Capital of exponent foundersan early-stage venture firm founded by alumni of startups like Plaid, Robinhood, and Ramp, has closed $75 million in capital commitments, TechCrunch is the first to report.
The company, which is now coming out of stealth, raised $50 million for its first fund in November 2021.
Managing partners Charley Ma and Mahdi Raza co-founded Exponent after meeting while Ma was leading fintech growth at Plaid and Raza was leading growth and payments at Robinhood. At the time, Robinhood was one of Plaid's largest clients, so the pair often found themselves on opposite sides of the negotiating table.
The couple invested separately as angels before coming together to start their own venture firm.
Exponent, which focuses on SaaS, fintech, infrastructure and GTM (go-to-market) enterprise software companies, invested in about 40 startups from its first fund. Among those startups are Apollo.io (which raised $100 million at a valuation of $1.6 billion in August), Chronosphere observability platform (which raised $115 million at a valuation of $1.6 billion in January) and legal tech startup EvenUp (which raised $50.5 million in June).
The firm has also had some departures, including Software startup Tactic sells to TaxBit earlier this year and other agreements, according to Ma, will be announced “soon.” As angel investors, the pair backed companies such as Modern Treasury, UnitMoov, Lithic, Persona, Stytch and Persona, among others.
Ma was one of the first hires at Plaid, where she led the fintech and developer sales vertical in San Francisco and helped build the company's New York office. Later, he was one of the first entrepreneurs hired at expense management startup Ramp and helped launch its corporate card as that startup's head of growth. Most recently, Ma served as head of growth at Alloy, an identity and risk infrastructure platform for financial institutions.
Raza became a trader after holding roles in technology and fintech investment banking at Evercore and investing in GIC. He worked in growth and payments at Robinhood before joining Stytch to lead early growth there.
“A big change for us at fund one was moving up in ownership from our typical 'friendly' sized angel check, to being one of the largest investors in the round, to leading and pricing the seed rounds,” he told TechCrunch. . In fact, investing from its first fund in 2023, the firm led or co-led the rounds of all the companies it invested in.
investment thesis
The size of the exponent's check depends on the dynamics of the round, but can range from $500,000 to $5 million. Mom said. The firm aims for a minimum ownership of 5% to 10% in the companies it backs.
Seventy-five percent of the company's new fund will be used to invest in the early stage, including pre-seed rounds. The rest is reserved for later investments. Exponent focuses on investing in the United States and Europe.
The fund's second closing was oversubscribed, according to Ma, who cites Carnegie Mellon University, Cook Children's Health Care System, LGT Group and Next Legacy as some of Exponent's limited partners (LPs). The company plans to invest in 20 to 30 companies in its second fund.
“We are a generalist and thematically focused company that covers all parts of enterprise software, including vertical ai, infrastructure and applied ai, as well as fintech and payments,” said Ma. “In particular, we are excited about the opportunity to deliver services and outcomes as software, creating core workflows needed in customer experiences across many domains.”
“Over time, we will continue to add new topics to our arsenal; for example, we have recently delved into legal services, pharmaceutical workflows and core banking infrastructure,” he added.
Learned lessons
Both believe their experience as traders and angel investors gives them an advantage as investors.
“The most important lesson we have learned is how to approach problems from a first principles perspective. “Each company we have worked for has gone through different periods of growth and each also had very different GTM moves,” said Ma. “We found that trying to apply a framework that worked in one company rarely worked directly in another and, In fact, it's a common trap that many former executives and founders fall into when working with startups. What's most important is to ask the right questions and dig as deep as possible to find out what is blocking growth in GTM, product, team, market, customers, etc.
Raising funds as an emerging manager in 2023 “was definitely not easy,” Ma admits.
“Everyone we spoke to advised us that this was the worst time to raise funds in the last decade, but we were starting to get involved in some institutional conversations about LPs, so we decided to start our fundraising in earnest in April” . Mom said. “We were deliberately targeting long-term nonprofit institutional investors for Fund 2 with a target of $60 million and a hard cap of $75 million.”
Want more fintech news in your inbox? Register at The Exchange here.
