Em Conversa: Accelerating Puerto Rican Fintech Development with Parallel18

Em Conversa tries to uncover the secrets of Latin America (LatAm) which has caused fintech market to boom, from being worth less than $50 million in 2016, to $2.1 billion in 2022. This week we spoke to Dr. Héctor JirauCEO of Parallel18to learn more about the Puerto Rican market and how local businesses can use Parallel18’s services to expand.

Hector Jirau, PhD, serves as the CEO of Parallel18, an innovation center focused on providing funding, mentorship, business connections and investment to underrepresented founders worldwide. Prior to this role, Dr Jirau served as director of operations and investment in the organization until January 2023. Currently, h.e leads Parallel18 to achieve its established metrics, support new partnerships and exponentiate its global recognition as a proven results-driven accelerator.

Among other things, he has a PhD in biochemistry, an MS in financial engineering, a BS in cell and molecular biology and a diploma in computer science. Dr Jirau has previous experience as a paralegal in Unity Growth Funda late-stage private equity firm with investments in Stripe, SpaceX, Klarna, Epic Gameand other top performing companies.

Sitting with Fintech TimesDr Jirau explains why the Puerto Rican market is one to watch and how Parallel18 is helping innovators accelerate their growth:

Can you tell me more about the company and your role in it?

Parallel18 is a performance-driven international start-up program at the top level with a social mission: oprovide entrepreneurs from around the world with access to high-quality business training, access to capital and networks to help them scale globally. At the same time as we work to position Puerto Rico as a unique hub for innovative companies and technology.

The program is part of Puerto Rico Science, Technology and Research Trust, a private non-profit organization. It was created to maximize Puerto Rico’s participation and create jobs in the global knowledge economy by promoting investment and financing of scientific and technological research development.

The organization manages and hosts over a dozen initiatives. These range from grants and technical support to meetings and educational resources for researchers, entrepreneurs, farmers, investors and other groups.

We provide:

• Training and mentorship (pre-18 12 weeks; P18 20 weeks; Xpand 16 weeks)
• A guide and methodology for tracking growth and structuring the company for scalability
• Equity-free financing (pre-18 US$25,000; P18 US$40,000)
• Connections with potential customers in top companies and potential business partners
• Access to capital through our curated investor network.
• Additional support through the Puerto Rico Science, Technology and Research Trust in areas such as intellectual property; technical assistance to access funding for research, development and commercialization; matchmaking with top research talent and organisations, among other expert resources.

P18

Our accelerator program welcomes companies worldwide to help them scale to global markets. Our team works hard to provide high quality business education, develop business relationships and create investment opportunities for all our startups.

• Over 4,500 applications received (P18 Gens 1 to 10)
• 252 companies have completed Parallel18
• 85 percent of the companies that have been through Parallel18 are still in operation.
• Industries – As of Gen.6, 64 percent of our companies were B2B, while 36 percent were B2C. The program remains Industry Agnostic, having served entrepreneurs from all areas.

Before 18

Our local pre-acceleration program focuses on helping innovative, early-stage Puerto Rican startups with global potential go to market. As a result, we close the access to capital and education gap that allows them to focus full time on their new business and dream big.

• More than 1079 applications (Gen. 1, 2, 3 and 4)
• 138 companies have participated in the programme
• 50 of them have participated in P18
• Gen. 5 started in January 2023 with 25 startups

Xpand

Xpand Puerto Rico is a post-acceleration program run by the Puerto Rico, Science, Technology & Research Trust. It does so through Parallel18, and Banco Popular de Puerto Rico which aims to support innovative startups from the island in the growth stage. Those who are ready to expand towards achieving sustainable growth and scaling into new markets.

The program seeks to combine Banco Popular’s capabilities and resources with the domain expertise, scaffolding and community of Parallel18’s network. A network consisting of +600 investors and +75 corporate partners. At the same time, using other Puerto Rico Science, Technology and Research Trust entrepreneurship pillar programs, such as Colmena66, provides a huge market research database that can benefit participating companies.

