Rivian CEO RJ Scaringe could earn up to $4.6 billion personally over the next 10 years if he can meet specific profit and stock price targets set out in a new compensation package recently approved by Rivian’s board of directors.
The payout, which could be compared to Elon Musk’s Tesla pay plan, likely never would have been possible without the 42-year-old Rivian founder and his father making “highly economically irrational” decisions. In 2009, they each refinanced their homes to secure the funding they needed to get their companies off the ground, he said in an October 2024 interview at his undergraduate alma mater, Rensselaer Polytechnic Institute.
Scaringe said he founded Rivian, originally called Mainstream Motors, the day after he earned his doctorate in mechanical engineering from the Massachusetts Institute of Technology in June 2009. He dreamed of starting a car business from an early age, helping neighbors restore classic cars and researching low-emission ignition engines as part of his PhD program at MIT’s Sloan Institute for Automotive Research.
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His first business project was building a hybrid sports car. However, it lacked sufficient funds to launch a capital-intensive business. Auto companies can require “billions of dollars…thousands of engineers (and) manufacturing plants that take years to build,” Scaringe told RPI.
Investors were reluctant to provide funding because Scaringe had no employees at the time and had not yet designed or built the underlying infrastructure or technology for his proposed vehicle, he said.
“This is an incredibly risky plan, which is why my father and I actually financed the start-up (of Rivian). I had a house that I refinanced, and my father had a house that he refinanced,” Scaringe said, adding, “My father’s love for me and his belief in me led him to do things that were very financially irrational…without that, it would have been impossible to move forward with the business.” The New York Times reported in July 2019 that both refinances were second mortgages.
Scaringe said on a September 2022 episode of the How I Built This podcast that he bought his first home in high school with money he saved from two summer jobs at a restaurant and as a mechanic apprentice, and then rented it out to earn extra income.
From sports cars to electric trucks and SUVs
Rivian’s founders have not disclosed how much money they secured through the two refinances, but they told “How I Built This” that the funds, along with some investments from “friends and family,” were enough to hire Rivian’s first engineers and begin manufacturing prototype vehicles.
The company also leased a warehouse from Mr. Scaringe’s father, an engineer and founder of Rockledge, Fla.-based Mainstream Engineering Corporation, which manufactures a variety of HVAC and refrigeration products.
Scaringe told the Orlando Sentinel in May 2010 that he hired about 15 engineers to design a four-seat sports coupe that he hoped to eventually sell to potential customers for about $25,000. After two years of development, he shelved the prototype and instead aimed to build something that could have a bigger impact on the auto industry, he said, “Here’s how we built this.”
“The idea of going out and building on what Tesla had already done[with the Tesla Roadster electric car]we felt that wasn’t a problem the world needed to address,” Scaringe said.
Scaringe was back to square one, calling it one of the “most perplexing and difficult times” of her life. He was drawn to the challenge of building all-electric pickups and SUVs, he said. These are popular vehicle categories that produce more emissions than smaller cars when equipped with a gasoline engine.
In 2012, Rivian raised more than $1 million in funding led by Saudi car distributor Abdul Latif Jameel. Scaringe said he met Chairman Abdul Latif Jameel, an MIT alumnus, through MIT’s alumni network and successfully sold his vision for Rivian, “how I built this.” Rivian ultimately raised $10.5 billion in funding from Amazon, Ford and others and went public in 2021, the same year its electric trucks and SUVs finally hit the market.
Rivian currently has a market value of more than $20 billion, according to Forbes, and Scaringe owns about 1.4% of the company. If Mr. Rivian meets all of the earnings and stock price targets in Mr. Scaringe’s pay package over the next 10 years, the company’s market value could increase by about $153 billion and Mr. Scaringe’s business could accrue more equity, the company said in a Nov. 7 filing with the U.S. Securities and Exchange Commission.
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