That’s according to a report Monday (March 30) from Fortune, which noted that the private credit space has largely steered clear of the crypto world.
“I think what these guys are doing is really just like being able to be the translation agent between these two industries,” said Sean Judge, general partner at Castle Island Ventures, which led the seed funding round.
Connor Dougherty and Lily Yarborough, Valinor’s co-founders and veterans of the private credit arm of asset manager Blackstone, declined to share at what valuation they raised their capital, the report added.
In 2024, the pair founded an earlier version of Valinor, the latest in a string of tech startups to take its name from J.R.R. Tolkien. (In this case, Valinor refers to the “Undying Lands,” home to immortal beings.)
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At first, the company focused solely on lending to crypto businesses before deciding that—in addition to lending to blockchain companies—they could employ blockchains to make lending more efficient, the report added.
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“We realized there was a real opportunity to use crypto technology to be a more effective lender,” said Yarborough.
The report noted that private credit lending relies on a rules-based process using a combination of spreadsheets and human oversight to make lending work. Valinor argues that smart contracts, or blockchain-based programs that automatically route money according to certain conditions being reached, can replace existing systems.
“Especially at a private credit firm, you’ve always had someone who’s actually pushing the wire button,” Dougherty said.
The company’s efforts are happening at a time when observers say the private credit market—already at $2 trillion—could surpass $3.5 trillion in the years ahead, as PYMNTS wrote recently.
“That growth has been supported by a network of banks, asset managers and institutional investors that provide financing behind the scenes,” that report said. “Yet that interconnection is now under closer review. Banks supply credit lines and funding facilities that allow private credit funds to operate, which means they share exposure to borrower performance even when they do not originate the loans. When liquidity tightens, that exposure can surface across multiple parts of the financial system.”
Loan sizes have also risen, often north of $80 million, as the Federal Reserve has written, while many borrowers are in sectors with limited tangible collateral. That combination has raised questions about how risk is priced and how losses might be absorbed in a downturn.
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