Binance Labs: Our Investment Principles and Philosophy

Original Title: “Binance Labs #AMA Series 1: Our Story & Investment Principles”

Source: Binance Labs

Compiled by: Biscuit, Chain Catcher

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

To date, Binance Labs has invested in over 200 projects from more than 25 countries. Among these, 50 projects have been incubated, including Polygon, CertiK, Nym, Perpetual Protocol, Injective Protocol, and Dune Analytics. Binance Labs' strategic focus covers a range of key areas: infrastructure, DeFi, gaming/metaverse, SocialFi, crypto fintech, and developer applications/tools.

Binance Labs also offers value creation services, including but not limited to general consulting, operational support, and technical/product co-development, allowing project founders to benefit from Binance Labs' advice and network.

Binance Labs believes in innovation through collaboration and education. The team has launched a series of webinars covering the Web3 space. This knowledge sharing aims to help aspiring founders better navigate the evolving Web3 industry and refine their business strategies. The first webinar was held on August 9, 2022, discussing the story and investment principles of Binance Labs.

Q: What are Binance Labs' investment principles?

A: We typically look at five attributes.

The first attribute is product innovation. Are you building something new that users will benefit from?

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

The third attribute is traction. How many users does the project have at its current stage? What revenue is being generated? If you are in the pre-launch phase, we would like to understand the development work you have done.

The fourth attribute is the quality and durability of the team. Are you and your co-founders able to commit full-time to this project if needed?

The last attribute is technology. Is the technology you are building feasible and realistic? We will look at what you have built and what can be built based on your project roadmap.

Q: Does Binance Labs invest in both token trading and equity? Do these two sectors require different investment themes?

A: The fundamental criteria for evaluation are the same. However, from a strategic acquisition perspective, we prioritize three things based on the current market stage.

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

Second, we focus on reaching and converting more users, whether through fiat on-ramps or informational websites. We pay attention to anything upstream and downstream of Binance that can be directly integrated into the ecosystem to expand our user base.

Third, we try to provide the best user experience across geographical regions. Some verticals we focus on include institutional traders, NFT wallets, and more mature trading tools.

Q: Looking at the macroeconomic environment, what cycle are we in?

A: Given the uncertainty of inflation and recession, we are hesitant to determine the depth or duration of this cycle. We have all heard of consolidations at the expense of limiting access to liquidity or funding for participants. However, what we really want to see is not consolidation at the entity or equity level, but more integration of ideas and teams so that we, as an industry, can narrow our focus and advance specific applications of blockchain technology.

The ecosystem has expanded on a large scale. There is now more interconnection between projects. This has triggered many chain reactions in the market. On the other hand, we see many founders rethinking and reinventing their products, shifting their focus to user experience and value propositions. We see this as a positive signal.

Institutional investors have also shown enthusiasm for the blockchain industry. Therefore, we have seen a lot of innovation in areas such as security, latency management, liquidity matching, and network capacity expansion.

Q: How does Binance Labs support companies that may lack liquidity or feel distressed?

A: We take a consistent investment approach and do not deviate from our strategy. We are certainly more cautious in deployment and pay attention to systemic risks when evaluating new projects.

But regardless of what happens in the ecosystem, we look at the root causes of each issue. If a liquidity crunch is caused by a flaw in the business model, we tend to steer clear of such projects. Our team spends a lot of time determining whether a project has a viable business model and can get back on its feet. In fact, we seek the same level of quality as with any other project.

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

A: Through the Binance incubation program, we provide support to founders in areas such as product ideation, operational management, tokenomics design, and fundraising. We leverage Binance Labs' extensive network and resources to help founders get all the assistance they need.

In the 8-week program, founders receive guidance from market leaders who share insights on business operations and product development. During the demo day, founders have the opportunity to present their products to over 300 investors. All of our incubated founders are also part of the Binance Labs family, and we welcome them back anytime they need support.

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

A: Binance Labs initially started as an incubator. We take pride in being an accelerator that drives broader adoption and more practical innovations in the Web3 space. To this end, we focus on early-stage projects and support them throughout the entrepreneurial journey of Web3 founders.

Our vision as a venture capital firm dealing with investments and value creation is not only to promote the development of the Web3 industry but also to provide the right support to set industry standards.