Binance’s VC Arm, With Over 200 Investments, Focuses on 'Explosive' Potential for Web3

Binance Labs has grown its assets to $9 billion from $7.5 billion despite a bear market and the post-FTX collapse turbulence.

AccessTimeIconMay 11, 2023 at 3:27 p.m. UTC

Binance, the world’s largest crypto exchange in terms of trading volume, may have found itself in the crosshairs of the U.S. regulators, but its venture capital (VC) arm, Binance Labs, continues to invest across the Web3 ecosystem.

Despite the looming U.S. regulatory uncertainties and a continued bear market, Binance Labs has been able to grow its assets to $9 billion at the end of the first quarter from $7.5 billion last August. The VC arm expanded because it believes Web3 is still in its early stages and that blockchain technology has yet to see an “explosive” use case outside of financial instruments, Yibo Ling, the chief business officer of Binance Labs, said during an interview with CoinDesk.

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  • “We are very much long-term investors in this space. We're not a fly by night – come in, and try to get a quick hit and move on because our core business is obviously long on the entire industry,” Ling said. He also added that his firm looked for investment opportunities that haven’t been rocked by market conditions or potential regulations.

    The VC’s parent company, Binance, has found itself in the target of U.S regulators following a lawsuit from the Commodity Futures Trading Commission (CFTC) this year. Like many other crypto firms, heightened scrutiny for the centralized crypto exchange coincides with an extended bear market and follows the collapse of centralized exchange rival FTX.

    The move by the regulators and policymakers has spooked many industry veterans and investors alike. Some observers have even called it a "war on crypto," while industry giants like Coinbase have hit back against the U.S. Securities and Exchange Commission (SEC), arguing that the markets regulator is providing insufficient regulatory guidance for companies operating in the crypto sector.

    FTX: A head scratcher

    Binance rival FTX had an epic collapse late last year. At one point Binance agreed to bail the company out, but that deal fell apart in a day amid the fast-moving disaster. A cascade of events following that, eventually led to the current gloomy market environment.

    Companies that FTX’s own VC division invested in were left in an awkward position after the collapse.

    “We were always surprised by the level of investment that [FTX] made in their VC arm, as well as their marketing,” said Ling. “We’re obviously much bigger than they are, and we were looking at how they were spending money and how we were spending money and we were just scratching our heads on how they had the resources available to do what they did,” he added.

    Centralized exchanges faced increased scrutiny in the wake of the FTX, particularly about potential liquidity concerns. However, Ling said he hasn’t heard concerns from portfolio companies if Binance Labs could see any notable disruptions of its own.

    “There’s no way to draw a line between the two points of where we’re at, and where [FTX is] at,” he said.

    10x returns

    Binance Labs has over 200 portfolio companies from over 25 countries and 50 of those projects were incubated through Binance programs. Some of the portfolio companies include Ethereum sidechain Polygon, security firm CertiK, infrastructure provider Polyhedra Network and South Korean game developer GOMBLE.

    To keep growing its investments, the VC firm is currently deploying funding from a $500 million fund it announced last summer, which included Binance, DST Global Partners, Breyer Capital and Whampoa Group as its limited partners (LPs). Returns are “well in excess of 10x at the moment,” said Ling.

    The venture capital arm invests across all Web3 verticals and all investment stages, though there’s a “very strong preference” for early-stage bets on seed and Series A-stage companies that could benefit the most from the operational support of the broader Binance ecosystem.

    Asked what crypto sectors will have the strongest positions coming out of the bear market, Ling highlighted decentralized finance (DeFi) and infrastructure projects that make it easier for developers and users to make the transition from Web2 to Web3.

    One area of interest is the path between Web2 and Web3 gaming, where even legacy studios are looking for ways to add blockchain technology to their ecosystems, Ling noted.

    Sticking with Binance Labs’ long-term vision, Ling thinks the industry still has a long way to go and the sector has barely scratched the surface.

    “We’re still very much in the early days in Web3, which makes it equal parts exciting and frustrating because there’s a lot to be done,” he explained.

    Edited by Aoyon Ashraf and Nick Baker.

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    CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

    Brandy Betz

    Brandy covered crypto-related venture capital deals for CoinDesk.