By Lydia Belanger, Entrepreneur
Puerto Rico was struggling long before Hurricane Maria devastated the island in September 2017. The Puerto Rican government had been looking for potential solutions toward economic recovery, and it had turned to Chile with the goal of emulating its successful government-funded accelerator, Startup Chile.
Sebastian Vidal was a member of the founding team of Startup Chile. The goal of the program, he describes, was to “attract talent to Chile to help change the entrepreneurial mentality towards the global-minded entrepreneur.” Over the course of five years, he worked with key government and business stakeholders and the World Bank on how countries could best empower and attract entrepreneurs with a global scope. In 2015, Vidal accepted an invitation from the Puerto Rico to design an accelerator on the island. Today, that program, Parallel18, is nearly three years old.
Parallel18 has adapted its program in the wake of Hurricane Maria, first ensuring that those who remained on the island had their basic survival needs met, then pivoting to focus on local entrepreneurs for the time being. In an interview with Entrepreneur, Vidal shares how circumstances in Puerto Rico have affected entrepreneurship on the island in a way that has accelerated, rather than limited, innovation and growth.
This interview has been edited for length and clarity.
1. What is Parallel18 and what were the initial goals of the organization?
Parallel18 is a global accelerator based in Puerto Rico. It aims to attract but also retain local companies that can set operations in Puerto Rico, but grow in bigger markets like the United States or Latin America. We take companies that have a product in the market already, that are making $5,000 to $25,000 in revenue a month. We do this with the goal of creating a new generation of local entrepreneurs that have a global vision and feel that they can do something on the island.
Fifty percent of the engineers that graduate from the University of Puerto Rico leave the island after they graduate. We believed, at that time, that Parallel18 would help retain that talent. And for the talent that is already here, if we built a global program, where we created interaction between global startups and local startups, we would change that mentality and create a new economy.
We started in December 2015, and we opened an application process at that time where we offered a 20 week — five months — acceleration process. I would say 80 to 90 percent of the mentors were from the U.S., so most of the expertise that they got was how to market to the U.S., how to price. That was the curriculum. We also do funding. We give $40,000 equity-free grants. We help startups open their bank accounts, if they don’t have one.
Besides that, we allocated a small fund to invest in some of the companies we’ve accelerated. We typically invest about 10 percent of the whole cohort. We select up to 40 companies per cohort, and we do two cohorts per year. So far, we have accelerated over 100 companies from 15 different countries, and we have received more than 2,000 applications from 50 different countries.
2. What happened when Hurricane Maria hit?
We had to postpone the program. All of our international companies left — we asked them to leave. Even the local companies, we had to relocate them to other places either in Latin America or in the U.S. The biggest thing was how uncertain everything was.
A month later, we decided to resume the program in January 2018. One hundred percent of the companies that we had been accelerating came back. We also designed a new program that focuses only on Puerto Rican startups, just to create a recovery initiative to help and support them. We weren’t leaving our core, to support innovative companies, but we understood that there was a big amount of entrepreneurs thinking about doing something about what was happening on the island in terms of the hurricane. We launched that program, called Pre18, like a pre-accelerator. More than 300 companies in Puerto Rico applied, and we ended up selecting 40 early-stage local companies.
3. What challenges did startups face given the storm, and how did you support them through those difficulties?
If you don’t have power, you cannot load your computer. The first thing that we did was to figure out a way for our coworking space to have the minimum things working, like a generator. In our building, we have fiber internet, so after two to three days, we already had internet in the office. We opened the office to the entrepreneurs, and it became like their home. They’d spent the whole week, including Saturdays, Sundays and nights. And me, too — it was kind of our home.
Our team became some sort of a support service. How do we relocate this guy? Find an office for this startup? How do we find food? How do we find water? Those were the day-to-day tasks for our team.
The first week, it was all about basic needs. We got together and did some pasta for 40 to 50 people. Then water, then transportation. Then a week later, we had a gas crisis — there was no gas. I remember going on my bike, running around everywhere finding stuff, communicating with people, going to meetings. Everything was devastated at that time.
The entrepreneurs, themselves, got much more attention than before. I see the ecosystem now, and it is definitely more resilient.
4. Why do you think it’s more resilient?
Entrepreneurs are problem-solvers. That was one of the reasons behind building Pre18, the pre-accelerator. The key for us was maintaining the focus on supporting the entrepreneurs and the needs they had at that moment.
