The latest success of Mate Rimac, who managed to secure an investment from the Chinese company Camel Group worth 30 million euros, deserves applause. Especially since eight years ago, de facto, Rimac had just emerged from his garage. However, we will not write psalms, odes, and praises to Rimac. With this latest investment, he will embark on a production expansion, for which, as the company announced a few days ago, he will hire another 100 people. Whatever one thinks of Rimac and his way of working (as there are conflicting opinions), his business model has somehow begun to change the thinking about how a company operates.
How the Chinese entered ownership
66.4 million kuna is the current share capital of Rimac Automobili, which was 20,000 kuna two years ago.
Mate Rimac is usually buttoned up for Lider’s journalists. To gain a more detailed insight into how his company Rimac Automobili has changed over the past few years, we decided to peek into its records at the Commercial Court in Zagreb. A considerable number of papers in several folders would leave no one indifferent, and the fact that everything was recorded and attached to this file shows the seriousness of the business. This file mainly contains decisions from shareholder meetings (let’s call them that) and data on changes in their strength. Mate Rimac remains the majority owner with a 62% stake, while the Chinese investor Camel Group has climbed to second place with a 19.35% stake. The company’s share capital is now 66.4 million kuna, while it was 20,000 kuna two years ago.
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The Chinese did not ‘enter’ ownership with the entire amount of 30 million euros (of which three million goes to Rimac’s electric bicycles Greyp Bikes). They paid for their ownership stake 12.8 million kuna by depositing that money into the company’s share capital, and the remainder up to the targeted amount will be paid into reserves for further investments. How Rimac and Camel have formally resolved their cooperation is not publicly known. Namely, they have, as Rimac stated, signed a ‘subscription agreement’. For most Croatian entrepreneurs, this is probably an unknown term. Simply put, it is a contract between two people/legal entities that defines their rights and obligations, and it does not have to be public and filed with the court.
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– The ‘subscription agreement’ is likely structured so that there are certain KPIs (Key Performance Indicators) and CPs (Conditions Precedents) that, when fulfilled, then something belongs to someone. The security can be a patent or some other intellectual property right, as that seems to me to be the only concrete value of that startup. Additionally, Rimac certainly has obligations such as maintaining reputation, continuing work on projects, and similar – says lawyer Danijel Pribanić. He believes that the Chinese want technology that they can use for mass production, which is what Rimac has been lacking – mass production.
What is a ‘subscription agreement’
This is a type of contract between an existing and potentially new shareholder. Such a type of contract is not visible in the Court Register, although it relates to business shares. This contract does not have to formally transfer ownership, but the activation of the transfer of business shares, management rights, or some specific assets occurs due to the reasons stipulated therein. – Given that this is a confidential contract that regulates future relations, it serves, in layman’s terms, as a kind of social contract, as a system of rules for the mutual relations of old owners and investors. It is actually a secret social contract, or a social contract where the owner is limited in his rights, but no one knows or has the opportunity to find out how he is limited. This is all aimed at preserving confidentiality about the true nature of the transaction – explains lawyer Danijel Pribanić.
Possible scenarios
– One scenario of this investment could be that the Chinese company decided to follow Rimac in production, use him as a brand, and keep him as a frontman, and later take over the entire production and patents. According to this scenario, Rimac would be a kind of renter of his previous achievements, because if he wanted to use the Chinese only for production, he could have done so with a regular business bank loan – emphasizes Pribanić.
Unlike the more conservative thinking of lawyers, investor and entrepreneur Hrvoje Prpić has a slightly different stance. For example, as an investor in his latest investment, he required the company to pay out 30% of profits each year. He notes that it is generally normal for investors to accept a certain risk, invest money, and hope for the best. Thus, ‘return’ the investment and wait for an exit.
– Almost never, if entering the ownership structure of a startup or such a tech company, does an investor get a stake as large as 30 or 40 percent. Of course, depending on the amount of investment and conditions, one gets five or ten percent. Even 20 percent is not usually obtained at once. However, since investments in such companies happen multiple times, the investor (if the same) increases his stake from five to ten, then to 15 percent, and so on. Quite often, such an investor reaches 30 to 40 percent ownership – explains Prpić.
With fresh money, Rimac will more strongly embark on development and growth, introduce new products, and strengthen global presence. His goal is, as he says, to build a new, state-of-the-art manufacturing facility and launch a new supercar. The latter is planned for Geneva in March next year. Rimac, by producing the supercars Concept One and Concept Two, shows what he can produce.
Photo: Pixsell
This is a very interesting business model because his goal is not, at least not for now, to mass-produce and sell cars, but to produce and sell parts, software, and technology to other manufacturers that are in the mentioned cars.
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– Investors get ownership with their money, and Rimac gets money for the development of his idea. The investor benefits from future profits and the growth of the company’s value. As more investors appear, this is not done on an exclusive basis. Rimac has not given anyone exclusivity, thereby sharing the risk. If we look at the foundations of capitalism, then the conclusion is clear – the foundation is the sharing of risk. One entrepreneur does not risk everything, but rather several do. And the potential for profit for Rimac’s company is enormous because it is a product that knows no boundaries – emphasizes consultant Željko Perić.
100 new people will be employed by Rimac Automobili, and after the latest Chinese financial injection, they are going into production expansion.
He adds that Rimac’s products are not of a local character; his market is the whole world.
– When you have an investor who is exclusively from your own country or region, then you are somewhat market-limited. And Rimac has investors from the Far East to the West – emphasizes Perić. He believes that Rimac is a playful guy who has taken business seriously, driven by research and development, and does not burden himself with the end product.
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– In which direction the story around Mate Rimac will develop is uncertain. Whether it will end with a top-notch car or the best battery in the world or unimaginably good management system, no one knows – says Perić. He hopes that he will not embark on overly ambitious projects. Namely, it would not be the first time in some business that one simply burns out in great desire.
Co-ownership insurance
– I think that this cannot happen to him so easily because he is not alone. This can happen to Todorić, who financed everything with debt and always disposed of other people’s money, whether it was bank money or suppliers. And Todorić did not renounce his ownership all this time. Rimac has, he has co-owners and does not decide alone where to invest money; there are more heads involved, and they are not managers working for a salary, but people who have invested their money. It will be much harder for Rimac to experience what happened to Todorić – concludes Perić.
Whatever Rimac’s final plan may be, there is still room for new investors in the ownership structure. He can still ‘share’ 12% of the company’s shares while remaining the majority owner. And maybe he will. Or maybe he will relinquish majority ownership because it may not be important to him, but rather development and technology are important to him.
