Today’s private credit market is fragmented. Nonbank lenders often depend on several providers to make and manage loans, keep records, distribute payments, and ensure transactions are accurate. Because those providers all rely on different internal systems, the process can be slow and costly. That’s why a Brooklyn-based fintech company called Tare is pledging to simplify the process by using blockchain technology to bring those functions onto a single platform.
Cofounded by credit and crypto veterans Kevin Miao, Keerthi Moudgal, and Lucas Vogelsang, Tare announced Wednesday that it had raised a $13.25 million seed round, which closed in March. The company plans to use the funding to build software on the Avalanche blockchain that creates digital records of loans, while automating the administrative work involved in managing them.
Blockchain Capital led the round, joined by Janus Henderson, Strobe Ventures, the Venture Dept, Neoclassic Capital, and the Avalanche Foundation. Individual backers included Aave CEO Stani Kulechov, Tether cofounder Phil Potter, and Privy CEO Henri Stern. Tare declined to disclose its valuation following the seed round.
In an interview with Fortune, Tare CEO Kevin Miao argued that the difference between what borrowers pay and what investors ultimately earn is often absorbed by the intermediaries that sit between them. Using mortgages as an example, he noted that middlemen costs inflate the interest rates borrowers pay while lowering the yields investors receive. Blockchain-based systems can automate that operational work and eliminate extra costs.
“We deserve to have a system that works for us [and] doesn’t extract from both sides, and we need to build a platform or a marketplace that connects the two sides with no friction,” Miao said. “If we do this, everyone is going to benefit.”
Modernizing credit systems
Certain companies have already made headway in using blockchain to make credit markets more efficient. Figure operates a blockchain-based lending and loan-trading platform, while tokenization platform Centrifuge helps bring real-world assets, including private-credit products, onto blockchain networks. Trading platform Octaura, meanwhile, has developed digital tools to streamline institutional credit trading.
Rather than trying to compete with existing products, Tare is focused on updating the outdated systems financial firms use behind the scenes to manage loans, said Aleks Larsen, a general partner at Blockchain Capital.
“I don’t see a direct competitor in crypto today. This is the first time we’re taking this entire system and trying to put it on-chain,” Larsen told Fortune. “The old way of doing things is the competitor.”
Tare’s cofounders have spent years working at the intersection of credit and blockchain. Miao began his career at Citigroup in 2014, where he traded subprime mortgage products and helped early fintech lenders access debt capital markets. Inspired by a 2017 paper on using blockchain for securitizations, he later launched BlockTower Credit, a $2 billion institutional private-credit fund focused on bringing real-world credit assets and securitizations onto blockchain networks. Vogelsang cofounded Centrifuge in 2018 and led the company for several years before becoming a venture partner at Blockchain Capital and later turning his attention to Tare.
Miao and Vogelsang first worked together on a deal when BlockTower selected Centrifuge as its tokenization infrastructure partner. They later met Moudgal, who was leading development at Kinexys, J.P. Morgan’s internal blockchain unit. The three concluded that earlier tokenization efforts had addressed only isolated parts of the credit market. At the end of 2023, they left their respective roles to launch Tare.
Besides its New York headquarters, Tare has an office in Lisbon, Portugal. The company will use funds from its seed round to build and expand its loan management software, hire staff, and obtain the licenses needed for its lending arm, Tare Credit LLC, to operate across the United States.