A recent $20 million funding round, spearheaded by Galaxy Ventures, the venture capital division of Mike Novogratz's Galaxy Digital, aims to harness the power of blockchain to transform the $6 trillion asset-backed finance market. This market, where many transactions still rely on manual processes, 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. This layer, encompassing tasks such as tracking loan pools, verifying collateral, and managing cash flows, is often fragmented and reliant on outdated methods like spreadsheets, PDFs, and email, leading to slower transactions and reduced visibility for investors. Fence seeks to replace these inefficient 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 can lead to cost savings 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. Unlike many blockchain-based solutions, Fence utilizes blockchain as a 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 allows for the automation of tasks such as data checking and payment clearing, which can take days in traditional facilities. Fence can also tokenize lender positions in financing vehicles and 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 tangible value. As Montero emphasized, 'We don't want to be perceived as a blockchain company; we're building the infrastructure for capital markets.
Others digitize paperwork; Fence has rebuilt the underlying infrastructure.' Currently, Fence oversees approximately $1.5 billion in assets across its platform, working with prominent firms like BlackRock and Fortress. It can onboard new deals in a matter of weeks, significantly faster than the months required by standard processes. The funding will be used to expand the company's presence in the U.S. and further develop its product, with the goal of reshaping the operational backbone of credit markets through faster data processing and reduced manual steps.