Cuba Journal

How Cuba Can Build A Startup Ecosystem

Inscribed at his grave in London is one of Karl Marx’s most powerful statements, “The philosophers have only interpreted the world, in various ways. The point, however, is to change it.”

Written in 1845, Marx’s revolutionary thinking set off a century defined by the struggle between communism and capitalism – culminating in Cuba’s emergence as the only communist state in the Western Hemisphere.

The ideological battalions underpinning communism are finished, and now there is a new revolution for Cuba to embrace as it slowly pivots towards economic freedom.  For a variety of reasons, entrepreneurs and the tech sector offer what Cuba needs most without risking what the Castro’s fear the most.

For a variety of reasons, entrepreneurs and the tech sector offer what Cuba needs most without risking what the Castro’s fear the most.

The Castro’s have made it clear they will not accept the frontiers assigned to them from the United States. For example, in response to Google’s offer last year to bring free Internet for all Cubans, Cuban Vice President Jose Ramon Machado Ventura said, “Everyone knows why there is no Internet in Cuba, because it is costly. There are some who want to give it to us for free, but do not do it so that the Cuban people can communicate, but in order to penetrate us and to do ideological work to achieve a new conquest. We must have Internet, but in our way, knowing that it is the intention of imperialism’s to handle it as a way to destroy the Revolution.”

The thorn of this comment is not so much intended for the United States but reflects where Cuba stands, filling the doorway, between the past and a future – without a new script.  It is a fertile time for Cuba not so much in terms of tangible social and economic development – things move slowly in Cuba – but for the possibility to plant the seeds for improved economic performance and to craft a new script – on the terms Castro can accept and that will have generational impact.

Luckily, there are many examples where developing countries have adopted their own style of development that harnesses the vitality of a vibrant startup ecosystem.  And, most appealing to Castro, there are no examples of startup communities fomenting anti-revolutionary thinking and regime change.  So embracing the idea of shaping Cuba’s future through entrepreneurs and the development of a robust tech sector is an ideal, country-level product-market fit.

Startup Chile

Startup Chile prominently promotes a motto that Cuba should consider: “Instead of changing the world through revolution, we can change the world through #innovation.”

Startup Chile is a program that is part of Chile’s economic development agency called Corfo. The program was created in 2010 and attracts early stage, high-potential entrepreneurs to bootstrap their startups in Chile from all parts of the world – and from Chile itself. Start-Up Chile emerged as an innovation hub impacting all of Latin America.

The project started in 2010 as a pilot, leading to the 2011 application processes with the goal of bringing 300 startups to Chile during the first year. The goal was to create 1,000 boot-strappers by the end of 2014. The first application process in 2011 brought 87 startups to Chile from over 30 countries, after having received 330 applications.  The following year, more than 650 startups applied.

Start-Up Chile has gained impressive international recognition, having been published in Forbes, The Economist, BusinessWeek, and TechCrunch (among many others) and has inspired other governments around the world to have similar programs such as those in Britain, Greece, Italy, Brazil, Jamaica and Peru.

The organization is supported by the Chilean government with special consideration from the Ministry of Economy, the Ministry of Foreign Affairs, and the Ministry of Internal Affairs.

Rwanda

According to Daniel Isenberg article, “The Big Idea: How to Start An Entrepreneurial Revolution“, economic studies from around the globe consistently link entrepreneurship, particularly the fast-growth variety, with rapid job creation, GDP growth, and long-term productivity increases. In Rwanda’s case, its domestic policies propelled the country in a new direction. Rwanda moved from 143rd to 67th in the World Bank’s 2010 Ease of Doing Business ranking. And on another subindex of the same study, the ease of opening a new business, Rwanda ranked 11th worldwide.

“Unfortunately, many governments take a misguided approach to building entrepreneurship ecosystems. They pursue some unattainable ideal of an ecosystem and look to economies that are completely unlike theirs for best practices. But increasingly, the most effective practices come from remote corners of the earth, where resources—as well as legal frameworks, transparent governance, and democratic values—may be scarce. In these places entrepreneurship has a completely new face.” – Daniel Isenberg

From 1995 to 2009, Rwanda’s per capita GDP has almost quadrupled.  As Rwanda’s president, Paul Kagame, has put it, “Entrepreneurship is the most sure way of development.”

Airbnb in Cuba

Airbnb could be a game changer for Cuba – and the first of many tech companies to directly impact the course of Cuba’s economic trajectory. According to founder Brian Chesky, in 2015 Airbnb’s fastest growing market is Cuba. The number of Airbnb guest homes in Cuba is now in the thousands since the service was launched in April of last year. In hotel terms, this is the equivalent of 5 or 6 major hotels coming on line within a few months. And this momentum is likely to increase as Cubans realize the economic potential in room renting through the Internet.

In a traditional sense, Airbnb’s economic impact is relatively simple to measure. Everybody wins. What’s different about Airbnb in Cuba is the social impact. Every peso collected by a Cuban through Airbnb is also a deposit in the bank of that person’s emotional stability. What is such a simple concept – renting a room – contains transformative potential by exposing Cuban homeowners to a rare phenomenon in low-income countries: the prompt seizure of economic opportunity. Inevitably, competition will drive homeowners to invest in their houses using local skilled laborers; employment will grow in diverse sectors as homeowners spend profits locally rather than the profits being remitted to the Cayman Islands-based LP investors of a traditional hotel project.

Minimum Viable Product

Experts suggest Cubans are the best educated in Latin America. According to Ted Henken, author of Entrepreneurial Cuba: The Changing Policy Landscape, Cuba graduates 4,000 IT engineers annually.  Furthermore, Cuba’s experience with rapprochement with the United States has demonstrated Cubans’ resourceful under conditions of resource constraints.  The TV series, Cuban Chrome, displayed Cuban ingenuity (Cubans call it “a lo Cubano”) and a thick thread of resilience that Cubans display in the face of the daily struggles to obtain and maintain basic material goods.  These are the ingredients for an engine-of-growth pivot and the presence of a foundational “minimum viable product” for Cuba’s rulers to allow entreprenuership and the tech community to flourish.

Here is a summary of Isenberg’s key principles that government leaders should focus on to start an entrepreneurial revolution:

  1. Stop Emulating Silicon Valley.
  2. Shape the Ecosystem Around Local Conditions.
  3. Engage the Private Sector from the Start.
  4. Favor the High Potentials.
  5. Get a Big Win on the Board.
  6. Tackle Cultural Change Head-On.
  7. Stress the Roots.
  8. Don’t Overengineer Clusters; Help Them Grow Organically.
  9. Reform Legal, Bureaucratic, and Regulatory Frameworks.
How Cuba Can Build A Startup Ecosystem was last modified: February 1st, 2016 by