Exponent Founders Capital Raises $75 Million in Second Fund to Invest in Enterprise SaaS and Fintech Startups
Former Plaid and Robinhood executives launch venture firm to support early-stage companies in the software and financial technology sectors.
Exponent Founders Capital, a venture firm founded by Charley Ma and Mahdi Raza, has closed its second fund with $75 million in capital commitments. The firm, which raised $50 million for its first fund in November 2021, focuses on investing in early-stage enterprise software-as-a-service (SaaS) and fintech startups. With a track record of successful investments in companies such as Apollo.io and Chronosphere, Exponent aims to provide strategic support and capital to emerging companies in these sectors.
Founders’ Backgrounds and Investment Strategy
Exponent’s founders, Charley Ma and Mahdi Raza, bring a wealth of experience and expertise to their role as investors. Ma, who previously worked at Plaid and Ramp, has a strong background in fintech growth and sales. Raza, on the other hand, has experience in fintech investment banking and worked at Robinhood before joining Stytch. Together, they leverage their operational and angel investing experience to identify promising startups and help them navigate the challenges of scaling their businesses.
Exponent’s investment strategy focuses on early-stage companies in the enterprise SaaS, fintech, infrastructure, and go-to-market (GTM) software sectors. The firm aims to invest in companies that have the potential to become market leaders and generate significant returns. With check sizes ranging from $500,000 to $5 million, Exponent seeks to secure a minimum ownership stake of 5% to 10% in the companies it backs.
Successful Investments and Exits
Exponent’s first fund has already yielded successful investments and exits. The firm backed approximately 40 startups, including Apollo.io, Chronosphere, and EvenUp. Apollo.io, a data platform for sales and marketing teams, raised $100 million at a $1.6 billion valuation in August. Chronosphere, an observability platform, raised $115 million at a $1.6 billion valuation in January. EvenUp, a legal-tech startup, raised $50.5 million in June. In addition to these investments, Exponent has had successful exits, including the sale of software startup Tactic to TaxBit. The firm has more undisclosed deals in the pipeline.
Investment Thesis and Focus Areas
Exponent’s investment thesis centers around the belief that software is transforming various industries, including finance, and that there is a significant opportunity for startups to disrupt traditional workflows and processes. The firm focuses on themes such as vertical artificial intelligence (AI), infrastructure, applied AI, fintech, and payments. While Exponent is currently investing in enterprise software and fintech, it remains open to exploring new themes and sectors. Recently, the firm has been exploring opportunities in legal services, pharmaceutical workflows, and core banking infrastructure.
Lessons Learned and Unique Approach
Ma and Raza attribute their success as investors to their ability to approach problems from a first principles perspective. Drawing on their experience working in different companies with varying growth trajectories, they emphasize the importance of asking the right questions and understanding the unique challenges faced by each startup. They caution against applying a one-size-fits-all framework and instead advocate for a deep understanding of the specific factors impacting growth, such as GTM, product, team, market, and customers.
Conclusion:
Exponent Founders Capital’s successful second fundraise demonstrates the confidence and support it has garnered from institutional limited partners. With $75 million in capital commitments, the firm is well-positioned to continue investing in promising early-stage startups in the enterprise SaaS and fintech sectors. Leveraging their operational and angel investing backgrounds, Charley Ma and Mahdi Raza bring a unique perspective to their role as investors, focusing on first principles and tailoring their approach to each company’s specific needs. As software continues to transform industries, Exponent aims to support and nurture the next generation of disruptive startups.