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 transforming the $6 trillion asset-backed finance market by leveraging blockchain technology. The round also included investments from Parafi Capital and Crane Ventures. Fence is developing software to streamline the operational aspects of structured credit deals, an area often plagued by fragmentation and reliance on outdated methods such as spreadsheets, PDFs, and email. This outdated setup can lead to slowed transactions and reduced visibility for investors into the assets backing their investments.
According to Juan Montero, co-founder and CEO of Fence, the company aims to replace these inefficient processes with a unified system that provides real-time data updates. This allows lenders to continuously monitor loan performance and cash flows, rather than relying on periodic reports. Fence claims that its approach can significantly reduce costs for major asset managers.
In collaborations with BBVA, one of Spain's largest banks with $800 billion in assets, Fence has reported lower funding costs for borrowers and decreased operational workload, while successfully tracking large volumes of loans. The company utilizes blockchain as a back-end solution, rather than a front-end product, employing smart contracts to manage cash, collateral, and deal terms without promoting tokens or crypto wallets to banks and asset managers.
In a typical facility, lenders often wait days for loan data verification, report generation, and payment clearance. Fence expedites this process by pulling information through APIs, running checks in software, and using smart contracts to release cash when deal terms are met. Additionally, the company can tokenize lender positions in financing vehicles and, in some cases, the underlying loans or invoices, enabling investors to transfer positions, borrow against them, or receive automatic payments in the event of ownership changes.
However, tokenization is only used when it adds value. Montero emphasized that Fence is focused on building infrastructure for capital markets, rather than being perceived as a blockchain company.
While others digitize paperwork, Fence has rebuilt the underlying plumbing. The company currently 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.
The funding will be used to expand the company's presence in the U.S. and further develop its product, with the goal of reshaping the credit markets through faster data and reduced manual steps.