it does need to get authorised, unfortunately.

Paloma Lecheta: We have so many bright minds in the world that can figure that out with us. It shouldn’t be that hard. If you’re ruthless about figuring it out, people will support you.

It’s a matter of execution. Are we going to be the crazy ones or the visionaries? It all comes down to executing, getting it done and being okay if it fails. Every experiment should learn that part of building any company is that there is a high chance you might fail. Part of building anything in life is that there is a high chance of failure, and that’s okay.

It’s not a guaranteed success. We’re going to maximise as much as we can to achieve it. Learning from other experiments that failed helps the next one succeed. It’s all about pushing humanity to the next level.

What we currently have in government was someone else’s experiment. Learning the historical lessons of the past, at some point that was a great idea because they had something even worse. It sounds very stupid today to look at how things work in government, but at some point it was brilliant. Humanity stacks things up.

When it becomes that changing point, someone has to own it and try it. The next person takes a little bit of that lesson and tries a little bit more. If Honduras did it first, great. They took the big risk. But it’s not too late, because then we add a little bit more, and every country can keep improving.

If they allow it, which is the big question, then we take it a little further. Some things might work out, some might not. That’s the sandbox. Then someone else will look and say, that worked, that didn’t, let’s do it here too.

At some point we’re on Mars and trying there too.

Timothy Allen: Paloma, I think it’s a great project. I know a lot of the projects, and I think it has great ingredients. I wish you well with it, and I suspect it will work out just fine.

Próspera, in one sense, is a snowplough. The tip of the plough is making its way through, and people can now see it.

Paloma Lecheta: So let’s book your ticket. When are you coming?

Timothy Allen: I will come. No question about that. I definitely will. Like I said, I know the place well, and I want to come and see it.

Paloma Lecheta: You tell me the date, and we’ll be happy to host you there. I’m going to be even more excited to have this conversation with you by the beach next time.

Timothy Allen: We’re still on a beautiful Caribbean island, but Brazil would be great. I’ll be in touch. Paloma, thanks. Lovely conversation. Thanks for coming in, thanks for telling us all about it, and best of luck. I’ll follow it very closely from now on.

I think it’s a really viable project. I think it’s perfect in many ways that you possibly don’t even necessarily understand yourself yet, because you haven’t thought about it for long enough maybe. But take it from me, I think it’s a brilliant opportunity. Good luck and thanks for sharing the story. It’s been great.

Paloma Lecheta: Thank you for having me.