Crypto Exchange Binance.US Raises $200 Million Seed Round At $4.5 Billion Valuation

Binance.US, the US franchise of Binance.com, the world's largest cryptocurrency exchange led by billionaire Changpeng Zhao has raised a seed round of $200 million. Although the company launched in 2019, this is the company's first outside funding and gives the 2.5-year-old company unicorn status with a $4.5 billion valuation.

Investors include RRE Ventures, Foundation Capital, Original Capital, VanEck and Circle Ventures. The company also brought in firms explicitly focused on diversity and inclusion, such as Gaingels and Gold House, as part of an effort to further crypto goals of equality and financial opportunity for all.

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Binance.US CEO Brian Shroder, who was appointed CEO after the brief four-month tenure of his predecessor Brian Brooks, former interim Comptroller of the Currency, expressed pride in how the round was built and what it portends for the future. the future of Binance.US. “When you look at the overall research of who actually uses crypto, it disproportionately leans toward people of color, LGBT, and Latinos. Precisely for this reason, during this round of fundraising, we prioritized the inclusion of mission-driven funds in our cap table.”

Binance.US offers spot trading pairs against 72 crypto assets, as well as an OTC desk and other institutional services such as trading APIs. It has licenses to operate in 45 states with plans to be available nationwide by the end of the year.

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The funds come at an opportune time for the company, as the venture capital industry remains extremely effervescent for cryptocurrency companies despite the market's slow start to the year. Even after the March rally, the total crypto market capitalization has still lost more than $100 million in 2022. Still, venture firm Paradigm raised a $2.5 billion fund in November, Haun Ventures recently raised $1 thousand million for his first fund, and Andreessen Horowitz is rumored to close a massive $4.5 billion fund.

The increase will also help the company develop its headcount, which has doubled since Shroder joined the company to more than 350, bolster its marketing budget, and iterate on new products that have become popular, such as decentralized finance/lending. (DeFi), offering an NFT store, providing staking services that allow investors to earn passive income similar to interest payments on certain stakings.

However, Shroder is not looking to simply copy what others are doing. He says that while the company is looking at all these opportunities, the firm is treading carefully to ensure it offers best-in-class service.

“The question we ask ourselves is how can we do something better, faster, cheaper and with a better customer experience, because I'm not interested in just offering a follow-up service. When we launch something, we do it because we want to be the winners.”

While Binance.US plans to put these funds to work, competition continues to mount, especially from US market leader Coinbase, which went public last April via the largest direct listing in history, processed $3.9 billion in spot volume over the last 24 hours and in 2021 made a net profit of $3.6 billion on $7.3 billion in revenue. By contrast, Binance.US processed $384 million. Coinbase is also making significant strides in diversifying its revenue from trading fees to subscription services like custody, which are comparatively expensive, especially for retail traders.

For example, a basic trade on Coinbase can cost up to 2.99%, while Binance.US charges only 0.1%. In fact, RRE Ventures pointed to this price advantage as a key reason for its participation in the round. However, while the fee structure may offer Binance.US a substantial pricing advantage for retail and lower volume traders, it also requires the company to spread these lower fees across a much larger customer base or find sources of additional income to achieve similar levels of financial performance. The company is profitable, but Shroder declined to give specific financial numbers or a specific number of customers, saying only that the company has millions and millions of customers.

Additionally, newer firms like Crypto.com and FTX.US, the US affiliate of FTX.com, the Bahamas-based exchange led by crypto billionaire Sam Bankman-Fried are gaining recognition and building a business base through deals. massive nine-figure sponsorships. . In November, Crypto.com paid $700 million for the naming rights to the building formerly known as Staples Center and FTX has signed celebrity sponsors including Tom Brady, Stephen Curry, David Ortiz, Naomi Osaka, and Kevin O'Leary.

As part of the increase, Binance.US will be adding two additional members to its three-person board. One will be hired to represent the initial investors and the other will be independent. Binance.com CEO Changpeng Zhao remains on the board.

Looking ahead, Shroder mentioned the strong possibility of announcing follow-on strategic investors in the coming months. It has also publicly targeted an IPO in 2024/2025, depending on Binance.US performance and market conditions.

Note: Binance plans to make a large investment in the parent company that will own Forbes following the public listing transaction previously announced by Forbes.