We had companies growing 400 percent after Maria, like EntregaMeds, a prescription-medicine delivery company. After Maria, you didn’t have a way to go to a pharmacy, or medications weren’t available. A startup called BrainHi does artificial intelligence for virtual assistance for physicians, and they have their grown 70 percent a month in the past five months. It’s the fastest early-stage growing company in Puerto Rico, and it’s because they’re problem solvers.
There are a lot of people coming to the island just to offer help. There are a lot of donations that were given to the island focusing on small businesses, startups and other economic development initiatives. I think that is going to keep growing. I don’t know how to prove it, but it has been a mindset since the hurricane. I think the only proof that we have is, we launched a program just for Puerto Ricans, and we received 300 applications. Our average is 50 companies from Puerto Rico. So getting 300, I couldn’t have imagined it.
5. Were the fast-growing companies founded after the hurricane?
The companies that grew after the hurricane had gone through the Parallel18 accelerator. They already had a company, they were growing their business and grew even more after the hurricane. One of these companies is one that sells insurance online, Aseguratec. They figured out that people would be buying insurance, because they wouldn’t want to pass through another natural disaster like this.
StageBoom is a marketplace that offers a big pool of musicians to different events and hotels. Right after Maria, musicians were leaving Puerto, heading to Miami or New York. But music is so important for Puerto Ricans that StageBoom decided to launch an event to give them hope and happiness — I’m talking about mid-October 2017, people were stressed, panicking, sad. They held a concert and more than 600 people attended. Musicians and event organizers learned about the platform, and it started growing and growing. It recently raised money and has been growing sustainably for the last four to five months. That’s another good example of a company that saw an opportunity and is growing around that.
6. What are the program’s preparations for the upcoming hurricane season?
We recently launched the new application process for the Parallel18 program despite the risk of future hurricanes. And we got another record — we received almost 600 applications from about 40 different countries. So that gave us a lot of hope that Parallel18 will keep growing.
7. How are you incorporating the international community and companies back into Parallel18?
On the Pre18 side, we are actively looking for funds that can allow us to keep supporting local entrepreneurs with this program. We have seen that people are interested, but we don’t have enough funds, so we are actively fundraising on that side.
8. In addition to funding, how else can people support entrepreneurship efforts to support Puerto Rico?
It’s not about asking for money. It’s about asking people to understand what happened here, to come here, to help us rebuild and to support local entrepreneurs. It’s very important for people to see how Puerto Rico is dealing with this. The amount of people who are still without power. But also, it’s important that they see that there’s a group of entrepreneurs that want to grow, that are growing and are part of a community that needs help.
The first step is for people to come to the island, to support and help entrepreneurs, and then, if they want to support with funding, they are more than welcome.
9. What about support in the form of information or consulting, that could potentially be done via phone or email?
What kinds of support do the entrepreneurs in the accelerator today need from experienced entrepreneurs?
We’re working with 40 local early-stage companies at the moment, and we know that not all of those business models are new. Some are similar to others that worked in the U.S. Anyone who worked in a company that was really similar and made it grow could offer to sit down with one of the entrepreneurs for an hour and tell them about some things that they don’t have to do, as well as how to avoid the same mistakes.
And for the growing companies, they need to learn about growth strategies and fundraising opportunities — how to fundraise, how to approach investors. If there are investors interested in coming to the island to sit down and teach companies how to fundraise, that would be fundamental.
Then, for entrepreneurs themselves, Puerto Rico is a great place to be an entrepreneur. In San Juan, you can have a great lifestyle, the bilingual workforce — all of that is attractive. As of today, there are a lot of problems to solve.
10. How would you categorize the primary industries that are ripe for innovation?
Forty to 45 percent of Puerto Rico’s GDP is manufacturing. Then, you have services and tourism, which is a small percentage. Agriculture is even smaller. I think there’s an opportunity for innovation in those industries. In the tourism industry, how to attract more people and make it more efficient within the island. In agriculture, how to be efficient and create more produce, because Puerto Rico imports almost 90 percent of the produce it consumes. The third one is energy. Energy in Puerto Rico is very expensive, and we need to figure out and understand alternative energy supplies to the island.
This story has been updated to accurately state the dollar amount of equity-free grants Parallel18 awards.