It has been a mixed year for Cuba’s tech scene. “At this point, it’s not something that is a boom,” says John Caulfield, former Chief of Mission of the U.S. Interests Section in Havana, and co-founder of theInnovadores Foundation, “but it is something that’s happening.”
Thanks in part to the coordinated efforts of international foundations and tech accelerators, a number of Cuban entrepreneurs are getting their tech businesses off the ground, the majority of them designed to serve the needs of Cuba’s emerging private sector. Developers of apps for everything from restaurant reviews to Cuba’s version of Craigslist have taken the lead, with more heavy-duty programing for U.S. corporations in the wings.
But the substantial cost of a “cuentapropista” license, limited internet connectivity, and a lack of banking services still makes going into a private IT business a risky venture for Cubans.
The Innovadores Foundation (IF) began working in Cuba two years ago with the goal of creating an incubator for young entrepreneurs in the areas of programming and design. “Our goal is to help create an ecosystem in Cuba where intelligent, hardworking Cubans have a reason to stay, and don’t go to work abroad, or make money for people abroad,” explained Jono Matusky, who oversees the foundation’s operations in Havana.
“You know—actually work in Cuba and solve problems in Cuba,” said Matusky. “That’s sort of our dream.”
Innovadores is now in the third year of its internship exchange program, which brings Cuban high school and university students to work with the NYC-based accelerator Grand Central Tech. Down the road they hope to create a full incubator program on the ground in Havana, which will provide interns with access to resources like the internet, software, computers, mentorship, and a co-working space.
Much like any foreign organization or business hoping to establish a presence on the island, the Innovadores Foundation has been in talks with government officials for years, and still awaits approval from the Ministry of Culture. “We got in at a nice time, and because we have a good partner down there, it was going well,” said Matusky, referring to the Ludwig Foundation of Cuba (LFC). But after an uncertain year, the government has begun hitting the breaks on international projects.
“There was a Rolling Stones concert, Chanel show, all these big international projects,” Matusky said. “I think the government felt like they weren’t sure if everything that was happening was what they wanted in terms of the cultural standpoint. So they sort of froze a lot of approvals for international [projects] under the Ministry of Culture.”
Then, of course, came Donald Trump’s election, and Fidel’s death. “The government is not taking any big risks right now, so we’re just being patient, and doing what we can in the meantime.”
While they wait for the green light to open their Havana incubator, Innovadores is still able to provide mentorship and other non-material support to local cuentapropistas—licensed workers in the private sector—such as connecting one young designer to New York fashion insiders, and helping an artist-programmer duo run an Indiegogo campaign to raise money for their video game.
Matusky, himself an engineer and the co-founder of a gluten-free microbrewery in Pittsburgh, refers to the young Cuban entrepreneurs as “teams” even though legally, they work as individual cuentapropistas under either a programmer’s or artist’s license.
Right now, there are two ways these innovators can work together on projects. “There’s the one model where it’s a team of equal developers,” said Matusky “and they’re sort of sharing things, and doing it without a contract, based on trust.” The other model is that of sole proprietorship, where one designer or programmer owns a business, and hires other licensed entrepreneurs who “are basically contractors, if you look at it from a U.S. [perspective].”
For the Innovadores incubator—and for the native tech industry as a whole—internet access remains the sticking point.
“We could do almost everything we wanted to do right now without approval from the government,” Matusky told Cuba Trade. “We could rent a space. We could invite different people to come and work there. But as soon as you want to provide internet access, that’s where you really run into difficulty… You have to have explicit approval from the government, and then they want to know what you’re doing.”
The Talent Pool Awaits
Although the introduction of wifi hotspots and cuentapropista licenses have made it possible for a small entrepreneurial tech scene to exist in Cuba, the government’s cautious steps forward have not been enough to counter the global demand for skilled IT workers, which has lured talented computer scientists off the island for decades.
