In a significant move to revolutionize 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 focused on developing software for the operational layer of structured credit deals. This 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 data 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 depending on periodic reports. The company claims that its system can reduce costs for major asset managers and has already demonstrated this in deals with BBVA, one of Spain's largest banks, overseeing $800 billion in assets.
Fence's use of blockchain is notably behind the scenes, utilizing smart contracts to manage cash, collateral, and deal rules without promoting tokens or crypto wallets to banks and asset managers. By pulling information through APIs, running checks in software, and using smart contracts to release cash when deal terms are met, Fence significantly streamlines the process. The company can also tokenize lender positions in financing vehicles and, in some cases, the underlying loans or invoices, allowing for the transfer of positions, borrowing against them, or automatic payment upon ownership changes. However, tokenization is only applied where it adds value.
With the goal of expanding in the U.S. and enhancing its product, Fence, which currently oversees about $1.5 billion in assets across its platform, working with firms like BlackRock and Fortress, aims to reshape the credit markets by reducing manual steps and increasing data speed.