A Quick Word on Investing at Binance

As many of you know, we recently announced that He Yi would take on a role as head of Binance Labs, Binance's venture capital and incubation arm. After running our marketing and customer service departments, both massive undertakings, Yi’s move to Binance Labs will build on her previous work. We're incredibly fortunate to have Yi with us. She's an inspiration to us all and one of the most hard-working, intelligent, and strategic leaders we have. 

Some may think that current market conditions would offer fewer opportunities. But we think the contrary is true; you need only look at our stake in Polygon in 2019 (bottom of the bear market) as an example of a successful, strategic investment amid a challenging market. 

To us, bear markets present more opportunities for landing solid investments and pursuing our strategic goals. So when it comes to Binance Labs, you can expect to see even more activity on the investment front.

A Binance Labs Investment Isn’t Your Average Investment

When Binance Labs invests in a company, it's much more than just a simple investment of capital. As an industry leader, we have deep knowledge and experience that is valuable to our portfolio projects.

We can help design token economics, allowing founders to build for the long term and protect users. We have dozens of tried-and-tested tips and recommendations that can help kickstart a new project, including unlocking schedule, transparency, use of incentives, etc. If projects follow these best practices, they are more likely to build trust with users quickly. If they don’t, we don't invest.

Our ecosystem is also a valuable resource. We can successfully guide projects on the best ways to run initial sales. In some select cases, our Launchpad team would review and list tokens that meet our strict listing requirements. In the process, we help to drive users to the projects and boost their credibility. We can also mentor and develop product integrations. The list really does go on. So, a Binance Labs portfolio project has a much higher chance of success because we can advise and guide them on all these fronts. This level of backing is unprecedented across the blockchain industry, and other investors normally can’t provide such comprehensive support. They don’t have the resources, ecosystem, or liquidity.

We also have a lot of dry powder sitting around, and we plan to use it to support the most promising projects.

A Binance Labs Investment Is Also an Industry Investment

We believe that the more we invest in the industry, the bigger the industry gets. And today, Binance is the largest player in the space by far. It’s not meaningful to compete with smaller exchanges. All that would do is provide us with an extra one or two percent in market share. It doesn’t move the needle. But if the industry gets bigger, say 10x bigger, then we will likely grow with it. For this reason, we invest in the larger industry and its health rather than competing with other exchanges. Our focus is on growing the blockchain space.

Furthermore, we now invest not only in blockchain businesses but in traditional ones too. That's why we’re involved in the Forbes deal. Our main thought process here? Giving traditional industries new crypto business models will help the blockchain industry expand.

We're looking at many traditional sectors, including news media, games, e-commerce, and really anything you can imagine. We'll do it if we think there's a right fit, and it will benefit the blockchain ecosystem. We're significantly increasing the scope of our investment coverage, and we'll monitor how the strategy works over the next few years. 

Tips for Building After a Successful Raise

Recently, someone came to me looking for advice on what to do after a successful raise. It's a great question, and it's not uncommon to get so tied up in fundraising that the next stage can come as a shock. So, let's say you managed to secure an investment. What comes next? At this point, you're ready to build. 

Hopefully, by now, you already have an actual product. You have something people are willing to use and pay to use. If you don't have that, you must keep trying. Do not scale before you have a usable product. Otherwise, you’ve made the initial failure even bigger and more challenging to manage.

One common mistake in crypto is forgoing the usable product step and paying people to use your product instead. This ineffective approach is usually realized through token incentives. People come in, use the platform for a little while, and then stop. 

You need to look at the churn rate, and you need to look at stickiness. For every user you bring in, they should want to invite more than one other user and continue to do so in the future. If you can achieve that, you have a good product.

I also highly recommend not spending all the funds raised on the first attempt at building and scaling. You need to make the money last and use it to fund more than one attempt if needed. In the blockchain space, you will also likely have token holders from your raise. You really have to treat them well. For now, your token holders are your users.

Understanding the Project-User Relationship

In the blockchain space, we have new business models that are very different from those in more traditional industries. Traditionally, you have investors who are shareholders of a company, then the company has users, and the users pay the company. Profits are then shared with the shareholders. It's a one-way system.

In the digital asset industry, your users are holding your tokens. The more successful your platform or product becomes, the more users will come in, and the more your token holders benefit. The more users you have, the higher the demand for and the price of your token. 

These mechanisms create a much stickier ecosystem made up of you and your users. Your users become your best sales guys. When users are at the center of your whole ecosystem and benefit directly from its success, they're incentivized to promote your project.

It’s a concept many traditional businesses don't get or even need to know. But for us, in the crypto world, it's one you need to understand thoroughly.