Binance is banking big on M&A and VC deals

The exchange’s chief business officer talks investments, BD and the future of the exchange

The world’s largest crypto exchange by volume, Binance, is making big bets on M&A this year, paying particular attention to geographical gaps and customer base. And to help the exchange get there is the company’s chief business officer, Yibo Ling.

He joined Binance nearly seven months ago, after stints at Bird and Uber. Ling’s role at the company focuses on VC investments, strategic M&A and business development. And there’s a lot to look at there; Binance Labs, the exchange’s VC arm, has a portfolio valued at about $9 billion right now, Ling shared. “That’s well in excess of 10x return.”

I sat down with Ling at Consensus 2023 to learn more about Binance’s focus for investments, layer-1 blockchains, geographical and product growth for the business, among a ton of other things.

(Editor’s note: This interview has been edited for length and clarity.)

I know you just started recently, but what are the profitability metrics that Binance looks at as its north star? What are the most impressive or important metrics? And how has performance been?

In my role as chief business officer, I don’t primarily focus on operating the exchange, I focus on the deal work that we do. So all the outbound VC investments that focus on strategic M&A, bringing in capabilities to the core exchange … I focus on our commercial business development relationships. So I’m probably not the right person to talk about that but yeah, the business seems pretty healthy. Clearly the market has meaningful impact, but the business is doing quite well.

When you look at VC investments and strategic M&A, what areas is Binance focusing on and most interested in?

Our VC arm, we call that Binance Labs, and the mission there is really this notion that a tide lifts all boats. So the investments that we do are basically across the board. That’s why it’s actually good for me to be in places like this [at the conference], because there are so many projects, working on different things. And we very generically invested in almost everything. So let me get more specific in that, but we also invest upstream and downstream.

So we invest in the growth stage, we invest in early stage, seed and [Series] A. Our preference and our focus is on seed and [Series] A going early stage, because that’s where we think we can add the most value. But all of that is just to zoom back to the broader thing that we’re focused on from Labs’ perspective. We think that there’s just so much potential for growth, for disruption, for improvement in many aspects of how people go about their lives. And so that can be enabled by web3 and blockchain technology. And so, ROI and return metrics are important for us there on that side of the house. The value of our portfolio is around $9 billion right now. That’s well in excess of 10x return. Again, mostly in the early stage, some in later-stage investments.

For the most part, we don’t exit our investments because we’re able to buy and hold them really, really long term because of the mission. At this point we have probably over 200 portfolio companies on every continent other than Antarctica. We also have incubation, not just sort of direct investments. And so about a quarter of those portfolio companies come out of our incubation programs.

Now within specific sectors in a way that we think of our mission of what the tide, lifting all boats means … there’s an observation that many have made about this space, as well. It’s been around for a little bit. How come there’s no real big use cases that are built yet? Why are there no big companies on the decentralized application side of things? Which I think is fair and unfair.

I sit here, as someone who was a kid who grew up in the ’90s, and I remember the internet back then. I won’t take you all the way back. But there were things like dial-up modems, and nothing really spoke to each other. It was just incredibly clunky. I think we’re in a moment where things are new, promising, but super clunky. And so that’s one of the reasons why I think some of the killer apps haven’t necessarily appeared yet. But I do feel like that’s coming down the pipe. So we focus on, first and foremost, infrastructure, the bottom layer because of scalability, speed —  all of that’s really important.

Do you think there’s too many L1s out there?

Yeah, there’s so many of those. But then above that, I think it is about making the customer experience much more seamless. So we’ve done, for example, Trust Wallet, SafePay, we’ve done to help at least make the payments part of things a little easier. I mean, I feel like honestly, payments haven’t even been that well solved in [Web 2.0]. It’s nice now I suppose that you can pay with Apple Pay, but it’s not necessarily available everywhere for everything.

Anyway, there’s that aspect of stitching together everything to make the customer experience a little bit more manageable for the average human. And then, you know, dApps extend on top of that. And we’ve looked at a lot of stuff there. We’ve invested all across SPACE ID, STEPN … we recently invested in GOMBLE, which is gaming. I do think gaming’s an exciting use case. Earlier, we saw the wave of earn-to-play. Now we’re seeing a lot of folks using GOMBLE as an example of this, where it’s often offshoots of traditional, but gaming studios are getting into it and focusing on making fun games first and foremost. So I think all of that’s coming.

If more applications ultimately get built in, that requires more fundamental infrastructure elements to be built first.

Where are you seeing the most growth geographically and in terms of the business itself for Binance? Where are the hard-core crypto users?

I think the U.S. is a really interesting market. But to be very clear, we do not operate in the U.S. even remotely.

What do you mean by that?

