In a significant push to modernize 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 streamlining the operational aspects of structured credit deals. The round also saw participation from Parafi Capital and Crane Ventures. Fence's primary objective is to tackle the fragmented and manual processes that currently dominate the industry, such as tracking loan pools, verifying collateral, and managing cash flows, which are often handled through spreadsheets, PDFs, and email, leading to slowed transactions and limited visibility for investors. According to Juan Montero, co-founder and CEO of Fence, the company aims to introduce a unified system that provides real-time data updates, enabling lenders to continuously monitor loan performance and cash flows, rather than relying on periodic reports.
This approach is expected to reduce costs for major asset managers. Fence has already demonstrated the potential of its approach through partnerships with BBVA, one of Spain's largest banks, overseeing $800 billion in assets, where it reported lower funding costs for borrowers and reduced operational workload while tracking large volumes of loans. Unlike many blockchain-based solutions, Fence utilizes blockchain technology as back-end infrastructure rather than a front-end product.
The company focuses on using smart contracts to manage cash, collateral, and deal terms behind the scenes, without emphasizing tokens or crypto wallets to its clients. This approach allows for the automation of processes such as data checking and payment clearing, which can otherwise take days.
Fence can also tokenize lender positions in financing vehicles and underlying assets, enabling the transfer of positions, borrowing against them, or automatic payment upon changes in ownership, although tokenization is only used when it adds significant value. Montero emphasized that the company's goal is not to be seen as a blockchain company but as a builder of infrastructure for capital markets, distinguishing itself by rebuilding the underlying plumbing rather than just digitizing paperwork.
Currently, Fence oversees approximately $1.5 billion in assets across its platform, working with prominent firms like BlackRock and Fortress, and can onboard new deals in weeks, a significant improvement over the months required by standard processes. The newly secured funding is expected to facilitate the company's expansion in the U.S.
and the further development of its product, with the ultimate goal of reshaping the operational backbone of credit markets through faster data processing and reduced manual steps.