Exponent Founders Capital, an early-stage venture firm founded by alumni of startups such as Plaid, Robinhood and Ramp, has successfully closed on $75 million in capital commitments as TechCrunch exclusively reports.
The firm, which is making its debut today, had previously raised $50 million for its very first fund back in November of 2021.
The Managing Partners Charley Ma and Mahdi Raza came together to establish Exponent after meeting while Ma was leading fintech growth at Plaid, and Raza was overseeing growth and payments at Robinhood. Interestingly, the pair often sat at opposite ends of the negotiating table as at the time, Robinhood was one of Plaid’s biggest customers.
The two had previously invested separately as angel investors before ultimately teaming up to start their own successful venture firm.
Exponent has its sights set on enterprise SaaS, fintech, infrastructure, and GTM (go to market) software companies, having already invested in approximately 40 startups through its first fund. Some notable examples are Apollo.io, an organization that secured $100 million at a valuation of $1.6 billion in August, Chronosphere, an observability platform which raised $115 million at a $1.6 billion valuation in January, and EvenUp, a legal-tech startup that raised $50.5 million in June.
The firm has already experienced some successful exits, with software startup Tactic being acquired by TaxBit earlier this year, and more deals in the pipeline that Ma promises will be announced “soon.” As angel investors, the pair have also backed several companies including Modern Treasury, Unit, Moov, Lithic, Persona, Stytch, and others.
Ma, who was one of the initial business hires at Plaid, had led fintech and developer sales in San Francisco and played an integral role in establishing the company’s New York office. Later on, he was also among the very first business hires at Ramp, an expense management startup, where he led the launch of its corporate card as the head of growth. Most recently, Ma served as Alloy’s head of growth, which is an identity and risk infrastructure platform catering to financial institutions.
On the other hand, Raza’s background includes working in fintech and technology investment banking at Evercore and investing at GIC before transitioning into a role in growth and payments at Robinhood. He eventually joined Stytch to lead early growth there.
A significant shift for us in fund one was moving into larger ownership stakes from our traditional ‘friendly’ sized angel investments, to becoming one of the leading investors in the round and setting the price for early-stage funding,
Raza pointed out to TechCrunch. Interestingly, the firm has led or co-led the funding rounds for all the companies it backed during its first fund in 2023.
Investment thesis
When it comes to investment, Exponent’s check size is largely dependent on the dynamics of the round but typically ranges from $500,000 to $5 million, according to Ma. The firm’s goal is to hold a minimum 5% to 10% ownership stake in the companies it invests in.
The new fund will mainly be utilized for investing in early-stage companies, including pre-seed rounds, which accounts for 75% of the total fund. The remaining portion will be allocated for follow-on investments. Exponent currently has its focus set on investing in the United States and Europe.
The Managing Partners also revealed that the second fund close was heavily oversubscribed. Notable limited partners (LPs) of Exponent include Carnegie Mellon University, Cook Children’s Healthcare System, LGT Group
, and Next Legacy
. The firm aims to invest in around 20 to 30 companies as part of the second fund.
We are thematically focused, generalist firm with expertise in all sectors of enterprise software – from vertical AI and infrastructure to applied AI – as well as fintech and payments,
Ma highlighted. In particular, we are excited about the potential for software to revolutionize various domains by building crucial workflows and enhancing the overall customer experience.
As we progress, we will continue to expand our focus areas, as evidenced by our recent deep dive into legal services, pharmaceutical workflows, and core banking infrastructure,
he added.
Lessons learned
According to the pair, their rich and diverse backgrounds as both operators and angel investors have provided them with an edge as venture capitalists.
The most crucial lesson we have learned is how to approach problems from a first principles standpoint. Each company we’ve worked for has gone through various stages of growth, with a unique GTM approach. We have realized that trying to apply a framework that worked for one company rarely yields the same results in another. In fact, this is a trap that many former executives and founders fall victim to when working with new companies. What really matters is asking the right questions and digging deeper to identify the key growth inhibitors across all aspects such as GTM, product, team, market, customers, and more.
Ma explained.
Despite that, fundraising as an emerging manager in 2023 wasn’t exactly a walk in the park, admits Ma.
Everyone we spoke to advised us that this was the worst time to raise funds in the past decade. However, we were already starting to see significant interest from institutional LPs, which prompted us to kickstart our fundraising efforts in April,
he recalls. Our primary goal was to attract 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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