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. This market, where many transactions still rely on manual workflows, is poised for disruption through the strategic application of blockchain technology. The funding round, which also included investments from Parafi Capital and Crane Ventures, underscores the potential for innovation in the operational layer of structured credit deals. Fence's software is designed to streamline the complex processes involved in tracking loan pools, verifying collateral, and managing cash flows, which are often fragmented and reliant on outdated methods such as spreadsheets, PDFs, and email.
By introducing a unified system that updates in real-time, Fence aims to enhance transaction speed and provide investors with greater visibility into the assets backing their investments. According to Juan Montero, co-founder and CEO of Fence, the company's approach can significantly reduce costs for major asset managers.
In collaborations with BBVA, one of Spain's largest banks with $800 billion in assets under management, Fence has demonstrated its capability to lower funding costs for borrowers and decrease operational workload, all while continuously tracking large volumes of loans. Notably, Fence's use of blockchain is focused on back-end operations rather than front-end applications, utilizing smart contracts to manage cash, collateral, and deal terms without promoting tokens or crypto wallets to its clients. This approach enables lenders to monitor loan performance and cash flows in real-time, rather than waiting for periodic reports. The integration of blockchain technology allows for the automation of processes that previously required manual intervention, such as the release of cash when deal terms are met.
Additionally, Fence can tokenize lender positions in financing vehicles and, in certain cases, the underlying loans or invoices, facilitating the transfer of positions, borrowing against them, or automatic payment upon changes in ownership. However, tokenization is employed judiciously, only where it adds tangible value.
Montero emphasized that Fence's primary objective is to build infrastructure for the capital markets, rather than being perceived as a blockchain company. The company has made significant strides, currently overseeing approximately $1.5 billion in assets across its platform, with clients including BlackRock and Fortress. It can onboard new deals in a matter of weeks, a substantial improvement over the months required by standard processes.
The newly secured funding is expected to fuel Fence's expansion in the U.S. and the further development of its product, driven by the conviction that enhanced data efficiency and reduced manual steps can fundamentally reshape the operation of credit markets.