I mean, every single possible measure, whether it’s IP or IP address, whether it’s user ID, whether it’s like a telephone, anything that we can look at that suggests someone may have a U.S. tie, we just can’t take those users. We stay very, very far away as a dot-com business from anything that touches the U.S. Binance.US is regulated within the U.S., and they are focused on U.S. users. I don’t have anything to do with Binance.US. I know the name and the association with CZ there creates a lot of, I think, confusion. But we don’t even talk to each other for the most part.

Geographically, aside from the U.S., the great thing about is that it is so diversified. And we all know that web3 and crypto is a pretty volatile space and that volatility has a general high beta volatility that tracks across markets. And so we are less exposed to market-specific volatility because we are so diversified. In terms of where the preponderance of the business sits, it tracks pretty well.

We are an internet-oriented company; you need connectivity and technology. And so there’s a huge opportunity, I certainly think, in some of the more developing markets.

But one of the things that personally attracted me to web3 and crypto is this notion of payments across borders. An immigrant could come here and work their butt off for 100 hours a week, and then try to wire money home to somewhere in South America, and then 30% of that goes to the prospect. That’s just morally offensive to me. And so, we’re very interested in enabling those types of things across the world. And so that does require technology to improve across some of these geographies.

What type of products do you expect to drive more growth this year?

The exchange business is really what we’re focused on, first and foremost. I’m looking at ways to fortify our exchange business, whether that is from a product diversification, for customer diversification perspective or geographic perspective. Nothing concrete to say, but like, it’s all the obvious factors that you would think. But my focus is really on the exchange business there.

That’s very, very distinct, though, from the VC investment portfolio. The thing about that is it’s a traditional venture capital model. So for the most part, those investments have almost had very, very little to do with the dot-com business. But what we do offer there is this capability for early-stage projects to be able to plug into the broader ecosystem, right? So even though the engine of the business is the exchange, there’s a lot that we do around that to help enable that broader ecosystem.

Do you think Binance and centralized exchanges are gaining share against decentralized exchanges?

That’s another aspect and thematic point that we are investigating very, very actively on the Binance Labs side of the house. I very much believe we’re at a moment in time that’s looked at as 1994 for the internet. It’s so early; there’s so much room for growth.

Our point of view is we’re very focused on just fostering the development of crypto and the web3 ecosystem, and so we do invest in DeFi. We’re investing quite a bit to DeFi ourselves, but we don’t see that as necessarily competitive because of this whole notion that we’re barely scratching the surface of the addressable market.

I mean, the market cap at its peak for crypto was around $3 trillion and what is it for equities? You know, like $100 trillion? Something like that. So we’ll see there sort of being a competitive element to those two things. It’s just different users that have different needs.

Given everything that’s happening in the U.S., even globally, there’s a lot of talk about regulation. How have the rising regulatory actions around the world impacted Binance and what is it doing to make sure the business continues to operate the way it does?

I don’t really spend any time on that at all, so I don’t think I have anything sort of unique to offer on that. I will say that clearly, we see that happening and that’s something we take into account in our business. I came in six months ago and I’ve worked at a lot of companies before and I will say that Binance is the most buttoned-up place I’ve ever worked at by a pretty huge margin.

Do you think the recent closures of crypto-friendly banks in the U.S. has affected Binance’s growth?

So for Binance, because we don’t operate in the U.S., the impact on us is fairly de minimis. But I suppose the larger macro question that’s not necessarily specific to us, but everyone here seems to be asking, [is] “What does this mean with respect to crypto and web3 in the U.S.?” As an American, I hope that our goal isn’t to sort of push that innovation everywhere else necessarily. I think that there are lots of talented folks here who want to participate. So we’ll see what happens.

Do you ever see a future where Binance and Binance.US would get together?

There’s a quip that says prediction is hard, especially about the future. The direction of travel, I would say as it currently stands, would not suggest that.

Where do you see the business going within the next year or two? What are the big plans you want to implement near term and long term?

From a Binance Labs perspective, the VC and M&A, we want to double down on the mission.

So there’s the people who are continuing to build, and this is a moment that applies maybe even to broader tech as well, with some of the unfortunate layoffs that you’ve seen. But what that does is it opens up the labor market, like a lot of people who are spending time on less productive things could maybe go do something really cool, interesting, entrepreneurial and build something new. This is a moment where I feel like there’s just a lot of opportunity on that side.

Then on the broader focus for M&A, there continues to be gaps in our portfolio with respect to geographies and with respect to certain types of customer bases, and especially the products. So we want to fill the gaps in that portfolio.

The exchange business has so much more to be done to fill out that suite. So over the course of the next one or two years, I think we need to be very, very squarely focused on just getting better at what we know how to do, which is the exchange business. That’s our bread and butter.