A recent $20 million funding round, spearheaded by Galaxy Ventures, the venture capital division of Mike Novogratz's Galaxy Digital, is set to transform the $6 trillion asset-backed finance market by harnessing blockchain technology. This market, which has traditionally relied on manual workflows, is poised for disruption. The funding round, which also included investments from Parafi Capital and Crane Ventures, will support Fence, a startup dedicated to developing software for the operational layer of structured credit deals.
Currently, this layer, encompassing tasks such as tracking loan pools, verifying collateral, and managing cash flows, is often fragmented and reliant on outdated tools like spreadsheets, PDFs, and email, resulting in delayed transactions and limited visibility for investors. Fence aims to replace these antiquated processes 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 relying on periodic reports. The company claims that this streamlined approach can significantly reduce costs for major asset managers. In partnerships with BBVA, one of Spain's largest banks with $800 billion in assets under management, Fence has reported lower funding costs for borrowers and reduced operational workload while tracking large volumes of loans. Notably, Fence utilizes blockchain technology as a back-end solution, rather than a front-end product.
The company focuses on using smart contracts to manage cash, collateral, and deal terms, rather than promoting tokens or crypto wallets to banks and asset managers. By leveraging APIs, software checks, and smart contracts, Fence can accelerate the processing of loan data, reports, and payments, which typically takes days. Additionally, the company can tokenize lender positions in financing vehicles and, in some cases, the underlying loans or invoices, facilitating the transfer of positions, borrowing against them, or automatic payment upon changes in ownership.
However, tokenization is only employed where it adds significant value. As Montero emphasized, 'We don't want to be seen as a blockchain company; we're building the infrastructure for the capital markets.
Others digitize the paperwork; Fence rebuilt the plumbing.' Currently, the company oversees approximately $1.5 billion in assets across its platform, collaborating with firms like BlackRock and Fortress, and can onboard new deals in weeks, compared to the months required by standard processes. The funding will enable the company to expand its presence in the U.S.
and further develop its product, with the goal of reshaping the credit market's operational landscape through faster data processing and reduced manual steps.