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 for Fence, a startup dedicated to developing software for the operational layer of structured credit deals. This round, which also included investments from Parafi Capital and Crane Ventures, aims to utilize blockchain technology to streamline processes that have traditionally relied on manual workflows. Fence's innovative approach involves creating a single, unified system that updates data in real-time, thereby replacing fragmented and outdated methods that often involve spreadsheets, PDFs, and email.
According to Juan Montero, co-founder and CEO of Fence, this new system enables lenders to continuously monitor loan performance and cash flows, rather than relying on periodic reports. The company claims that its approach can significantly reduce costs for major asset managers. In partnership with BBVA, one of Spain's largest banks, overseeing $800 billion in assets, Fence has successfully reported lower funding costs for borrowers and reduced operational workload while tracking large volumes of loans. Notably, Fence utilizes blockchain technology as back-end infrastructure, rather than as a front-end product, using smart contracts to manage cash, collateral, and deal terms without requiring banks and asset managers to adopt tokens or crypto wallets.
By leveraging APIs, software checks, and smart contracts, Fence can expedite the processing of loan data, reports, and payments, which typically take days. The company can also tokenize lender positions in financing vehicles and underlying loans or invoices, facilitating the transfer of positions, borrowing, or automatic payments in the event of ownership changes. 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.' Fence has made significant strides, currently overseeing approximately $1.5 billion in assets across its platform, working with prominent firms like BlackRock and Fortress, and onboarding new deals in a matter of weeks.
The recent funding is expected to support the company's expansion in the U.S. and further development of its product, driven by the conviction that enhanced data efficiency and reduced manual steps can fundamentally reshape the operation of credit markets.