Over the last decade of so, Paul Lee had enjoyed a nice career as a venture capitalist. Last year, an idea began to nag at him, though, and in November, he left his job of several years, as an investor at Lightbank in Chicago, to pursue it with two other former Lightbank colleagues, Ryan Jeffery and Kathryn Saluke, and their friend Arman Ghosh.
The fruit of their labor: nine-month-old Roniin, a Chicago-based startup that spins off other startups — with a few twists that we haven’t seen before.
Here’s how the whole thing works. Roniin has raised money from lots of high-profile angel investors, many of them serial entrepreneurs like Sam Yagan. These investors are mostly busy running other companies – Yagan is the CEO of Match Group – but every once in a while (the thinking goes), one of them will have a business idea that they don’t have the time or inclination to pursue on their own.
Russ Fradin, for example, came up with the idea for Attendant, a maker of software for the funeral services industry.
Fradin is already the CEO of the social market company Dynamic Signal. So rather than explore the viability of his idea, he handed it off to Roniin’s 17-person team, which then sprang into action, combing over its database of C-level startup executives who might be enticed to head up a new startup. In Attendant’s case, the CEO that Roniin recruited was Alex Kruger, who worked previously as the VP of business at the Chicago-based on-demand parking-app startup SpotHero.
These CEOs get a good deal — at least, on a surface level. In addition to being handed an idea, along with a seat at the top of the org chart, Roniin takes care of a lot of the administrative stuff that nascent startups usually have to wrestle with, including figuring out what documents and vendors to use. (It mostly does this from a distance. “I’m a big believer that each company has to develop its own culture, and I feel like being housed in our studio takes away from that,” explains Lee.)
Roniin also gives the CEO the biggest stake in the newly formed company. Lee declined to say just how big a stake that is, but he says that Roniin itself looks to own between 10 and 30 percent of each company, and that it gives people like Fradin – who come in as the chairperson of the company – another 5 to 15 percent.
“We all get diluted together with any funding coming in,” Lee notes.
Roniin’s companies are, in fact, attracting funding. Attendant has already raised $700,000 from angel investors. Another company, Officeluv, which sells modern commercial office cleaning services, has raised $800,000 in seed funding. (Jai Shekhawat, cofounder and CEO of Fieldglass, a Chicago-based company that reportedly sold to SAP for more than $1 billion, is Officeluv’s chairman.)
Lee says a third company has also raised seed funding, though it isn’t ready for its close-up just yet.
As with any startup, larger questions remain. In Roniin’s case, just one centers on its ability to recruit the right people into the roles it is creating. Though the company is in “constant dialogue” with many potential founders — from venture-backed startups to larger businesses where individuals are running their own units — Lee admits that “finding the person with the right experience and the right timing is hard.”
Still, investors seem willing to give the company – which was named after an ancient samurai with no lord or master– a shot. In addition to a host of angel investors, Formation 8 recently led a $3 million seed round in Roniin. 500 Startups, Pritzker Group, Launch Capital, and Dom Capital also joined the round.
[Correction: This post originally confused Attendant — along with its mission and CEO — with another company whose app is called Attendant. Apologies for the mix-up.]