Rainmaking, a venture studio founded in 2007, helps corporations build startups. Its original headquarters were located in Copenhagen, Denmark, but have since moved to London, England. Rainmaking has about 300 employees across all its functions — which include more than venture building.
We spoke with Jordan Schlipf, Founder and CEO of Rainmaking Venture Studio UK, about the studio’s work; its funding and collaboration models; and the teams it employs for startups as part of our series exploring the landscape of venture studios.
Rainmaking works with large corporations, many of which happen to fall in the insurance and finance sectors, on venture building projects. But, according to Schlipf, the sector a corporation belongs to doesn’t necessarily matter — Rainmaking has experience across multiple industries and sectors. Schlipf said Rainmaking typically partners with corporates that have over a billion dollars in revenue — otherwise, he said, they’re probably too small. Rainmaking focuses primarily on Western Europe and North America in its venture studio model.
Schlipf said a corporation’s infrastructure assets and key capabilities also can make a big difference in the success of a venture. He said the studio leverages those assets for success in the venture.
“It’s not the money I care about; capital is cheap. … What I need is [a corporation’s] distribution to customers, their infrastructure assets, the logistics networks there, core capabilities that they have, regulatory licenses,” Schlipf said.
Rainmaking has worked with Barclays, Jaguar Land Rover, Airbus, DHL, BNP Paribas Cardif, and Morgan Stanley, among other corporations.
Schlipf said the Rainmaking model helps corporations to create ventures faster and more efficiently than they could do by themselves.
“Our model’s really quick to get up and running. It’s resource light, because we don’t use any of their talent; it’s a much more efficient use of capital, because we never charge them any fees, and we co invest millions from our fund. But most importantly, right at the core of what our model does, it de-risks the process of building new businesses — for the corporate partner, for us, and for the founders that we put into our portfolio ventures,” Schlipf said.
The model also helps to increase success rate and return on investment, he said.
Rainmaking has worked in partnership with BNP Paribas Cardif to create Wylly, a site for French consumers to sell used cars to dealerships virtually; in partnership with Tryg to create Undo, an app that looks to reinvent the insurance agency; and other ventures with large corporations.
Schlipf said there are four major steps to Rainmaking’s model for collaborating with corporations. Those steps are as follows:
Pre-seed — this step typically takes about eight weeks, and Rainmaking focuses on coming up with new venture concepts to present an investment pack to its fund and the corporate.
Seed — this step, which takes 12 to 15 months, allows the founders to iterate the business and prove product-market fit. It requires a 50/50 capital split from Rainmaking and the corporation.
Series A — this step lasts for four to five years. After founders approach Rainmaking and the corporation with their Series A ask, they work to build the venture out so it could nearly stand on its own. At this point, the corporation and Rainmaking come to a valuation agreement that will allow the corporation the right to acquire toward the end of the Series A round if they want to
Take Control (once scaled) — this step occurs between years four and six and is when the studio exits to return ownership to the corporate partner.
Rainmaking divides up the investment for a new venture with their corporate partners. The studio has a global fund that invests into all of the ventures it decides are worthwhile to put its money toward. Schlipf said the studio contributes anywhere from 1/3 to 1/2 of the capital that goes into most of the projects.
Once a corporate partner decides to take control, it buys the venture back from Rainmaking.
For corporate ventures in Western Europe, Schlipf estimated the average investment from Rainmaking to be $5 to $6 million. In the US, he said, it’s roughly twice as much.
Rainmaking selects two co-founders to lead each corporate venture it works on. Schlipf said Rainmaking picks those co-founders, and that the corporation has only a veto.
“We’re looking for the right skill sets across the pair that we think are going to be most critical for that business to be successful. We always invest in a CEO, CTO; we always invest in two co-founders — we will never invest in a single founder. And those co-founders then build their team. … They have autonomy of building their own businesses.”
Schlipf said Rainmaking and its founders headhunt for the right people on the teams — and that there is no shortage of talent inside the domains they recruit from.
Rainmaking builds teams externally from the corporate partner.
“We never ingest corporate talent. So if we need some domain knowledge, the founders and their team will work with certain specialists within the corporate side,” he said. “But there are no wanna-preneurs in our ventures.”
What’s the Key Question a Corporate Leader Should Ask Before Partnering with a Venture Studio?
Schlipf said corporate leaders need to ask themselves, “Do you have aligned incentives, and does everyone have skin in the game?” before partnering with a venture studio.
He said having alignment allows for better outcomes because the incentivization moves corporates and studios toward common goals.
“You need to hurt if it goes wrong,” he said.