Rainmatter Capital: Unveiling Unique Funding Model for Startups

Zerodha, a prominent name in the Indian financial and investment landscape, through its investment arm Rainmatter Capital is set to inject a fresh capital of Rs 1,000 crore to provide funding support the startup founders and promote sustainable development growth. The investment will focus on sectors like health, education, and climate change. 

The capital has been offered in a unique structure that has no exit mandates to investors in order to benefit founders.

Traditional venture capital investment models typically prioritize exiting investments within a relatively short timeframe, often within seven to eight years, through secondary sales or  Initial Public Offerings (IPOs). 

How Will The Startup Founders Benefit Through "Patient Capital"?

Nithin Kamath, the co-founder of Zerodha, took to Twitter to share the company's vision and strategy. "We are now increasing our commitment by increasing the allocation by an additional Rs 1,000 crore in a perennial structure or with the ability to stay invested forever," he stated.

We started @Rainmatterin in 2016 to support fintech startups working on helping people do better with their money. So far, we have invested ~ Rs 400 crores in 80 startups. In this journey, we realized that having patient Indian investors backing Indian founders is helpful. We're…

— Nithin Kamath (@Nithin0dha) August 10, 2023

This innovative approach aligns with the ethos of providing "patient capital" to founders, particularly in the Indian startup ecosystem, where building resilience and sustainability may take longer compared to more developed markets.

Rainmatter Capital’s Investments So Far: Diverse and Impactful Sectoral Focus

Rainmatter Capital, which was established in 2016, has already formed partnerships with over 80 startups and has invested nearly Rs 400 crore, as detailed in a recent blog post. The company's investment philosophy revolves around enabling entrepreneurs to thrive by providing them with flexible, long-term financial support that transcends the conventional exit-oriented approach often seen in venture capital.

Rainmatter's investment portfolio spans diverse sectors that align with the company's commitment to fostering positive change. The investment arm has dedicated resources to fintech startups like Smallcase, Ditto, and Sensibull. Moreover, it has actively supported initiatives in the health and wellness domain, collaborating with startups such as Devil Circuit, The Whole Truth, and Peesafe.

In addition to these sectors, Rainmatter has also directed its capital towards startups addressing critical challenges like climate change and media. Startups including Akshayakalpa, Learnapp, Finshots, and The Ken have benefited from Rainmatter's strategic investments, illustrating the company's wide-ranging impact on India's emerging entrepreneurial ecosystem.

How Is Rainmatter Fuelling Sustainable Progress?

Traditional venture capital investment models typically prioritize exiting investments within a relatively short timeframe, often within seven to eight years, through secondary sales or IPOs. Rainmatter's revolutionary permanent capital structure diverges from this norm, allowing venture capitalists to remain invested in a startup for an extended period, fostering stability and continuous growth.

In a blog post, Rainmatter said, "Investors who bring in long-term patient capital—investors who are willing to stick around and help in any way possible, where the goal is to build a good, sustainable, long-term business, and not just to generate rapid returns." This approach is poised to reshape the startup landscape by encouraging founders and investors to focus on building robust, impactful, and enduring enterprises.

Zerodha's co-founder, Nithin Kamath, highlighted the rationale behind Rainmatter's perennial investment structure. Drawing from Zerodha's own success story, he emphasized the importance of unfettered growth and the ability to chart one's course without undue pressure for rapid expansion. 

 The financial returns generated through Rainmatter's investments not only contribute to supporting more entrepreneurs but also feed into the Rainmatter foundation. Kamath emphasized that Rainmatter's engagement extends beyond mere capital infusion, as the company actively avoids taking board seats and instead engages as mentors and collaborators, fostering a holistic approach to entrepreneurship.

As the investment arm expands its horizons and bolsters its allocation, the Indian entrepreneurial ecosystem stands to benefit from a new paradigm that embraces patient capital and enduring impact.