Binance Labs to Give $500,000 to Crypto Startups in Exchange for a 10% Stake

Francisco Memoria
  • Binance is set to give startups $500,000 along with guidance in exchange for 10% stake in their business.
  • The crypto exchange's goal is to catch real blockchain use cases that'll help it "thrive."

Binance, the world’s largest cryptocurrency exchange by trading volume, is reportedly going to start giving select crypto startups $500,000 in exchange for 10% of their business through its new Incubation program.

According to TechCrunch the Binance Labs Incubation Program is set to take on around 8-10 companies per batch for a 10-week period. Ella Zhang, the CEO of Binance Labs, noted the company is looking to hold one batch per quarter.

Its $500,000 investment is relatively large, according to traditional standards, taking into account the company is only looking to get 10% equity in early-stage startups. The money, Zhang along with Binance Labs director Christy Choi noted, will “facilitate” startup founders by letting them focus on their products and services, instead of on setting up a business.

Notably, Binance hasn’t yet decided whether the investment will be in fiat, crypto, or a combination of both. Along with the money, the firm is set to help crypto startups through mentoring, technical advice, and access to its network.

The cryptocurrency exchange will reportedly also support startups through non-technical yet crucial activities like HR, administration, and more. Per TechCrunch, ideal candidates haven’t yet received any investments, as the company is looking to be the first one. The first batch is set to go live by October, in San Francisco.

While the first gathering will be in the US Binance Labs is looking for startups from all over the world, as Zhang noted it’s looking for opportunities for blockchain businesses everywhere. She was quoted as saying:

We’re looking at different cities across the world because blockchain and crypto are international. We see problems and opportunities in different regions with different ways to leverage the blockchain.

Ella Zhang

According to Zhang, the new Incubation Program is similar to Binance’s $1 billion blockchain startup fund. It’s set to focus on projects developing network infrastructure, blockchain scalability and security solutions, on decentralized exchanges, wallets, payment providers, decentralized apps, and on compliance.

Giving out equity isn’t common in the cryptocurrency space. Unlike traditional companies, crypto startups often raise capital through initial coin offerings (ICOs), which reportedly see them raise large sums with ease, but leave them dealing with retail investor expectations and other concerns that drain their resources.

Per Zhang, Binance’s program will help founders focus on their businesses as they’ll be able to “get rid of those noises and focus on their product.”

Binance’s Investment Strategy

According to TechCrunch Binance’s investment strategy is an aggressive one, but one that makes “perfect sense.” Being one of the leading cryptocurrency exchanges, with a daily trading volume often above $1 billion, it’s extremely profitable but mostly dependent on its core platform.

As CryptoGlobe reported, the exchange was more profitable then the Deutsche Bank, Germany’s largest bank, and its CEO Changpeng Zhao expects its profits this year to go up to $1 billion. This, after the company recorded a $300 million revenue in the first half of 2018.

As the news outlet claims, Zhang acknowledged Binance’s current situation, and added real uses cases for blockchain technology and cryptocurrencies are going to make Binance “thrive.” Binance’s fund and incubator were reportedly set up to identify these potential use cases and enable them to “flourish."