In a conversation with Cuba Trade earlier this year, John McIntire, chairman of the Cuba Emprende Foundation, said that “a disproportionate number of people who have left in the last few years are people in their 20s and 30s who are computer programmers. They know their skills are employable, and they can earn a lot more money outside of Cuba.”
McIntire’s Cuba Emprende Foundation has for years been raising money to support the Catholic Church of Cuba’s Proyecto Cuba Emprende, which trains potential entrepreneurs with the skills they need to run private businesses. So far more than 2,000 students have gone through programs administered via the church, including many in the high-tech sector, with an eye toward remaining in Cuba.
One U.S. employer who runs a small development team in Cuba describes a desperate “war for talented programmers” among the most advanced technological companies around the world. He believes Cuba’s pool of skilled techies is waiting to be discovered. “If you have a place like Cuba where there are talented people, the companies that could potentially hire them are going to find them.”
The biggest concern, he says, is the lure of higher wages off island. “It’s bad there right now,” he added. “There’s a big gulf between the cost of living and wages. How much longer is it sustainable to pay people a dollar a day?”
Cuba’s private tech sector may be nascent, but it’s state tech sector is not. The government has a long history of training coders that goes back to the 1970s, when developers were busy creating programs for the sugar industry. At the time, Cuba hoped to improve its centrally run economy through cybernetics—the science of communications and automatic control systems—the same degree that young Innovadores interns are graduating with today.
The severe economic collapse of the late 1980s left few practical applications for software development on the island, according to Merdardo Rodriguez, one of Cuba’s leading computer scientists and co-founder of the first “official” video game development group (Merchise). That’s when the IT sector became concentrated on outsourcing, “which I think is very sad,” he said, “because I consider these practices to be a form of modern exploitation.”
Things have improved significantly since the 1990s, when all but a few Merchise members left the island to work for overseas firms. Wilder Mendez, who was hired by an Ottawa game developer, recalled that “back then, an investor had to import everything into Cuba: computers, printers, keyboards, cameras, scanners,” and they had to travel to Cuba with cash to pay workers. “Now, a lot of investors can go to Cuba and find decent programmers everywhere that already have their computers at home.”
But the limited connectivity is still a problem. Even as outsourced labor, “a Cuban programmer still cannot compete with a Vietnamese programmer, due to the simple fact that the Cuban does not have internet in order to submit regular updates of his or her work, to test the app, and get paid for it,” Mendez told Cuba Trade.
Cuba’s internet provider, ETECSA, happens to be one of the government’s highest earning companies. “It’s a monopoly,” said Caulfield, “and it’s essentially funded by foreigners because it’s really foreign customers who are able to afford the fees—not necessarily directly, but through money they send to their relatives in Cuba.”
Wifi hotspots cost $1.50 an hour, and though black market resellers are offering cheaper connections using Connectify software and NanoStations, the cost remains steep when compared to the average monthly salary in Cuba which hovers around $28.
To rent a decent sized work space with internet access would cost around $1,000 a month, “which is astronomical if you’re just an independent freelance developer,” said Matusky. “You couldn’t afford that, so you would rely on public wifi spots. And if you don’t live near a public wifi spot, then in terms of working with international customers, you are kind of screwed.”
Despite these significant obstacles, Bernardo Romero, founder of the IT startup InGenius, says he prefers to develop his business in Cuba rather than just being part of the workforce in another country—even if he could earn a lot more money elsewhere. Besides the obvious benefits of staying in one’s own country, near family and friends, “I have potential here. These days in Cuba there are a lot of opportunities, and there will be a lot of opportunities opening up in the future.”
Since Ingenius was first profiled by the Washington Post two years ago, Romero has added one more employee and expanded his office. Thanks to a new wifi hotspot, he gets reception in his office and no longer has to run to the park to communicate with clients. Still, the majority of his customers are smaller companies “because of the conditions we have [here]—the payment method and slow internet,” said Romero. “Small businesses have more flexibility to work within our limitations.”
