Season 4 of Binance Labs Incubation Program: How to build, invest and grow startups?

Introduction

Welcome to the second bi-weekly progress report of Binance Labs Incubation Program Season 4. In weeks 3 and 4, Binance Labs invited Yi He (Co-Founder and CMO of Binance), Mo Dong (Co-Founder and CEO of Celer Network), and Nicole Zhang (partner at Lingfeng Innovation Fund) for the fireside chats. As long-term builders with proven records in the blockchain industry, they all shared very insightful and fruitful thoughts on building and growing startups.

The mentors focused mainly on these areas during their fireside chats:

• How to build a startup

• How to invest and fundraise

• How to grow 

During fireside chats, founders from the Season 4 incubation program were able to get some ideas from senior executives with different backgrounds. Binance Labs prepared a highlight piece of the undisclosed fireside chat sessions.

How to Build a Startup

1) Playbux Co-Founder Sarun: How did you get your first million dollars of revenue? How did Binance acquire its first one million users? Can you provide suggestions for “newbie” founders about managing and operating the startups in their first few months?

Yi He: Right now, Binance is a comprehensive blockchain ecosystem; however, it started with a centralized exchange in 2017. Our first million-dollar revenue came from the profits of the exchange. 

Binance went through difficulties just like other startups did. Because the community didn’t have much trust in a centralized platform, Binance had a tough beginning in 2017.

However, we were not disappointed and knew that we had to keep moving forward. ‘Community’ was the key back in the days for Binance. With the strong communities, we were able to acquire initial users with high loyalty to the platform. The secret was to listen to the communities carefully. We tried to accept the feedback and kept developing our platform based on user feedback.

Eventually, communities became our biggest supporters, and support from communities is one of the main driving forces of crypto and blockchain mass adoption. What I can tell the founders is that there has to be a strong product and community support to achieve sustainable growth.

 2) What are the typical mistakes that founders usually make? 

Nicole Zhang: One of the biggest problems is that founders don’t know how to choose the right investor at the beginning. Founders need to find investors that are able to guide them in the right direction. Some crypto-focused venture capitals can also help make things Web3-native. Another common mistake we see is the lack of practical estimation in terms of the valuation of your project. Thorough valuation is essential for fundraising.

3) What is your advice for the founders during the market turmoil? What are the important things that you think founders need to pay attention to?

Mo Dong: Blockchain technology is relatively new. Ethereum didn’t get enough traction initially, and many didn’t think smart contracts were legit. However, as time went by, Ethereum proved skeptics wrong and showed the potential of how blockchain can upend the status quo. Even during a bear market, they could still grow their community. 

For crypto startups, if you’re running your business in a slow market, it would be better to build reserves. Celer Network was lucky that we got funds to pass the winter.

There are several core questions we need to think about: What’s the pain point you truly want to solve? Why do crypto and non-crypto users need to use your product? What exactly will the ecosystem look like?

How to Invest and Fundraise

1) Qwestive Co-Founder & CEO Diego: How to come up with a proper valuation? We didn’t want to come up with an outlandish valuation or under-sell themselves. What are the concrete steps that founders can follow in coming up with an adequate valuation figure? 

Nicole: It depends on whether your product is e at a pre-product or post-product stage. As for a post-product stage startup, it would be great to think about what’s your revenue or profitability model. To offer a reasonable valuation, you should estimate how much money would be needed and how much equity you are willing to give out. Investors know how to deal with founders. Founders should also know how to negotiate and prove themselves more valuable. As long as you can justify your progress, you can be frank with the investor about the time you need to build, which helps justify the amount you target to raise and the valuation you offer.

If you are at a pre-product stage, then it would depend on how well you can make an analogy about your future roadmap, like targeting how many months to reach a certain milestone, how many users to be attracted, or how much revenue can be generated within specific periods. 

Even when the market is not performing well, the primary market is still very active. Investors are often looking for projects that can expand cryptocurrency use cases and drive the adoption of Web3 and blockchain technologies. For instance, A16Z and Binance Labs recently announced their new funds.

But when startups’ founders are reaching out to raise funds, make sure to look through the market to see what would be the best valuation and see what would be the proper discount for your pre-product. Moreover, knowing how to pitch your team/project is also important.

2) Grindery Co-Founder Christian: How to choose the right lead investors? 

Nicole: It’s difficult to generalize. Depending on what you need, different investors have different resources and styles.

Binance has been relatively sector-agnostic, chain-agnostic, and has a broader view of all the sectors, able to give good advice. There are also VCs who specialize in certain things and can help with certain areas. Relevant investors can truly add value to your projects.

How to grow

1) OpenLeverage Founder Tom H: What sets Binance apart from other leading crypto exchanges and custodians in this competitive space? What products or services do you think will be the main growth drivers in the next few years? 

Yi: Skills & Products: On the technical side, the matchbook of Binance was perfect at the beginning. Your products don’t have to be perfect but need to be better than your competitors. Make sure the technical infrastructure of the product is solid, safe, and strong enough. 

Community & Marketing: Listen to your users, make sure you have enough revenue to support users, and be able to solve their problems. Even if you’re the best product manager, you wouldn’t know what your users truly want unless you ask them directly. In Binance, Binance Angels help us a lot on the community side, sometimes serving as our customer service. Don’t waste money on unnecessary marketing or something else; spend money smartly on users and things that really matter for growth.

2) FilSwan Founder Charles: We are growing our marketing team in the infrastructure market. However, in the enterprise-level market, user acquisition is growing relatively slow. How to evaluate the performance of the team?

Yi: You need to ask yourself “What are the tasks assigned to my team members?” Assigning the right tasks to dedicated team members is a way. Also, founders need to understand who their true users are so that they would know how to set targets. Moreover, it’s a better way to understand the value proposition of what they’re working on.

No matter if it’s a user-centered or business-centered market, founders should be mindful when they perform token sales. While token sales can be a helpful way to raise funds in the beginning, it’s important to be aware of your goals and prepare a clear and comprehensive roadmap beforehand.

Project Updates

Playbux recently finished integration with 20,000 global merchants for its ‘Shop to Earn’ section, where users can buy from the merchants, and the merchants can earn crypto rewards in the metaverse. Our team also implemented a multiplayer function so users can join and chat with each other in the metaverse from their mobile devices.

FilSwan has launched Swan multi-chain storage kit V2.0.0. This release reduces the storage cost by 70% with multi geo locations backup feature. An Incentivized Proton Testnet is launching this month to enhance the usability of the cross-chain experience.

Reveel expanded the use case of its revenue-sharing protocol to metaverse concerts. Artists & DJs performing in Decentraland have started using Reveel to create shared tip jars that allow concert-goers to instantly send tips to all performing artists in a single transaction. 

Grindery recently released a new version of its whitepaper, detailing the decentralization approach of the system, tokenomics, and more use cases. It started the integration of the prototype with other chains, including Algorand, Near, and Flow. Also extended the team and are looking actively for someone to manage partnerships and community.

Qwestive has 80 NFT projects in the Solana ecosystem that joined their waitlist to use the platform. The team may speak about their Web3 version at BTIG DAO Tooling and Infrastructure Conference soon.

Coming Up Next…

Paris in the Vivatech!

14 projects of the Incubation Program are working hard with some amazing products in Paris! They will be presenting their work in Station F’s offices. Find the exciting scenes of startups in Paris!