Tax haven. Rich man's paradise. Starbucks on the Caribbean. Manufacturing hub.
Puerto Rico conjures such images but has never been seen as an early-stage technology hub. Yet a combination of economic crisis, opportunistic investors, and enterprising locals is coalescing to create the beginning of what could ultimately become a great startup story.
From the 1960s to the Great Recession of 2007, Puerto Ricans saw themselves as stable, predictable people in a stable, predictable country. U.S. companies in turn saw Puerto Rico as the primary source of low to mid priced, mid to highly skilled labor immediately outside the States, and locals could depend on a plentiful source of stable, local middle-class manufacturing jobs.
According to Puerto Rican leaders, there was little appetite, or need, for innovation. But the Great Recession changed all that, eliminating many jobs and reducing security, sparking a deep debt crisis, and ultimately striking hard at the ethos of a stability-oriented, satisfied culture.
"We are now looking toward the U.S. to find more partnerships and more effective access to capital for our early-stage startups," said Frankie Chévere, executive director of the Puerto Rico Trade and Export Company, which is a government entity designed to ease trade with different sectors of Puerto Rico's economy. "We are diversifying our economy, and technology and related services are areas we are focusing on while seeking new opportunities to export."
Changing Culture and Building an Ecosystem
Many countries have suffered similar crises and decline, with many failing to rise from it. But in Puerto Rico, the crisis has pushed its leaders to look forward and outward, and to aggressively showcase the commonwealth's incredible demographics, logistics, tax advantages, and natural beauty.
It's inducing wealthy immigration and investment into the island as a key part of the solution and alternative to austerity. Nowhere is this aggressive optimism more evident than in Puerto Rico's startup community, which is nascent but has some very exciting stories and proponents and may be a key future driver for the local economy.
"The economic crisis in Puerto Rico brings public and private together to encourage entrepreneurs," said Kenneth Kay, the founder of San Juan Tech Meetup and the Jumpstart New Jersey Angel Network, which is the second largest angel network in the Tri-State Region. "One example of this collaboration is the San Juan Tech Meetup, which is the only tech meetup that meets at a capital building."
Case Study: Spotery
One such story is Spotery, perhaps the island's most exciting early-stage technology startup. Spotery can be seen as the B2B Airbnb: seeking to create a marketplace of spaces and facilities for rental through a two-sided marketplace of large holders of inventory and interested consumers.
Puerto Rico's export authority and local investors recognized the potential early, sending Spotery to SxSW 2014, a full year before launch, to tell an exciting story. The same leaders then invited East Coast investors, myself included, to the H3 Tech Conference in San Juan to hear pitches, and ensured Spotery a featured slot, precipitating interest from several of us.
Combined with interest from San Juan Tech Meetup and local angels, that could lead to notable funding for Spotery. Its product launched November 22, so there is a long, long way to go to fruition, but the exciting buzz around this story, and others, shows the clear interest and potential of early technology here and the local interest in it.
"As an incentivized startup," said Spotery's CEO, Ricardo Davila, "we have great economic development advantages, among them a 4 percent fixed income tax rate, a 50 percent marketing match, and a 50 percent tax credit on R&D expenses--which can be sold for improved cash flow and serves as an excellent tool to attract potential investors. It's an exciting ecosystem."
What Comes Next
Puerto Rico's leaders hardly see early-stage technology as a panacea. Technology can only be one part of a thriving diverse economy, and it takes dedicated years of work to build a world-class startup ecosystem, with the island early in that process.
Yet, mired in crisis, Puerto Rico has turned to startups as one potential solution and, considering the number of investors who have already relocated, and rising stories like Spotery, there may be very exciting times ahead.
Lately, people outside Puerto Rico only hear the bad news, but a thrilling startup scene is emerging on the island with truly exceptional growth opportunities.
As Isabel Fernandez, program director for Puerto Rico's Protech initiative, which spearheads many of the island's startup efforts, says: "Our message is very clear. Puerto Rico is eager to partner with innovative minds ready to transform ideas into successful investments."