Galaxy Ventures, the venture capital arm of Galaxy Digital, has led a $20 million funding round for Fence, a startup aiming to transform the $6 trillion asset-backed finance market by utilizing blockchain technology. The investment, which also included Parafi Capital and Crane Ventures, will support Fence's development of software to handle the operational layer of structured credit deals. This layer, which encompasses tasks such as tracking loan pools, verifying collateral, and managing cash flows, is often fragmented and reliant on outdated methods like spreadsheets, PDFs, and email.
Fence seeks to replace these processes with a unified system that provides real-time updates, enabling lenders to continuously monitor loan performance and cash flows. According to Juan Montero, co-founder and CEO of Fence, this approach can significantly reduce costs for large asset managers. In partnership with BBVA, one of Spain's largest banks, Fence has reported lower funding costs for borrowers and reduced operational workload while tracking substantial volumes of loans.
Fence's use of blockchain is primarily focused on back-end operations, utilizing smart contracts to manage cash, collateral, and deal terms. This approach allows for faster and more efficient transactions, with Fence pulling information through APIs, running checks in software, and using smart contracts to release cash when deal terms are met. The company can also tokenize lender positions in financing vehicles and underlying loans or invoices, enabling investors to transfer positions, borrow against them, or receive payments automatically.
With this funding, Fence plans to expand its operations in the U.S. and further develop its product, aiming to reshape the credit markets by providing faster data and reducing manual steps.