Dialogue He Yi: Which Web3 projects does Binance Labs prefer?

Original Title: 《Binance's US$7.5 billion woman sees plenty of promise in bear markets》

Written by: TIMMY SHEN, Forkast

Compiled by: Deep Tide TechFlow

He Yi, who co-founded the Binance cryptocurrency exchange with Zhao Changpeng in 2017, is now in charge of managing the company's venture capital division. She believes that a downturn in the market and tough economic conditions are precisely the right time to look for potential projects to invest in.

In an interview with Forkast, Ms. He, who was appointed head of the incubator and investment division Binance Labs last month, said she has positive plans for the business, which is under the world's largest cryptocurrency exchange, managing $7.5 billion and overseeing over 200 projects.

At 35 years old, Ms. He is looking for early-stage projects that can bring long-term benefits to the industry. She believes that the current bear market conditions will create unprecedented opportunities, but she declined to disclose specific details. She added that it is essential to filter out "sham" projects that chase trends for quick profits. She stated that such projects lack solid business models and will not last.

Binance Labs reported last month that since its establishment in 2018, it has achieved a 2,100% return rate, with investment projects including Axie Infinity, Polygon, The Sandbox, and STEPN.

In June, Binance Labs announced the completion of a $500 million investment fund, with investors including internet investment firm DST Global Partners, Breyer Capital, private equity funds, some family offices, and several corporations.

The following is a record of the interview, which we have edited for brevity.

Timmy Shen: What is your investment strategy? How does it differ from venture capital (VC) investments in the internet industry or Web 2.0?

He Yi: We all know that bear markets are a great investment opportunity because many teams that only want to make quick money will be forced to exit the industry. Now is a good time to support those who genuinely want to operate sustainably and believe in this industry.

A key difference in fundraising between Web 3.0 and Web 2.0 is: Web 3 projects do not necessarily need to raise funds through venture capital firms; they might as well issue tokens directly and sell them to users.

In this case, venture capital firms are better off providing guidance rather than just money, which is more effective and valuable. This guidance can include advice on technology, security, or token models. This is important because users and the corresponding community are at the core of Web 3 projects.

Timmy Shen: You mentioned that now is a good time to invest. I wonder how bear or bull markets affect your venture capital?

He Yi: Generally speaking, regardless of whether it's a bull or bear market, we need to clarify what we truly want. In a bear market, I believe we should be more proactive in investing, but not just for the sake of investing.

In the investment industry, trend-following is very obvious, and many funds worry that they might miss out on a four- or five-year investment cycle. Some of our LPs also suggest investing in more projects and speeding up the investment pace. But I have already told them not to rush.

Timmy Shen: What types of projects are your investment preferences?

He Yi: We focus on three types of projects:

The first type is those building infrastructure.

This industry is still in its early stages. In the future, I envision that people should be able to use blockchain-native products almost everywhere, just as we are accustomed to using office software and social media. However, there are still technical bottlenecks. Therefore, infrastructure is an area where we will continue to invest, whether you are a layer one or a cross-chain protocol.

The second type of projects is those running various blockchain applications.

There are more and more projects emerging with large user bases, such as those adopting P2E or M2E models. We are closely monitoring products with innovative use cases.

For these projects, we will ask questions similar to those you would ask Web 2 companies: What is your business model? What problem or challenge are you solving? What is innovative about it? These are typical questions we would ask.

The third type is those providing blockchain-related services to support better industry development, such as data security.

It is rare to see Internet (Web 2) companies being hacked, but this has been happening in the Web 3 industry.

For a long time, people in the Web 3 industry have been repeating a saying: "Code is law." If your code is not good enough, then if something goes wrong, it is your responsibility. I agree, but if we want broader adoption, then you must make your product user-friendly to serve more people.

Additionally, I prefer projects with their own innovative approaches rather than imitators.

If you tell me you are just like some hot project and have a similar user base, then making some quick money, I am not interested in that.

Binance will not invest in projects for quick profits; we value "long-termism."

There are still some founders and entrepreneurs who believe that raising funds in Web 3 is easy and start to take it easy in this field.

These entrepreneurs do not realize that once you, as a founder, make a commitment to users, you must deliver. You cannot just pocket users' money and think that you are financially free now, so you can take it easy.

However, many people in this industry are still exploring different paths to success, and we hope to find those who value long-term approaches rather than pursuing short-term gains.

Timmy Shen: Before you took over Binance Labs, it invested in X-to-earn projects like Axie Infinity and STEPN. What are your thoughts on the X-to-earn model?

He Yi: Projects running the X-to-earn model need to recognize that "earning" is not the key; "X" is.

A typical example is P2E games. If users join just because they want to make money, then once the hype ends, the game will essentially be over, the user base will shrink, and the token price will drop.

The fundamental question is: If there is no revenue, does the game still have appeal? Are there enough people willing to pay ?

Timmy Shen: Binance stated in February that it would invest $200 million in Forbes, but CEO Zhao Changpeng said in June that this might change after the SPAC deal failed. Can you update us on this and your media investment strategy?

He Yi: We are still monitoring the investment in Forbes, which is related to an investment associated with a SPAC IPO, but there seem to be some difficulties, so they are making adjustments. Perhaps some of their shareholders want to dilute their holdings.

In terms of media investment, when Elon Musk said he wanted to acquire Twitter, we saw it as a great opportunity because Twitter has a large user base and is beneficial for Web 3 education.

Currently, we are not really listing media as a specific investment target, but if we do encounter good investments, we will pay attention.