In a significant move to modernize the $6 trillion asset-backed finance market, Galaxy Ventures, the venture capital division of Mike Novogratz's Galaxy Digital, has led a $20 million investment round in Fence, a startup dedicated to transforming the operational aspects of structured credit deals. This round also saw participation from Parafi Capital and Crane Ventures. Fence is developing software to manage the operational layer of these deals, which currently relies heavily on manual processes, including tracking loan pools, verifying collateral, and moving cash.
This layer is often fragmented and reliant on outdated tools such as spreadsheets, PDFs, and email, leading to slower transactions and limited visibility for investors. According to Juan Montero, co-founder and CEO of Fence, the company aims to replace these processes with a unified system that updates in real-time, enabling lenders to continuously monitor loan performance and cash flows rather than relying on periodic reports.
This approach has the potential to 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 reported lower funding costs for borrowers and reduced operational workload while tracking large loan volumes. Fence utilizes blockchain as a back-end solution rather than a front-end product. The company focuses on using smart contracts behind the scenes to manage cash, collateral, and deal governance, rather than promoting tokens or crypto wallets to banks and asset managers.
In a typical facility, lenders may experience delays of several days for loan data verification, report submission, and payment clearance. Fence streamlines this process by pulling information through APIs, running checks in software, and using smart contracts to release cash when deal terms are met. Additionally, Fence can tokenize lender positions in financing vehicles and, in some cases, the underlying loans or invoices, facilitating the transfer of positions, borrowing against them, or automatic payment upon ownership changes.
However, tokenization is only employed where it adds tangible value. Montero emphasized, 'We don't want to be perceived as a blockchain company; we're building the infrastructure for capital markets.
Others digitize paperwork; Fence has rebuilt the underlying plumbing.' Currently, Fence oversees approximately $1.5 billion in assets across its platform, working with prominent firms such as BlackRock and Fortress. It can onboard new deals in mere weeks, a significant improvement over the months required by standard processes. The funding is slated to support the company's expansion in the U.S. and further develop its product, with the goal of reshaping credit market operations through faster data processing and reduced manual steps.