April 24, 2019

In Puerto Rico, Building a Disaster-Proof Business Is Part of Recovery

By Molly Schwartz, The New York Times

For nearly a year after rain stopped falling on Puerto Rico, the island was without full power. For months, thousands of businesses closed and did not reopen. And for nearly as long, internet was scarce. So when Emmanuel Oquendo and Israel Figueroa Fontánez found connectivity along a central strip in San Juan known as the Milla de Oro (the Golden Mile), they plopped down on the sidewalk, opened their laptops, and worked from the street.

“It was during Hurricane Maria that we found a purpose,” Mr. Oquendo said.

Mr. Oquendo and Mr. Figueroa had been trying to start a company, BrainHi, that automated communication with doctors’ offices. If a human receptionist did not pick up the phone, BrainHi’s artificial intelligence chatbot would step in to answer questions, helping the offices that were severely understaffed after the hurricane.

Now, one and a half years later, BrainHi has clients around the world. The 15-person team has recently moved to a new office on the Milla de Oro. From his window, Mr. Oquendo can see the place on the sidewalk where he worked on his laptop after the storm.

BrainHi got its start as one of the companies in a start-up accelerator program in San Juan organized by Parallel18. For a little over three years, Parallel18 has worked with 168 tech-based start-ups, each of which receive $40,000 in equity-free funding, co-working space and coaching. Parallel18 also started a pre-accelerator program after Hurricane Maria to foster local start-ups in earlier stages of development.

In September 2017, a week after Hurricane Maria made landfall, residents in San Juan gathered around a free Wi-Fi hotspot outside the Telegrafo building to use the internet.CreditVictor J. Blue for The New York Times
Even before Hurricane Maria, Puerto Rico had been in a public debt crisis. An exemption in the United States tax code had given mainland companies tax breaks on income earned in Puerto Rico. But that exemption had expired, large corporations had been moving their factories off the island and, for that and other reasons, like the inability to declare bankruptcy the way full states could, the economy fell into a long recession from which it has yet to recover.

The hope is that by investing in entrepreneurs like Mr. Oquendo and Mr. Figueroa, Puerto Rico’s economy will be able to withstand exogenous shocks like changes to the tax code, predatory investments or future natural disasters. As the start-up ecosystem grows, the entrepreneurs in the center of it are trying to power a new wave of locally owned businesses that are resilient enough to weather future turmoil.

The numbers show that these entrepreneurship initiatives may be working. According to a University of Puerto Rico study, in March 2018, businesses in Puerto Rico started opening at faster rates than they were closing. The rebounding of businesses across the island was not universal, and many have not recovered. But the Global Entrepreneurship Monitor, a data set on entrepreneurship that is used by the United Nations and the World Economic Forum, published data showing that, from 2017 to 2018, entrepreneurial activity in Puerto Rico was on the rise.

Denisse Rodríguez Colón, the executive director of Colmena66, a resource hub for people trying to start businesses in Puerto Rico, was surprised by the immediate uptick in entrepreneurial activity after Hurricane Maria. Ms. Rodríguez thought that she would be out of a job after the hurricane. Instead, Colmena66’s hotline started ringing constantly.

“People were saying, ‘I’ve lost everything, so that idea I’ve had for three years, I’m not afraid anymore. I need to build this business because I’m out of a job,’” Ms. Rodríguez said.

Colmena66 and Parallel18 have offices next door to each other, and both receive funding from the nonprofit Puerto Rico Science, Technology & Research Trust. The two organizations have different missions, but they work together closely to create a pipeline of support for new business owners.

The number of applicants to Parallel18’s incubator program are the highest they’ve ever been, the group says. Last year’s cohorts of start-ups almost doubled their revenue generated from the year before. Marie Custodio, outreach manager at Parallel18, attributes some of the increased start-up activities to a change in attitudes after the hurricane.

“It was an awakening,” she said. “Before the hurricane, people thought that having a corporate job or being an employee was safe. But after the hurricane, nothing was safe or secure.”

Manufacturing Social Change
Nine miles south of Parallel18, in the Caimito district of San Juan, sits a small yellow factory surrounded by palm trees. Inside there are two sewing machines, a blanket stitch machine, some hand sewing workstations and to-do lists on the wall. These are the manufacturing headquarters for the footwear start-up Isleñas.

Karla López Rivera, the founder of Isleñas, moved back to Puerto Rico in April 2018 to join Parallel18’s pre-accelerator program. Born and raised in Puerto Rico, Ms. López had been living and working as a footwear designer in New York City.

“Maria really pushed the decision for me to move back,” she said. “I’d been away for 14 years. I had those feelings of urgency to come back and help.”

