Galaxy Ventures, the venture capital arm of Mike Novogratz's Galaxy Digital, has led a $20 million funding round for Fence, a startup revolutionizing the $6 trillion asset-backed finance market by introducing blockchain technology to automate manual processes. The funding round, which also included investments from Parafi Capital and Crane Ventures, aims to support Fence's mission to overhaul the operational layer of structured credit deals. Currently, this layer is often fragmented and reliant on outdated methods such as spreadsheets, PDFs, and email, resulting in slowed transactions and limited visibility for investors.
Fence's software seeks to replace these processes with a single, real-time system, enabling lenders to continuously monitor loan performance and cash flows. According to Juan Montero, co-founder and CEO of Fence, this approach has the potential to significantly reduce costs for major asset managers.
In partnership with BBVA, one of Spain's largest banks, Fence has reported lower funding costs for borrowers and reduced operational work while tracking large volumes of loans. The company utilizes blockchain as a back-end solution, employing smart contracts to manage cash, collateral, and deal terms, rather than promoting it as a front-end product. By doing so, Fence streamlines the process of loan data verification, report generation, and payment clearance, which can take days in traditional facilities.
The company has also successfully tokenized lender positions in financing vehicles and underlying loans or invoices, allowing for the transfer of positions, borrowing against them, or automatic payment upon ownership changes. However, tokenization is only used when it adds value to the process. Fence currently oversees approximately $1.5 billion in assets across its platform, working with prominent firms such as BlackRock and Fortress, and can onboard new deals in a matter of weeks.
The recent 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 through faster data processing and reduced manual steps.