In a bid to transform the $6 trillion asset-backed finance market, Galaxy Ventures, the venture capital arm of Mike Novogratz's Galaxy Digital, has led a $20 million funding round for Fence, a startup dedicated to developing software for the operational layer of structured credit deals. This round, which also included investments from Parafi Capital and Crane Ventures, aims to utilize blockchain technology to streamline the currently fragmented and manual processes involved in tracking loan pools, verifying collateral, and managing cash flows.
Fence's innovative approach involves creating a single, unified system that updates data in real-time, thereby enabling lenders to monitor loan performance and cash flows continuously, rather than relying on periodic reports. According to Juan Montero, co-founder and CEO of Fence, this approach has the potential to significantly reduce costs for major asset managers. In collaboration with BBVA, one of Spain's largest banks, overseeing $800 billion in assets, Fence has successfully reported lower funding costs for borrowers and reduced operational workload while tracking large volumes of loans on an ongoing basis. By leveraging blockchain as back-end infrastructure, Fence facilitates the use of smart contracts to manage cash, collateral, and the rules governing these deals, without requiring banks and asset managers to adopt tokens or crypto wallets.
This approach enables Fence to pull information through APIs, run checks in software, and use smart contracts to release cash when deal terms are met, thereby significantly reducing the time it takes for loan data to be checked, reports to be sent, and payments to clear. Furthermore, Fence can tokenize lender positions in financing vehicles and, in some cases, the underlying loans or invoices, allowing investors to transfer positions, borrow against them, or receive payments automatically if ownership changes.
However, tokenization is only used where it adds value. With this funding, Fence plans to expand its operations in the U.S. and further develop its product, with the goal of reshaping the credit market by leveraging faster data and fewer manual steps. Currently, Fence oversees approximately $1.5 billion in assets across its platform, working with prominent firms such as BlackRock and Fortress, and can onboard new deals in weeks, compared to months under standard processes.