The company has three employees working in its factory in Puerto Rico, where it manufactures four styles of espadrilles. By June, its team will have expanded to six people. These employees are a big reason that Ms. López wanted to start a company.

“We’re committed to social change through manufacturing,” Ms. López said. She is becoming partners with another female-founded start-up, Retazo, to provide employment for skilled seamstresses who lost their jobs when large garment factories in Puerto Rico closed in the 1980s and 1990s.

A Homecoming for Engineers
A few weeks ago, BrainHi hosted a día familiar, or family day, for the company. Seeing his co-workers surrounded by their families was a heart-touching moment for Mr. Oquendo, who is chief executive of BrainHi. Five of his employees left jobs at Silicon Valley technology companies, including Airbnb and Lyft, to move back to Puerto Rico and work at BrainHi.

“They were reunited with their families,” Mr. Oquendo said. “It gave validation to the importance of helping people come back home and be with their families, boyfriends, girlfriends, and loved ones.”

Creating well-paying jobs that entice young, skilled employees to stay in Puerto Rico has been a constant struggle for the island’s economy. Over the past 10 years, Puerto Rico has lost 10 percent of its population as workers leave the island in search of better job opportunities elsewhere. Since Hurricane Maria, another 130,000 people, or 4 percent of the population, have left.

Mr. Oquendo and his co-founder Mr. Figueroa, who is BrainHi’s chief technology officer, met when they were engineering students at the University of Puerto Rico at Mayagüez, on the west coast.

But when Mr. Oquendo graduated, he was one of very few of his classmates who stayed in Puerto Rico. “Basically, all of my friends have left the island one year after they graduated,” he said, citing better job opportunities in the mainland United States.

But Mr. Oquendo is trying to do his part to reverse the tide of out-migration by creating jobs and hiring back some of the engineers who left. And he’s not alone.

One of the companies to graduate recently from Parallel18’s accelerator program, Libros787, moved into offices next door to Parallel18’s. While Libros787 has not moved far from Parallel18’s tight-knit community of start-ups, the company’s founders have made a business of selling Puerto Rican books to the far-flung diaspora.

“We wanted to create a bridge to people living outside Puerto Rico, in the U.S. and around the world,” said Carlos Goyco Blechman, co-founder and chief executive of Libros787.

Libros787 sells Puerto Rican books for about half the price of its competitors, like Amazon. Mr. Goyco is able to sell these books so cheaply because he sells directly from publishing houses in Puerto Rico. According to Mr. Goyco, partnering with publishing houses became easier after Hurricane Maria.

“People were very willing to help us,” Mr. Goyco said. “It wouldn’t have been that easy to collaborate with other companies without the hurricane.”

Mr. Goyco got the idea to start Libros787 when Hurricane Maria cost him what he called a good corporate job. He had been working in book distribution for large multinational companies in Puerto Rico, like Walmart and Walgreens. When Hurricane Maria hit, many of these stores never reopened.

Two months later, with support from Parallel18, Mr. Goyco had Libros787’s website running. Today, he said, the company processes from 400 to 600 orders each month and continues to grow steadily.

The Parallel18 staff is also looking to grow the successes of their program beyond Puerto Rico.

“What happened with Puerto Rico, it didn’t happen in only Puerto Rico, but the whole Caribbean,” Ms. Custodio said, referring to the damage caused by Hurricanes Irma and Maria.

She hopes that by building a start-up ecosystem across the Caribbean, they will be better prepared to deploy regional solutions in response to future hurricanes. Together with Facebook, Parallel18 is making plans to begin Startup Hub Caribbean, which will be the first accelerator that Facebook has set up in the Caribbean.

Ms. Rodríguez also sees tech start-ups, which are adept at aggregating resources across supply chains, as key players in strengthening Puerto Rico’s self-sufficiency.

“In Puerto Rico, we imported 85 percent of everything we consumed. After the hurricane, that percentage went up to 95 percent because we lost all our crops. That puts us in a very vulnerable position as a community,” she said. “Our food chain in P.R. is so segmented and fragmented that that doesn’t happen naturally unless we have entrepreneurs coming in.”

Ms. Custodio has already seen proof of how this can work. Every week, she gets local Puerto Rican produce delivered to her doorstep, courtesy of PRoduce! Home Box, a food delivery start-up that graduated from Parallel18’s latest cohort.

The start-ups coming out of Parallel18 have also captured the attention of the federal Small Business Administration. After meeting the founders of Cleancult, a former Parallel18 start-up that makes green cleaners, Linda McMahon, the agency’s administrator, organized a stop in San Juan for the S.B.A. Innovation Research tour in November 2019.

“We’ve worked from sidewalks, we’ve done so many things,” Mr. Oquendo said. “I think as a company we’re super resilient. There’s nothing that is going to stop us.”