Since the improvement in relations between the United States and Cuba, culminating in Barack Obama’s recent visit to the Caribbean island, US startups have been moving into Cuba in search of business opportunities.
Following the thaw in US-Cuban political relations, sealed by the historic visit to Havana by President Obama in mid-March, US startups have begun rushing towards what they see as a potential new Eldorado. Inter alia, Irish online payments specialist Stripe has plans to help fledgling Cuban companies to incorporate in the United States and take advantage of the US banking system to finance their businesses. To this end, Stripe is working with the Havana-based Merchise Startup Circle, a discussion and support group oriented towards startups, the new technologies and entrepreneurship, to target promising Cuban companies likely to benefit from this service. Stripe’s Cuban venture is part of the Stripe Atlas programme, whose purpose is to help foreign entrepreneurs access the US financial system. For a $500 fee, a Cuban startup can incorporate as a US company, open a US bank account and obtain basic legal and tax advice. This should enable them to raise further funds to speed up the development of their business and access a market that is immeasurably larger and much more competitive than the Caribbean island has known to date.
Cuba’s digital gap
Stripe’s move is quite ambitious when you consider that only 5% of all Cuban households currently have Internet access. Until 2008, Cubans were even forbidden by law to buy personal computers. In 2014 the island of eleven million inhabitants had only just over a million computers, only half of which had an Internet connection and moreover browsing activity was subject to serious official restrictions. However, times have changed and the government is now planning for half of all Cuban households to possess an Internet connection by 2020 and for 60% of the population to have a mobile connection. In July 2015, the first (paid for) WiFi access point was installed in Havana, soon to be followed by around thirty more. Meanwhile the Cuban government can count on Google – which has announced that it is working to provide high-speed Internet all over the island – to help reach those targets. The Mountain View-based web giant recently signed a partnership deal with a Havana museum, the Museo Orgánico Romerillo, to enrich the visitor experience by using Chromebooks – laptops running the Google-designed operating system Chrome OS – and Google Cardboard – a virtual reality/augmented reality platform developed for use with a head-mount for a smartphone – connected to the Internet network owned by local carrier ETECSA. In an article published on the Google blog, Brett Perlmutter, Cuba Lead, Google Access, declared: “We hope this installation will enable people for whom Internet access is scarce to browse the web and find information. We’re excited that Cuban children will be able to try out virtual reality to explore sites from around the world – from Stonehenge to Port Hercule – the same way that children in other countries do.” Perlmutter underlined that these efforts are just a first step towards setting up new digital services in Cuba.
Tourism a potential goldmine
Digital sector specialists are however far from being the only US-based startups looking to do business in Cuba. With tourist numbers up by 20% last year, the hotel industry is another target area. Airbnb has now received special authorisation from the Obama administration to roll out its services in Cuba. In fact the private accommodation intermediary obtained a special dispensation to operate on the island as long ago as December 2014, thus becoming the first US company to do business with Cuba since a tight embargo was put in place in 1962. However, initially only US visitors were allowed to use the services of the San Francisco-based firm. The authorisation is now official, which means that tourists from all over the world will be able to do so. This new opportunity is potentially very lucrative for Airbnb. Cuba is its fastest-growing market, with 4,000 additional homes signing up to offer private accommodation last year. Starwood Hotels and Resorts has meanwhile signed an agreement to renovate and manage two hotels in Havana. This opening up of the hotel sector to US companies is not only good news for the companies concerned, but also for the Cuban government, as the addition of more and better-quality tourist infrastructure is likely to encourage more foreigners to visit the island. Perhaps the only caveat here is that the Cuban government will need to avoid following the example of Cancun and ensure that tourism does not transform the island into an overcrowded tourist trap.