In a bid 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 in Fence, a startup dedicated to developing software for handling the operational aspects of structured credit deals. The round also saw participation from Parafi Capital and Crane Ventures.
Fence's software aims to replace the traditionally fragmented and manual processes used in the industry, which often involve tracking loan pools, verifying collateral, and managing cash flows across multiple firms using outdated methods such as spreadsheets, PDFs, and email. By providing a single, unified system that updates in real-time, Fence seeks to enhance transaction efficiency and grant investors greater visibility into the assets backing their investments.
According to Juan Montero, co-founder and CEO of Fence, the company's approach can significantly reduce costs for major asset managers. In collaboration with BBVA, one of Spain's largest banks with $800 billion in assets under management, Fence has reported lower funding costs for borrowers and decreased operational workload while continuously tracking large volumes of loans.
Unlike many blockchain-based solutions, Fence utilizes blockchain technology as back-end infrastructure rather than a front-end product. The company focuses on using smart contracts to manage cash, collateral, and deal terms behind the scenes, rather than promoting tokens or crypto wallets to banks and asset managers. This approach enables Fence to streamline processes such as loan data verification, report generation, and payment clearance, which can often take days.
By leveraging APIs, software checks, and smart contracts, Fence can release cash when deal terms are met, thereby increasing the speed of transactions. Additionally, the company can 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 changes in ownership. However, tokenization is only employed where it adds tangible value. As Montero emphasized, 'We don't want to be perceived as a blockchain company; we're building the infrastructure for the capital markets.
Others digitize the paperwork, but Fence has rebuilt the underlying plumbing.' Currently, Fence oversees approximately $1.5 billion in assets across its platform, working with prominent firms such as BlackRock and Fortress. The company can onboard new deals in a matter of weeks, a significant reduction from the months required by standard processes. The newly secured funding will facilitate Fence's expansion in the U.S.
and further development of its product, driven by the conviction that enhanced data speed and reduced manual steps can fundamentally reshape the operation of credit markets.