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 Fence's primary objective is to tackle the fragmented and outdated processes that currently plague the industry, often relying on manual workflows, spreadsheets, and email. By introducing a unified system that provides real-time updates, Fence seeks to replace these inefficient methods.
According to Juan Montero, co-founder and CEO of Fence, this approach enables lenders to continuously monitor loan performance and cash flows, rather than relying on periodic reports. The company claims that this can lead to reduced costs for major asset managers. In collaborations with BBVA, a prominent Spanish bank overseeing $800 billion in assets, Fence has reported lower funding costs for borrowers and decreased operational work. Notably, Fence utilizes blockchain as a back-end solution, focusing on smart contracts to manage cash, collateral, and deal terms, rather than promoting tokens or crypto wallets as a front-end product.
This approach allows for the automation of tasks such as data verification, payment processing, and reporting. The company has also tokenized lender positions in certain cases, facilitating the transfer of positions, borrowing, or automatic payments in the event of ownership changes. However, Montero emphasizes that tokenization is only employed when it adds tangible value. Fence has chosen to emphasize its role in building infrastructure for capital markets, rather than being perceived as a blockchain company.
The startup has reportedly overseen approximately $1.5 billion in assets across its platform, with clients including BlackRock and Fortress, and can onboard new deals in a matter of weeks. The recent funding is expected to support the company's expansion in the U.S. and further development of its product, with the goal of transforming the credit market's operations through enhanced data processing and reduced manual steps.