Exponent Founders Capitalan early-stage venture firm founded by alumni of startups like Plaid, Robinhood and Ramp has closed on $75 million in capital commitments, TechCrunch is first to report.
The company, which is emerging from stealth today, raised $50 million in its first round of funding in November 2021.
Managing Partners Charley Ma and Mahdi Raza co-founded Exponent after meeting while Ma led fintech development at Plaid and Raza led development and payments at Robinhood. At the time, Robinhood was one of Plaid’s biggest clients, so the pair often found themselves on opposite sides of the negotiating table.
The pair invested separately as angels before teaming up to create their own venture capital firm.
Exponent, which focuses on enterprise, fintech, infrastructure and GTM (go to market) SaaS software companies, has invested in around 40 startups since its first fund. Among these startups is Apollo.io (which raised $100 million at a $1.6 billion valuation in August), observability platform Chronosphere (which raised $115 million at a $1.6 billion valuation in January) and legal tech startup EvenUp (which raised $50.5 million in June).
The company has already had some exits, including Software startup Tactic is sold to TaxBit earlier this year and other deals that Ma says will be revealed “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 entrepreneurs hired at Plaid, where he led fintech and developer sales in San Francisco and helped build the company’s New York office. Later, he was one of the first entrepreneurs to be hired on a fee-for-service basis by the startup Ramp and helped launch its corporate card as the startup’s chief development officer. Most recently, Ma served as head of development at Alloy, an identity and risk infrastructure platform for financial institutions.
Raza became an operator after roles in fintech and technology investment banking at Evercore and investing at GIC. He worked in development and payments at Robinhood before joining Stytch to lead early development there.
“A big shift for us in the fund was moving ownership up from our typical angel check to friendly size, to being one of the largest investors in the round, to fully led and priced early stage rounds,” he told TechCrunch. . In fact, when it invested its first capital in 2023, the firm led or co-led the rounds of all the companies it invested in.
Investment Thesis
The exhibitor check size depends on the dynamics of the round, but can range from $500,000 to $5 million. Ma said. The company aims to own at least 5% to 10% in the companies it supports.
Seventy-five percent of the company’s new fund will be used for early-stage investments, including seed rounds. The rest is reserved for later investment. Exponent focuses on investments in the US and Europe.
The fund’s second close was oversubscribed, according to Ma, who lists Carnegie Mellon University, Cook Children’s Health Care System, LGT Group and Next Legacy as some of Exponent’s limited partners (LP). The firm plans to invest in 20 to 30 companies from its second fund.
“We are a theme-focused, generalist company that covers all parts of enterprise software — including vertical AI, infrastructure and applied AI — and fintech and payments,” Ma said. “Specifically, we are excited by the opportunity for services and results as software, creating essential workflows in customer experiences across multiple domains.”
“Over time, we will continue to add new topics to our arsenal – for example, we recently delved into legal services, pharmaceutical workflows and core banking infrastructure,” he added.
Lessons
The pair believe their backgrounds as operators and angel investors give them an edge as investors.
“The most important lesson we learned is how to approach problems from a first principles perspective. Every company we’ve worked for has gone through different growth periods, and each has also had very different GTM moves,” said Ma. “We found that trying to apply a framework that worked for one company rarely worked directly for another, and is actually a common pitfall that many ex-executives and founders fall into when working with new companies. What’s more important is to ask the right questions and dig as deep as possible to find out what’s blocking growth in GTM, product, team, market, customers, etc.”
Raising funds as an emerging manager in 2023 “definitely wasn’t easy,” Ma admits.
“Everyone we spoke to advised us that this was the worst time for fundraising in a decade, but we started to get into some institutional discussions about the LP, so we decided to start our fundraiser in April.” Ma said. “We deliberately targeted long-term, non-profit institutional investors for fund 2 with a target of $60 million and a hard cap of $75 million.”
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