The first news of the $75 million in funding commitments made to Exponent Founders Funding, an early-stage venture firm created by former Plaid, Robinhood, and Ramp employees, comes via TechCrunch.
After raising $50 million for its first fund in November 2021, the company is now out of stealth. Managing Directors When Charley Ma was heading up fintech growth at Plaid and Mahdi Raza headed up growth and payments at Robinhood, the two met and co-founded Exponent. The two frequently found themselves on different sides of the bargaining table because Robinhood was one of Plaid’s most prominent clients at the time.
Before collaborating to launch their own venture company, the two made individual angel investments. With its initial fund, Exponent invested in over 40 firms, specializing in enterprise SaaS, fintech, infrastructure, and go-to-market software. These companies include legal-tech firm EvenUp (which raised $50.5 million in June), observability platform Chronosphere (which got $115 million at a $1.6 billion valuation in January), and Apollo.io (which garnered $100 million at a $1.6 billion valuation in August).
The software startup Tactic was sold to TaxBit earlier this year, and Ma believes further exits will be revealed “soon.” Also, the company has already seen several exits. Together, they were angel investors in companies including Persona, Stytch, Persona, Modern Treasury, Unit, Moov, and Lithic.
Ma headed the fintech and developer sales vertical in San Francisco and assisted in expanding the company’s New York office when he was one of the initial business hires at Plaid. He then served as head of growth and was among the original spending management firm Ramp employees, helping to create the company’s corporate card. Ma was the head of growth at Alloy, a platform providing financial institutions with identification and risk infrastructure.
Raza became an operator after holding positions in investment banking for fintech and technology at Evercore and GIC. Before driving early growth at Stytch, he worked in growth and payments at Robinhood.
He told TechCrunch, “Moving upwards in ownership from our typical ‘friendly’-sized angel check to being one of the larger investors in the round, to outright leading and pricing early-stage rounds, was a big shift for us in fund one.” The business-led or co-led the rounds of all the firms it invested in 2023, when it invested out of its first fund.
Thesis for investments
Although it might vary from $500,000 to $5 million, the envelope dynamics determine the exponent’s check size. They are stated, Ma. The company strives for a minimum of 5% to 10% ownership in the businesses it invests in.
Pre-seed rounds and early-stage investments will account for 75% of the company’s new fund. Reserved for future investment is the remaining amount. Europe and the United States are Exponent’s primary investment regions.
Ma lists Cook Children’s Health Care System, LGT Group, Carnegie Mellon University, and Exponent as some of its limited partners (LPs) and claims that the second fund closing was oversubscribed. The company’s second fund will invest in 20 to 30 different enterprises.
“We are a generalist firm with a thematic focus that covers all aspects of enterprise software, fintech, and payments, as well as vertical AI, infrastructure, and applied AI,” Ma stated. The possibility of developing essential processes across client experiences in several areas by using services and outputs as software excites us in particular.
For example, we’ve been delving deeply into legal services, pharmaceutical operations, and fundamental banking infrastructure lately. Over time, he continued, We’ll continue adding new subjects to our repertoire over time.
Knowledge gained
The couple feels they have an advantage as investors because of their experience as angel investors and operators.
Using a first-principles approach to issue-solving is the most significant lesson we have acquired. Each business we’ve worked with has seen distinct development phases and has had distinct GTM movements, according to Ma. In reality, many former executives and founders fell into this trap frequently when dealing with new companies: trying to adopt a structure that worked at one organization seldom works directly at another. Identifying the root causes of growth barriers in the GTM, product, team, market, customers, etc., is crucial to probing as deeply as possible with the appropriate inquiries.
It was “definitely not easy” for Ma to raise money in 2023 as an emerging manager.
“We determined to start our fundraise in earnest in April because everyone we spoke with advised us that this was the worst time to raise money in the previous ten years,” Ma said. “But we were starting to get pulled into a few institutional LP conversations.” For Fund 2, which had a target of $60 million and a hard ceiling of $75 million, we specifically aimed for long-term, nonprofit institutional investors.
