Despite the slump in cryptocurrency prices, the number of firms raising in the decentralized finance (DeFi) market has continued to pick up.
Lending protocol Goldfinch offers the latest example. The project announced Wednesday the completion of a $11 million fundraise led by venture capital investment giant a16z. The firm, which has grown by 2.5x over the last few months, provides borrowers the ability to take out an under-collateralized loan — a unique offering in a market where borrowers typically have to post more collateral than they want to borrow.
"I'm not used to dealing with this many zeros," said Mike Sall, a former Coinbase product analysis. Sall co-founded Goldfinch with Blake West, who also spent some time at Coinbase as a backend engineer.
While the DeFi market has typically been associated with rogue bands of retail traders, Goldfinch is wooing an array of institutions to help build out its platform. The three-sided market is made up of borrowers looking for capital, liquidity providers, and backers of the loans. It's being examined by credit funds managing billions that are looking to lend and financial technology firms that are looking to borrow.
In a sense, Goldfinch mimics some of the features of the traditional lending market, where banks assess the creditworthiness of a given borrower based on their own credit and risk analysis. "The backers are the core participants that help determine credit worthiness," said West.
Still, the mechanism by which users show their credit worthiness is decentralized, according to the project.
"The protocol does this by using the concept of “trust through consensus”: that borrowers can show creditworthiness based on the collective assessment of other participants, rather than based on their crypto assets," a press release explained.
The fresh capital injection will help Goldfinch make a few new hires, including a business operations manager and several software engineers.
As for the raise, a16z participated along with Mercy Corps Ventures, A Capital, SV Angel, Access Ventures, Divergence Ventures. Former Coinbase CTO Balaji Srinivasan and Messari CEO Ryan Selkis also participated.