“Puerto Rico’s fintech innovation panorama is second to none. It has many companies leading the way in their niche areas. Such as credit enhancement, credit access, insurtech and capital access platforms.”

What are some fintech trends in Puerto Rico and how do they compare to the rest of the region and the world?

Puerto Rico’s fintech innovation panorama is second to none. There are many companies that lead the way among their niche areas. Such as credit enhancement, credit access, insurtech and capital access platforms. In addition, we see a lot of innovation in adapting new verticals to look after socially and economically disadvantaged individuals.

You have to understand the strong resilience of Puerto Ricans amidst the various trials of time that have passed through the island. Hurricane Maria, Hurricane Fiona and The Great Earthquake of 2020 are just a few examples of the difficulties.

Local innovators have in their mind the capacity to give back to society while enjoying to change the world. This can clearly be seen in how they have adapted their technologies. Furthermore, they have refined their models to attest to both their local populations in Puerto Rico and provide access to alternative populations to expand.

We have seen that fintech remains a hotspot for capital allocators worldwide. Puerto Rican startups are making a paradigm shift to new vertical integrations. This could create an opportunity for larger and more established institutions to expand via a merger and possibly an acquisition.

What is Parallel18 doing to help improve the sector in Puerto Rico?

The main activity is through our pre-acceleration, acceleration and post-acceleration programs (pre18, p18 and Xpand respectively). To understand the complexity of these companies’ needs and the resource access they can benefit from, we have partnered with industry leaders for this specific purpose.

When it comes to our fintech startups, we have a strategic collaboration with MasterCard. While it benefits our alumni and the ecosystem as a whole, it targets additional opportunities for fintech startups. Especially those in payments.

What are some unique challenges associated with Puerto Rico’s fintech sector?

I wouldn’t pick a single challenge specifically aimed at the fintech sector per se. Rather, challenges that reflect our innovation ecosystem as a whole. Understanding that Puerto Rico is a small island, the flexibility and scalability of fintech must take into account export capacity.

Let’s compare that to the mainland United States. An innovative company with similar technology can expand organically through reach and expand into neighboring states with relative ease. Puerto Rican innovators must compete with exports to a relatively different geography. In the same way, it happens when Puerto Rican fintech startups want to expand to neighboring countries in LatAm.

A classic example is an expansion to Colombia or Mexico. Despite being in the highly regulated financial sector, fintech has major limitations when it comes to regulatory hurdles. These tend to be expensive, thus raising the bar in terms of difficulty for startups in these sectors. Similarly, the differences in customs, culture, currencies and demographics pose a significant challenge when it comes to fintech.

Plans for the future

Over the past three years, we have seen great innovation in fintech. Especially in payment, insurtech and credit niches. Startups like Rain jacket is revolutionizing insurance technologies based on the concept of parametric insurance with a streamlined process and end-to-end solutions. All while you are trusted by investors such as Softbank, Anthemisand Divergent Capital.

Another fintech startup work to look out for is Kiwi Credit. It focuses on providing access to small short-term loans, and making it possible for individuals to build up credit while having easy access to cash. At the same time, Kiwi maintains high loan repayments and a low default rate.

As we can see, institutional investors have put their trust in fintech innovation in Puerto Rico and, indirectly, their trust in Parallel18’s innovation hub. In doing so, they rely on the capacity to build strong companies and accelerate competitive workflows.

This is our driving force and reason to continue expanding our roadmap and growth plans. We are about to launch our first batch of Xpand, our post-acceleration program for local startups. This is the first expansion of our hub and the beginning of what we believe will be a global reach. We want to ensure that underrepresented and underserved entrepreneurs have access to resources, capital and networks to take their ideas to the next level.

Final thoughts

As mentioned, in my opinion, the challenges are not related to the technology or the innovation, but are more associated with the demographics and socio-economic factors related to the scalability. Nevertheless, Puerto Rican fintech startups have a slight advantage in one particular area; the fact that Puerto Rico has a bilingual workforce serves as a window of opportunity for local startups to enter LatAm and mainland US markets, while also serving as an acquisition target for larger mainland US companies to enter LatAm , and vice versa.