In a significant move to modernize the $6 trillion asset-backed finance market, Galaxy Ventures, the venture capital arm of Galaxy Digital, has led a $20 million funding round in Fence, a startup dedicated to transforming the operational layer of structured credit deals through cutting-edge technology. The round also saw participation from Parafi Capital and Crane Ventures. Fence's innovative approach focuses on developing software to handle the intricate backend processes of these deals, which often involve tracking loan pools, verifying collateral, and managing cash flows. Historically, these processes have been fragmented, relying heavily on manual workflows, spreadsheets, PDFs, and email, leading to slowed transactions and limited visibility for investors.
Juan Montero, co-founder and CEO of Fence, envisions a paradigm shift with Fence's single-system approach, which updates data in real-time, enabling lenders to continuously monitor loan performance and cash flows without the need for periodic reports. This streamlined process is poised to cut costs for major asset managers, as evidenced by Fence's work with BBVA, where it reported lower funding costs for borrowers and reduced operational workload while efficiently tracking large volumes of loans. Notably, Fence utilizes blockchain as a backend solution rather than a frontend product, employing smart contracts to manage cash, collateral, and deal terms without necessitating the use of tokens or crypto wallets for its clients.
By integrating APIs, software checks, and smart contracts, Fence significantly reduces the time lenders wait for loan data verification, report generation, and payment clearance. Furthermore, the company can tokenize lender positions and underlying assets when beneficial, facilitating position transfers, borrowing, or automatic payments upon ownership changes. With this funding, Fence aims to expand its presence in the U.S. and enhance its product offerings, driven by the conviction that enhanced data speed and reduced manual intervention can fundamentally reshape credit market operations.
Currently, Fence oversees approximately $1.5 billion in assets, working with prominent firms like BlackRock and Fortress, and boasts the capability to onboard new deals in mere weeks, a marked improvement over the months required by standard processes.