Why Binance is investing $1b to find the next blockchain unicorn

Photo credit: David McBee

Disclosure: The author of this article is not affiliated with any of the organizations mentioned in the article below.

Earlier this year, Binance (a blockchain ecosystem and cryptocurrency exchange) made mainstream headlines as the fastest company to hit unicorn status—it had only been operational for six months at the time.

They’ve recently allocated US$1 billion to an internal fund called “Binance Labs,” an initiative to incubate, invest, and empower blockchain and cryptocurrency entrepreneurs, projects, and communities.

I caught up with Benjamin Rameau, the director of Binance Labs, to learn more about it.

Why was Binance Labs set up?

After speaking with their team, it was clear that they were keen to see more blockchain unicorns in the space. By opening a new fund, the company can contribute to creating a more robust ecosystem to support their own exchange.

“We are for-profit, but not primarily motivated by profits,” says Rameau. “By providing capital to the best projects, we hope to assist those building the tools and applications for the first billion people to join the blockchain revolution.”

Opportunities to focus on

In order for the ecosystem to support the first billion users, blockchain’s infrastructure layer needs work. For large financial institutions to enter, custody is a critical element to ensure digital assets can be safely and securely managed. This is an area we are also focused on developing at HEX Capital.

For retail users, simpler crypto-wallets are needed to help onboard the masses, especially for those who aren’t “tech savvy.” Other aspects of the infrastructure layer that Binance Labs thinks still need enhancing are “more scalable protocols and more secure smart contracts.”

On top of the infrastructure layer, the industry needs more user-friendly applications (such as games), which Rameau believes can act as “an enticement for new users to join the revolution and become a frictionless gateway into crypto.”

Assessment criteria

Most early-stage tech investors look at a project’s founding team. This is because while their product may change, the team will likely stay the same.

Another key element Binance Labs focuses on is the problem being solved and how solving it will positivity impact the blockchain ecosystem. This is often unlike other crypto funds, which are mainly focused on generating profits and have a short-term focus.

Investment structure and time horizon

Whether through venture capital or ICOs, one big hurdle in fundraising is finding the lead investor.

So, it was refreshing to hear that Binance Labs tries to be the lead investor on every deal they participate in. According to Rameau, when it comes to their participation, they are “flexible and don’t have a specific target investment size.”

Building the team