In a significant move to transform 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 replace the traditionally fragmented and manual processes, often reliant on spreadsheets, PDFs, and email, with a unified system that provides real-time updates. 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 its method can significantly reduce costs for major asset managers, as evidenced by its collaboration with BBVA, where it reportedly achieved lower funding costs for borrowers and decreased operational workload while tracking large volumes of loans.
Fence utilizes blockchain as a back-end solution, focusing on the operational layer rather than the front-end product. It employs smart contracts to manage cash, collateral, and deal terms, without emphasizing tokens or crypto wallets to its clients. By integrating APIs, software checks, and smart contracts, Fence can expedite the process of loan data verification, report generation, and payment clearance, which typically takes days.
Additionally, the company can tokenize lender positions in financing vehicles and underlying assets, facilitating the transfer of positions, borrowing against them, or automatic payment upon ownership changes. However, tokenization is only used when it adds value. Montero emphasized that Fence aims to build the infrastructure for capital markets, rather than being perceived as a blockchain company.
The company has made significant progress, overseeing approximately $1.5 billion in assets across its platform, and collaborating with prominent firms such as BlackRock and Fortress. With the new funding, Fence plans to expand its presence in the U.S. and further develop its product, with the goal of reshaping the credit markets through faster data processing and reduced manual steps.