Tranched, a London-based embedded asset-based financing platform, has successfully raised $3.4 million in a pre-seed funding round. This round was spearheaded by Speedinvest and saw additional contributions from Andreessen Horowitz’s Crypto Startup Accelerator (CSX) program, Blockwall, Kima, and OVNI Capital. With these funds in hand, Tranched aims to enhance its platform with new features and extend its global reach. The company envisions serving a wide spectrum of financial institutions, including lenders, credit funds, asset managers, and banks worldwide, thus moving beyond its current European stronghold.
Revolutionizing the Securitization Industry
Tranched has its sights set on transforming the €12 trillion global securitization industry, a sector traditionally hampered by cumbersome manual processes and exorbitant fees. By harnessing the power of blockchain technology, Tranched aims to streamline and automate these processes, thereby slashing costs and making them less complex. Current asset-based deal structures are notorious for their red tape, which not only wastes time but also tends to be prohibitively expensive for lenders. Tranched’s innovative approach simplifies these processes, increases transparency, and reduces the need for intermediaries, whose fees often eat into economic value.
Michael Elalouf, co-founder of Tranched, highlighted that lenders frequently lose a significant portion of their economics to third-party fees and complex structured processes. With Tranched’s solution, the platform seeks to reclaim this lost value, providing easier access to a broader range of financing options. This is expected to benefit not only clients and consumers but also small businesses. In its initial transactions, Tranched has already managed to cut costs by up to an impressive 90%, showcasing the potential efficiency gains.
Benefits of Asset-Based Finance
Asset-based finance stands out as a natural diversifier and offers one of the best risk-return trade-offs available, as pointed out by Tranched co-founder Clément Larrue. Institutional investors who are in search of better value for their money can benefit from the granularity and structural protections that asset-based finance provides, all while enjoying a yield premium. However, the existing complexities, lack of clarity, and liquidity issues in delivering these benefits pose significant challenges. Tranched aims to tackle these obstacles head-on through blockchain technology and smart contracts.
Olga Shikhantsova, Partner at Speedinvest, notably mentioned that Tranched has the potential to become the dream tool for many fintechs, enabling them to attract financing more efficiently and thereby fueling further growth. This advancement could support hundreds of fintechs that have until now been underserved by traditional investors, marking an exciting new phase for Tranched. The promise of a more simplified, cost-effective approach could level the playing field for numerous financial technology firms.
Leveraging Blockchain Technology
Tranched leverages state-of-the-art blockchain technology to create an unprecedented level of direct connectivity between lenders and investors. At the heart of this innovative system is the deep application of tokenization, executed more comprehensively than ever before in the finance industry. Each lending facility sees the establishment of a dedicated protocol that tokenizes an originator’s receivables as they occur, instantly verifying their eligibility. Following this, smart contracts are deployed to enforce bespoke borrowing base and waterfall rules over the pool of tokenized receivables and their cash flows, all conforming to institutional standards.
This revolutionary approach not only allows for real-time updates on key financial metrics such as repayments, balance, and arrears but also ensures an indelible record for investors. This results in unmatched levels of transparency and security. Each protocol further provides access to investment opportunities through tokenized tranche tokens with varying degrees of seniority and risk, catering to diverse investor needs. This not only simplifies and reduces costs for deals of any size but also facilitates increased liquidity in the asset class, thanks to distributed ledgers that eliminate execution friction.
Future of Digital Finance
Tranched, a London-based platform offering embedded asset-based financing, has successfully secured $3.4 million in a pre-seed funding round. This funding initiative was led by Speedinvest, with significant contributions from Andreessen Horowitz’s Crypto Startup Accelerator (CSX) program, Blockwall, Kima, and OVNI Capital. The company plans to use this capital to introduce new features to its platform and expand its presence on a global scale. Tranched’s vision is to cater to a broad range of financial institutions, including lenders, credit funds, asset managers, and banks across the world. This ambitious expansion aims to take the company’s services beyond its current European base. By enhancing its platform and extending its reach, Tranched seeks to become a pivotal player in the global financing landscape, bridging gaps and offering innovative financing solutions tailored to the needs of various financial institutions operating in diverse markets around the globe.