Startup gains investment from Citi to build risk mitigation tools for auto finance & used cars
Fintech startup Exponential Markets is developing a series of next-generation tradable financial instruments designed to offer new levels of hedging capabilities and risk management for participants in a variety of asset classes, including auto finance and used vehicles.
The company landed a strategic investment on Tuesday from Citi to develop and launch those risk mitigation tools.
Citi invested in Exponential’s most recent seed round, which was led by MaC Venture Capital, and included support from Autotech Ventures and Avanta Ventures, bringing the total amount raised to more than $10 million.
Citi made the investment through its markets strategic investments unit.
Exponential’s first product is the Exponential Used Vehicle Index, which the startup called a “first-of-its-kind tradable index” for the automotive sector that can allow rental car companies, auto insurers and auto lessors to hedge used vehicle price risk.
The company’s product roadmap includes cash-settled index derivatives for new and underserved markets, in addition to exploration of smart market applications.
“Sweeping changes in the economy over the last 20 years driven by technological advances have given rise to new risks that need to be managed, as well as new data sets that can be used to develop tools to manage those risks,” said Katya Chupryna, director of markets strategic investments at Citi.
“Our investment in Exponential reflects our support for market-based solutions to address these emerging risks, thereby creating a healthier and more resilient ecosystem,” Chupryna continued.
Citi’s investment demonstrates the growing interest in Exponential’s innovative approach to risk management.
While derivative instruments are currently used for the hedging of rates, foreign exchange, and equity markets, Exponential pointed out there are numerous asset classes and industries, such as automotive financing, currently lacking any derivative products.
In addition to the investment, Citi intends to collaborate with Exponential to cultivate the market for Exponential’s used-vehicle derivatives, as well as jointly develop new products that will enable more efficient risk transfer across a variety of asset classes, industries, and market participants.
“Pioneering new financial markets involves great complexity and rigor. Having investors and strategic partners connected to our multi-sided market is invaluable and will help us kick start trading and build liquidity,” said Ryan Naughton, CEO and co-founder of Exponential Markets.
“The investment and support from a global financial leader like Citi are a testament to our vision and ability to execute,” Naughton went on to say.