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Rivian CEO took out second mortgage to start multi-billion dollar company
Rivian CEO RJ Scaringe could personally earn up to $4.6 billion over the next decade if the electric automaker hits specific profit and share price targets laid out in a new compensation package recently approved by his company’s board of directors.
The potential payout, which is earning comparisons to Elon Musk’s Tesla pay plan, likely never would have been possible had the 42-year-old Rivian founder — and his father — not made a “financially highly irrational” decision. In 2009, they took out a pair of second mortgages to secure the money needed to get the company off the ground.
Scaringe has said that he formed Rivian, initially named Mainstream Motors, the day after he earned his PhD in mechanical engineering from the Massachusetts Institute of Technology in June 2009. He dreamed of starting an automotive business since childhood, when he helped a neighbor restore classic cars, and researched lower-emission combustion ignition engines as part of his PhD program at MIT’s Sloan Automative Lab.
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His first business project: building a hybrid sports car. But he lacked enough funding to launch a capital-intensive business: A car company can require “billions of dollars … thousands of engineers [and] a manufacturing plant that would take years to build,” Scaringe said in an October 2024 interview at his undergraduate alma mater, Rensselaer Polytechnic Institute.
Scaringe had no employees at the time, and hadn’t yet designed or built any of his proposed vehicle’s underlying infrastructure or technology — so investors weren’t eager to supply funding, he said.
“It’s this incredibly high-risk proposition. So, because of that, my dad and I actually financed the beginning [of Rivian]. I had a house that I refinanced [and] my dad had a house that he refinanced,” said Scaringe, adding: “His love for me and belief in me led him to do something that was financially highly irrational…If it were not for that, it would have been impossible to get going.” Both refinancings were second mortgages, The New York Times reported in July 2019.
Scaringe initially bought his own home in high school with money he’d saved from two summer jobs — working in a restaurant and also as an apprentice machinist — and then earned extra income renting the home, he told the “How I Built This” podcast in a September 2022 episode.
From sports cars to electric trucks and SUVs
The Rivian founder hasn’t publicly disclosed how much money he secured from the two refinancings, but the funds were enough — along with some investments from “friends and family” — to begin hiring Rivian’s first engineers and start building a prototype vehicle, he said on “How I Built This.”
The company also rented a warehouse from Scaringe’s dad, an engineer and founder of Rockledge, Florida-based Mainstream Engineering Corporation, which makes a range of HVAC and refrigeration products.
Scaringe hired roughly 15 engineers and designed a four-seat, sports coupe that he hoped to eventually sell to prospective customers for around $25,000, he told the Orlando Sentinel in May 2010. After two years of development, he shelved the prototype, aiming instead to build something that could have a bigger impact on the auto industry, he told “How I Built This.”
“The thought of going out and building what Tesla had already done [with the electric Tesla Roadster] … just felt like that wasn’t a problem that the world needed [to be] worked on,” Scaringe said.
Scaringe went back to the drawing board, which he called one of the “most perplexing and challenging times” of his life. He was drawn to the challenge of building all-electric pickups and SUVs, he said — popular vehicle categories that produce more emissions than smaller cars when powered by gas engines.
In 2012, Rivian raised more than $1 million in funding, led by Saudi Arabian auto distributor Abdul Latif Jameel. Scaringe met the chairman of Abdul Latif Jameel, a fellow MIT alum, through the school’s alumni network and successfully pitched him on his vision for Rivian, he told “How I Built This.” Rivian ultimately raised $10.5 billion in funding from the likes of Amazon and Ford before going public in 2021, the same year the company’s electric trucks and SUVs finally hit the market.
Today, Rivian has a market value of more than $20 billion, with Scaringe owning a stake of about 1.4% in the company, according to Forbes. If Rivian hits all of the profit and share price targets in Scaringe’s pay package over the next decade, its market value could increase by roughly $153 billion and Scaringe would accrue a larger stake in his business, the company said in a Nov. 7 filing with the U.S. Securities and Exchange Commission.
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