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 in Fence, a startup dedicated to streamlining the operational layer of structured credit deals. This round also saw participation from Parafi Capital and Crane Ventures. Fence's software aims to handle the intricate processes involved in these deals, from tracking loan pools to verifying collateral and facilitating cash movement, which are often fragmented and reliant on outdated methods such as spreadsheets, PDFs, and email.
This outdated setup can lead to slowed transactions and limited visibility for investors into the assets backing their investments. According to Juan Montero, co-founder and CEO of Fence, the company seeks to replace these inefficient processes with a unified system that updates in real-time, allowing lenders to continuously monitor loan performance and cash flows rather than relying on periodic reports.
Fence claims this approach can significantly reduce costs for major asset managers, citing its work with BBVA, one of Spain's largest banks, which oversees $800 billion in assets. The collaboration with BBVA resulted in lower funding costs for borrowers and reduced operational workload, while efficiently tracking large volumes of loans. Unlike many blockchain-centric companies, 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 the rules governing these deals, without emphasizing tokens or crypto wallets to its clients.
This approach enables Fence to pull information through APIs, run checks in software, and use smart contracts to release cash when deal terms are met, significantly streamlining the process. Additionally, Fence can tokenize lender positions in financing vehicles and, in some cases, the underlying loans or invoices, allowing for the automatic transfer of positions, borrowing against them, or receiving payments if ownership changes. However, Montero emphasized that tokenization is only employed where it adds tangible value. Montero clarified the company's vision, stating, "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, Fence oversees approximately $1.5 billion in assets across its platform, working with notable firms such as BlackRock and Fortress, and can onboard new deals in weeks, a significant reduction from the months required under standard processes.
The freshly secured funding is expected to facilitate the company's expansion in the U.S. and further develop its product, with the ultimate goal of reshaping how credit markets operate behind the scenes through faster data and fewer manual steps.