Binance Labs #AMA Series 1: Our Story & Investment Principles

Binance Labs, the venture capital (VC) arm and accelerator of Binance, was launched in 2018 to empower the decentralized web. Its mission is to incubate, invest in, and support promising entrepreneurs building for the long-term success of the blockchain industry. The team identifies early-stage Web3 projects via its incubation program and provides early stage investments to  high-potential blockchain projects.

To date, Binance Labs has funded more than 200 projects from over 25 countries. 50 of these projects have been incubations, including Polygon, CertiK, Nym, Perpetual Protocol, Injective Protocol, and Dune Analytics. The strategic focus of Binance Labs spans a range of key sectors: Infrastructure, DeFi, Gaming/Metaverse, SocialFi, Crypto FinTech, and Developer Applications/Tools.

Binance Labs also offers value creation services, including but not limited to general advisory, operational support, and technology/product co-development. Project founders benefit from Binance Labs’ advice and network.

Binance Labs believes in innovation through collaboration and education. The team has kicked off a series of webinars covering the Web3 landscape. This knowledge sharing aims to help aspiring founders better navigate the evolving Web3 industry, and pivot their business strategies. 

The inaugural webinar was hosted on August 9, 2022, to discuss Binance Labs’ story and investment theses. If you’ve missed the session, play it back or read on as the team has distilled all the key takeaways below!

Q: What are the investment principles of Binance Labs?

A: We usually look at five attributes. The first attribute is product innovation. Are you building something brand new that users will benefit from? 

The second attribute is a sustainable business and token model. Is your business model profitable in the long term, and are your token incentives structured in the right way? 

The third attribute is traction. What is the number of users you have already on-boarded? What is the revenue your project generates? If you're at the pre-launch stage, we will look to have a sense of the development work that you’ve done. 

The fourth attribute is the quality and permanence of the team. Are you and your co-founders committed to this project full-time and for as long as it will take?

The final attribute is technology. Is the technology you're building feasible and realistic? We look at what you’ve already built and what is buildable based on your project roadmap.  

Q: Binance Labs invests not only in token deals, but also equity stakes. Do these two sectors entail different investment theses? 

A: The underlying criteria for assessment are the same. From the strategic M&A perspective, however, we prioritize three things based on the current stage of the broader market. 

First, we look into security and compliance. Cross-jurisdiction regulations and alignment with local regulators are very important. To provide our users with the safest experience, we look at innovative products related to AML, KYC, DID, etc. 

Second, we focus on reaching and converting more users, whether it be fiat gateways or informational websites. We look at anything that's upstream from Binance, downstream from Binance, and that directly plugs into the ecosystem to expand our user base.

Third, we try to provide the best user experience across geographic regions. Some verticals we look at are institutional traders, NFT wallets, and tools for more sophisticated traders.  

Q: If we look at the macroeconomic environment, what kind of cycle are we in?

A: We'd be hesitant to pinpoint the depth or duration of this cycle, given the uncertainties around inflation and recession. We have all heard about consolidation at the expense of players who have restricted access to liquidity or funding. Yet, what we really want to see is less of a consolidation on an entity or equity level, but more of the consolidation of ideas and teams so that we as an industry can narrow our focus and press forward into specific application areas of blockchain technology. 

The ecosystem has expanded massively. There’s more interconnectedness amongst projects now. This has prompted a lot of chain reactions in the market. But on the flip side, we see many founders go back to the drawing board, rethink and reinvent their products, and shift their focus to user experience and value proposition. We consider it a positive sign. 

Institutional investors are also warming to the blockchain industry. As such, we are seeing a lot of innovation in terms of security, latency management, liquidity matching, network capacity expansion, etc.

Q: How does Binance Labs support companies that might be lacking liquidity or feel distressed?

A: We adopt a consistent approach to investing and do not deviate from our strategy. We are definitely more prudent in terms of our deployment, and take note of the systematic risks when assessing new projects. 

But regardless of what is happening in the ecosystem, we look at the root cause of each problem. If it is a business model flaw that has led to a liquidity crunch, we tend to stay away from such projects. Our team spends a considerable amount of time determining if a project has a viable business model and is capable of getting back on their feet. The appetite is there, but we look for the same level of quality that we seek in any other project.

Q: How does Binance Labs support founders from the incubation perspective?  

A: Through the Binance Labs Incubation Program, we support founders on product idea generation, operations management, tokenomics design, fundraising, and much more. We leverage the massive network and extensive resources of Binance Labs to help founders get all the help they need.  

During the 8-week program, founders are mentored by market leaders who share their insight on business operations and product development. On the demo day, founders have the opportunity to showcase their products to an audience of over 300 investors. All of our incubation founders remain a part of the Binance Labs family and are always welcome to come back to us if they need any support.

Q: What is Binance Labs’ long-term view and vision for the Web3 industry?

A: Binance Labs started off as an incubator. We pride ourselves on being an accelerator for innovative ideas that drive wider adoption and more utility into the Web3 space. To do so, we focus on early-stage projects and support Web3 founders throughout their startup journey. 

Our venture side, which deals with investment and value creation, is driven by the vision to not only facilitate the development of the Web3 industry, but also provide the right support that will set the industry standard.

Ready to hop on the Web3 bandwagon as the Binance Labs team takes deeper dives into the crypo sector? Follow them on Twitter or head to the official website to keep tabs on all upcoming #AMA sessions and webinars!