Romero was also a winner of 10x10k, a competition by the Cuba Emprende Foundation and #CubaNowthat brought a group of ten startups to the U.S. for a two-week accelerator program. His new project, Cubazon, is an online marketplace that allows people outside of Cuba to order items produced by the Cuban entrepreneurs, for delivery anywhere on the island.
The Internet Throttle
Insiders are quick to point out that programmers and coders don’t need the internet to do their jobs. But the lack of connection limits entrepreneurs, who are the ones creating the need for a local tech industry. When Cuba Emprende and #CubaNow co-sponsored their 10x10k contest to support tech startups, they were flooded with proposals for apps and websites geared toward the service industry: advertising platforms, B&B finders, cultural guides, platforms to connect freelancers with clients, “all kinds of stuff that you’d see in a developing economy,” said McIntire.
But the developing economy can only grow as fast as it’s communications system. “The poor people in the Airbnb,” Caulfield told Cuba Trade. “It’s very frustrating [for] them because they have to go out into the park every day to see who’s registered, and they’re often running into problems where they get double booked because they can’t be online all the time.”
If the government wanted to provide Cubans with internet access, “they could do it tomorrow,” said Caulfield. “They could certainly purchase the technology, and there’s plenty of people offering it to them. It’s just that so far they are reluctant to go there.”
The Cuban government understands the economic necessity of improving communications, “but they’re very worried,” Caulfield told Cuba Trade. Because internet access undermines the government’s monopoly on information, “They’re constantly back and forth between opening it up a little [and] kind of restricting it.”
As Cuba emerges from a completely state-controlled economy to one with a stronger private sector, there will be inevitable growing pains as the old methods give way to the new. It is a two-step-forward, one-step-back process of evolving economic models. As part of this process, one of the challenges faced by the high-tech entrepreneurs of Cuba is just how public they can make themselves as independent, private businesses.
“Unfortunately, as soon as something gets a lot of international publicity, that the government is not running itself, it causes problems,” Caulfield told Cuba Trade. “This is just part of the reality of living in Cuba.”
Last August, for example, a much-anticipated startup weekend organized by the Merchise Startup Circle was shut down a day before the event, all of the hotels suddenly claiming “technical problems.” Earlier that spring Stripe Atlas, a U.S. firm that helps internet businesses get started, announced it was partnering with Merchise to help Cuban entrepreneurs gain access to bank accounts and accept payments from all over the world.
The deal gained considerable international attention, and President Obama even mentioned Merchise during a speech in Havana. But following this burst of international attention, Merchise was erased from Cuban media.
On the other hand, Cuba’s underground railroad of digital entertainment—El Paquete (the packet), a collection of video and music transferred by flash drives—has for years been distributed across the island without government interference. At last year’s eMerge technology conference in Miami, one of the Paquete’s founders said this tolerance was based on the absence of anything political in the content.
It’s not certain what this means for young entrepreneurs who are learning how to brand themselves, or for the new waves of students graduating from such academic powerhouses as the Universidad Tecnológica de la Habana José Antonio Echeverría, named after the famed student leader who died during the Revolution.
“Most of the entrepreneurs that we work with are the ones that are willing to be a little more public in what they’re doing,” Matusky said of the Innovadores interns. “So a lot of them are kind of developing apps, are developing websites, and are deliberately generating press and generating a little bit of attention.”
It’s a “much riskier proposition,” said Matusky, as opposed to working under the table in the grey market—but it is happening. “I’m seeing guys that were doing just the independent software development, and now they’re seeing that other people are being successful trying to make apps, and they’re able to talk about it, the government isn’t shutting them down. And so I think that now people are starting to take a little bit more risk and try new things.”
So far the mission of the Innovadores Foundation, which is to foster onshore businesses and create a reason for talented graduates to stay in Cuba, seems well aligned with the interests of the government. “That’s why I think we’ve been allowed to operate as we are,” said Matusky, “and why we’re still hopeful about our program and our internship.”