A recent $20 million funding round, spearheaded by Galaxy Ventures, the venture capital division of Mike Novogratz's Galaxy Digital, is set to transform the $6 trillion asset-backed finance market. This market, where many transactions still rely on manual workflows, is poised for disruption through the integration of blockchain technology.
The funding round, which included investments from Parafi Capital and Crane Ventures, will support Fence, a startup dedicated to developing software for the operational aspects of structured credit deals. The current system, often fragmented and reliant on spreadsheets, PDFs, and email, can lead to slowed transactions and limited visibility for investors.
Fence seeks to replace these outdated processes with a unified system, providing real-time data updates. According to Juan Montero, co-founder and CEO of Fence, this 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 successfully lowered funding costs for borrowers and decreased operational workload while continuously tracking large volumes of loans. Rather than promoting blockchain as a front-end product, Fence utilizes it as back-end infrastructure, leveraging smart contracts to manage cash, collateral, and deal terms.
This approach enables lenders to monitor loan performance and cash flows continuously, rather than relying on periodic reports. Fence's technology can also tokenize lender positions in financing vehicles and underlying loans or invoices, facilitating the transfer of positions, borrowing against them, or automatic payment upon ownership changes. With this funding, Fence plans to expand its presence in the U.S.
and further develop its product, aiming to reshape the credit market through enhanced data efficiency and reduced manual processes.