MaC Venture Capital, Autotech Ventures, and Avanta Ventures invest in startup pioneering new solutions addressing market volatility-related financial exposure in auto
WASHINGTON, July 26, 2023 — Financial innovation platform Exponential Exchange today announced the successful close of an oversubscribed $7.4 million seed funding round led by MaC Venture Capital to continue building a suite of financial instruments designed to bring new risk-management solutions into the automotive ecosystem and other industries with underserved asset classes.
While industries such as agriculture, energy, and manufacturing have long been able to hedge against price risk by using derivatives, this ability has never been available to auto fleet owners and insurance companies. Exponential is on a mission to change this by creating a set of financial instruments that would allow rental car companies, auto insurers, and auto lessors to transfer their financial exposure to other market participants – the first of many industries Exponential plans to serve with this ability.
“Pioneering new financial markets involves great complexity and rigor. Having investors and strategic partners connected to each side of our multi-sided market is invaluable and will help us kickstart trading and build liquidity,” said Ryan Naughton, CEO and co-founder of Exponential Exchange. “The fact that our seed round was oversubscribed amid an extremely challenging fundraising environment is a testament to our vision and ability to execute.”
Exponential recently launched its initial product, the Exponential Used Vehicle Index, designed to offer an efficient and effective method for tracking used vehicle values using best-in-class data sets and modern data science techniques. It’s the first benchmark designed and built to serve as an underlying instrument for hedging and trading used vehicle market values. The creation of such derivatives is the next step in Exponential’s plan.
“The transportation revolution has created a fascinating array of new mobility choices for consumers, but the companies who own, finance, and insure these vehicles have limited options in managing the elevated levels of risk that come with rapid technological advancements,” said Marlon Nichols, founding managing partner of MaC Venture Capital. “Exponential is on a mission to create a more stable environment for the companies driving some of the world’s most ground-breaking innovations in auto and beyond, and we look forward to helping them launch a full array of risk management tools, similar to ones that exist in other industries.”
Other investors in the round include Autotech Ventures, an early-stage venture capital firm with a mission to solve the world’s ground transportation challenges with technology, and Avanta Ventures, the venture capital arm of CSAA Insurance Group. The round also includes participation from several other investors from the automotive, finance and derivatives trading ecosystems.
“Exponential Exchange is pioneering risk-mitigation tools in auto that have been standard in other industries for decades, unlocking unprecedented opportunities for companies and market participants across the vehicle ecosystem,” said Burak Cendek, partner at Autotech Ventures. “We believe that these solutions could create a new multibillion-dollar opportunity, and if there is a team that can make that happen, it is the Exponential Exchange team, so we are very excited to partner with them.”
Exponential is now focused on cultivating over the counter (OTC) trades as a proof of concept while building the market architecture and engagement required for futures trading. The result will be a suite of derivatives products that are cash-settled against the Exponential Used Vehicle Index. This will allow both parties in a vehicle derivatives contract to effectively hedge against the inherent volatility in used vehicle depreciation – a significant problem for rental car companies, auto insurers, and lessors.
“Current risk-mitigation approaches are inefficient for both automotive fleets and lessors who want protection against market values declining more than expected, and for insurers who want to protect themselves against volatile vehicle replacement costs,” said David Li, senior principal at Avanta Ventures. “Exponential’s products address both of those market needs.”
Exponential Exchange has now raised a total of $8.8 million, including an earlier convertible debt funding round of $1.4 million. This new infusion of capital will enable the company to execute on its plan to pilot multiple OTC transactions while building the infrastructure required for exchange-traded futures.
About Exponential Exchange
Founded by a team with decades of expertise across fintech, derivatives design, data science, risk management, and automotive finance, Exponential Exchange is creating a series of next-generation financial instruments designed to offer new levels of financial protection for participants in a variety of asset classes. These tools will allow hedgers to offset exposure to adverse price movements via derivatives that settle against Exponential-powered indices. Targeting asset classes that lack effective risk-management tools, Exponential relies on robust data sets to create their tradable financial instruments. The result is a powerful and innovative alternative to more expensive, less efficient versions of risk mitigation, offering new levels of financial protection for hedgers, while unlocking new tradable asset classes for the derivatives market. Exponential’s launch product is designed for vehicle fleet owners and auto insurers looking to hedge against used vehicle market price volatility. For more information, visit www.exponentialexchange.com.
About MaC Venture Capital
MaC Venture Capital is a seed-stage venture capital firm based in Los Angeles and Silicon Valley that invests in technology startups leveraging shifts in cultural trends and behaviors. The general partners represent diverse backgrounds in technology, business, politics, entertainment, and finance, allowing them to accelerate entrepreneurs on the verge of their breakthrough moment. The firm provides hands-on support crucial for building and scaling category-leading companies, including operations strategy, brand building, recruiting, sales development, and mission-critical introductions. MaC Venture Capital is the result of a merger between Cross Culture Ventures, co-founded by Marlon Nichols, and M Ventures, co-founded by Adrian Fenty, Michael Palank, and Charles D. King. Find MaC Venture Capital online at macventurecapital.com and @MaCVentureCap.
SOURCE Exponential Exchange
