Yi He, the woman who co-founded crypto exchange Binance with Changpeng Zhao in 2017, now runs the venture capital arm of the company and sees declining markets and challenging economic conditions as a time to identify promising projects to invest in.
In an interview with forkIt has strong plans for the operation, which manages $7.5 billion in assets across more than 200 projects for the world’s largest cryptocurrency exchange, said last month, who was appointed head of incubator and investment unit Binance Labs last month.
The 35-year-old said she is looking at early-stage projects that offer long-term benefits to the industry and sees opportunities in current bear market conditions, but declined to give details. She added that it is necessary to liquidate the “counterfeit” projects that jump on the fad to make some quick money. She said such projects lack strong business models and will not last.
Binance Labs said last month that it has generated a rate of return of 2,100% since its inception in 2018 and has investments that include play-for-profit game Axie Infinity, layer 2 blockchain Polygon, metaverse game The Sandbox, and the STEPN app. .
In June, Binance Labs closed a $500 million investment fund that included partners such as online investment firms DST Global Partners and Breyer Capital. The new fund has also attracted private equity funds, family offices, and corporations as limited partners (LPs), according to a June statement.
The following interview has been translated from Chinese and edited for language and brevity.
Tim Sheen: What is your investment strategy? How is it different from investing in venture capital (VC) in the Internet or Web 2.0 industry?
Yee: We all know it’s a good investment opportunity in a bear market where many teams just looking to make some quick money will be forced out of this industry. It’s a good time now to support those who really want to run a good business and believe in the industry.
The main difference in fundraising between Web 3.0 and Web 2.0 is that Web3 projects do not necessarily need to raise funds through VCs. They may also issue tokens and sell them to users. In such a scenario, the role of venture capital could be more valuable in providing guidance rather than giving money. This can include guidance on technical or security aspects or about the model of tokens. This is important because the users and the corresponding community are of the essence when it comes to running a Web3 company.
Shin: I said now is the time to invest. How do bearish or bullish market conditions make a difference to your venture capital investment?
he is: We generally discover what we really want regardless of whether we are in a bullish or bearish market. In a bear market, I think we should make investments more robust, but not just for the sake of investing.
There is this trend in the investment industry to follow the herd and many funds are concerned that they may miss a four- or five-year investment cycle. Some of our partnership providers also suggested investing in more projects and investing faster. I told them not to be nervous.
Shane: How do you determine preferences when deciding which projects to invest in?
he is: There are three types of companies to look forward to. The first type are those who build infrastructure.
The industry is still in its infancy. In the future, I imagine that one should be able to use native blockchain products almost everywhere, just as we are used to using office software and social media. It’s just that there’s still a technical bottleneck. So, infrastructure is an area that we continue to invest in, regardless of whether you are a tier one company or a multi-threaded protocol.
The second type of projects we invest in are those that run all kinds of blockchain applications. There are more and more startups with large user bases, such as those that are adopting play-for-earning or moving-for-profit models. We monitor products that come with innovative use cases.
For these projects, we will ask questions similar to those you would ask Web2. What is your business model? What issues or problems are you solving? What is innovation? These are the typical questions we ask.
The third type of companies we are looking for are those that provide services related to blockchain technology to better support the development of the industry, such as data security. It’s rare to see a Web2 company get hacked, but it happens all the time in the Web3 industry.
For a long time, the folks at Web3 have repeated the common phrase, “Token is the law.” If you don’t code well enough, it’s your responsibility if something goes wrong. I agree, but if we want wider adoption, you will have to make your products easy to use in order to serve more people.
Also, I prefer projects that have their own innovative approaches to replicas. If you tell me that you are similar to a certain popular project and share a similar user base, which can therefore save you some quick money, this will not work for me.
Binance doesn’t invest in projects just to make some quick cash. We value “long lasting”.
There are still founders and entrepreneurs who find it easy to raise money in Web3 and start ‘tang ping’. [Editor’s note: Tang ping is a phrase that translates as “lying flat” and refers to younger generations in China rejecting a work lifestyle that demands long hours to succeed.]
These entrepreneurs did not realize that once you make a promise to your users as a founder, you have to fulfill. You can’t just put money from users in your pocket and now feel financially free, so you get a “tang ping”.
However, many in the industry are still exploring different avenues to success and hope to find those that appreciate the long-term approach.
Shen: Before you took over Binance Labs, you invested in X-to earn Projects, such as Axie Infinity and STEPN. What is your plan for the X-to-Earn models?
he is: Companies running X-to-Ear models need to realize that “earn” is not the key, and “X” is the key.
A typical example is play-to-earn games. If users join only because they want to earn money, once the “pumping” period is over, the game is often over as well, with user numbers shrinking and token prices dropping.
You will need to go back to the point of origin to see if the game is still attractive if there is no winning. Will there be enough people who want to buy it?
Shen: Binance said in February that it would invest $200 million in Forbes, but CEO Changpeng Zhao He said in June It can change after the failure of the SPAC deal. Can you give us any update on this and your media investment strategy?
he is: We are still following the Forbes case. This is an investment linked to its initial public offering through a backdoor menu in plain language. But there seems to be some difficulties, so they are making adjustments. Perhaps some of their shareholders may want to dilute the holdings.
In terms of investing in media, when Elon Musk said he wanted to buy Twitter, we thought it was a good opportunity because Twitter has a large user base and that would be good for Web3 education. [Editor’s note: Binance said in May it will commit US$500 million to Elon Musk’s buyout, which has gone sour.]
Now, we don’t include media as a specific investment target, but we’ll take a look if we come across any good ones.