Binance’s Yi He explains her strategy for crypto investments

Binance’s Yi He explains her strategy for crypto investments

Binance co-founder Yi He isn’t as well known as the crypto giant’s colorful and controversial CEO, Changpeng “CZ” Zhao.

That could soon change. The 35-year-old executive is taking on a new, higher-profile role at the world’s largest crypto exchange as head of Binance Labs, the company’s venture capital arm. With $7.5 billion in assets to oversee, that instantly makes her one of the most powerful VC investors in crypto.

It’s her first turn at running the crypto powerhouse’s investment strategy after serving as Binance’s chief marketing officer, a position she still holds. But she has the experience of a decade-long career in crypto, including five years with Binance, which He co-founded in 2017.

“I’m one of the most OG in the Binance group,” she told Protocol.

Crypto’s new enough that 10 years can make you old-school. But Binance’s track record of controversial, even questionable investments makes He’s new role all the more challenging.

Just recently, Binance got embroiled in an M&A controversy over WazirX, a crypto exchange it said it had acquired in 2019. Amid reports that the Indian government was investigating the exchange for alleged money laundering, CZ caused a stir on Twitter when he said the deal was never completed. WazirX’s founder Nischal Shetty has disputed that claim.

Binance also drew fire for investing in Terraform Labs, whose failed UST stablecoin and luna coin helped drag down the crypto market this year. CZ has said the $1.6 billion loss on its Terraform-related holdings was almost entirely on paper, since it got the tokens as part of a $3 million seed investment.

Binance’s investments outside crypto have also raised eyebrows and prompted some head-scratching. The company signed up to back Elon Musk’s troubled bid for Twitter, committing $500 million to the takeover proposal.

In February, Binance announced a $200 million strategic investment in Forbes. The publication put CZ on the cover in 2018, shortly after the company launched; Binance later sued Forbes for defamation over a different story about its approach to regulation. (The suit was dropped last year.)

In explaining the investment, CZ said “media is an essential element” to educate the public about blockchain and Web3 technologies. But recently, he cryptically said that the planned Forbes investment was “changing” after a planned SPAC deal collapsed in June.

Forbes is a “fantastic business,” He said, even as she addressed the perception that Binance might be trying to buy media influence. “Even with the investment that the editorial would be completely independent,” she stressed.

But she acknowledged that Binance has struggled with its public perception. The company has been accused of letting criminals use its services and wrestled with regulatory challenges in major markets, including the U.S.

The company has been essentially banned in CZ and He’s native China, which blocked the site the year the company launched in 2017. Last year, Binance disallowed trades involving the Chinese yuan after China declared crypto transactions illegal. It seems like a painful irony for He, who came up with the Chinese name for the company, which translates as “safe coins.”

Binance, which now has more than 6,000 employees, operates from regional offices in Dubai, where He now spends most of her time, and France; she travels to Europe frequently.

She grew up in a rural area in Sichuan province in western China, where her parents worked as teachers. “I’m from a very small village and a very poor family,” she said.

Her father died when she was young, which she said brought on new challenges for her family but “made [her] stronger.” Her mother wanted her to also become a teacher, but He pursued other paths.

Her first job was promoting a new soft drink by standing outside a supermarket and offering consumers a free taste. It was a hard job and “all the talking and hawking led to a hoarse voice,” she said in a biographical summary prepared by the company.

She also worked as an art school assistant and a travel TV host before venturing into marketing, a career that eventually led her to tech and crypto.

She met CZ at a crypto meetup when she was working as a vice president at a mobile video tech company. CZ invited her to join him in launching Binance in 2017.

She agreed, though it was a rocky launch. Binance’s native BNB cryptocurrency crashed by 50% on its first day, though it quickly recovered, she said.

Binance’s rise as a major crypto industry player was meteoric. The media spotlight has been directed mostly at CZ, while He stayed mostly in the background. Ray Wang, chairman of Constellation Research, said she played a critical role as an executive who “understands all the angles” of the crypto ecosystem.

Wang gives He credit for making “smart moves in building alliances in the crypto space with key winners like FTX and Polygon.”

Last year, Binance said it had integrated the Polygon blockchain network. The company announced in 2019 that it had made a strategic investment in the then-new FTX. That relationship ended after FTX, which has emerged as a major Binance rival, bought back Binance’s shares in the company last year.

It’s a critical time for He as Binance Labs’ new leader.

Binance remains the biggest crypto exchange, with more than $16 billion daily trading volume. Coinbase is a distant second with daily trading volume of roughly $2.3 trillion, according to CoinMarketCap. (Binance bought the market-data site in 2020, another sign of its acquisitive reach.)

Binance Labs, which covers around 200 portfolio projects, announced in June that it had closed a $500 investment fund for blockchain and Web3 technologies. In announcing He’s new role, CZ said it was “the perfect moment” for her and the company. “This market presents an unparalleled opportunity to identify those projects with the tenacity to thrive in tough market conditions,” CZ said.

Melody Brue, analyst with Moor Insights & Strategy, said He is known for being “strategic, but aggressive.” That’s also how Wang describes her, noting how He has emerged as a major female figure in “a very male-dominated space.”

“Many executives have underestimated her fierceness and resolve to win,” Wang said. “She’s learned to round out her rough edges, and folks value the continuity in her approach.” Wang said she can be “a hard person to work for,” according to friends of his who work for her.

“But you work hard and you also get rewarded,” he said. “She’s got super-high standards. She’s ultimately tough but fair.”

He’s aggressiveness could pay off in a key area for Binance: dealing with regulators. Wang said she’s “not afraid to jump into the fire.”

“Instead of shunning regulators, she’s been going head-on and engaging them,” he said. “She knows the winners in crypto will be regulated.”

It’s an issue that’s top of mind for He in her new role. “A lot of people feel, ‘OK, it’s a bear market. It’s a crash. It’s time to buy,’” she said. But He said she wants to pick her targets well, going after companies based on what Binance needs now.

With regulation a major concern, it makes sense to buy a company with the needed licenses: “That’s valuable,” she said.

“If they don’t have a license, if they don’t have a user base, and [they] lose money every month, and you buy it, it’s [like buying] a bigger hole, and you’re just continuing to lose money,” she said.

Brue said the downturn offers many opportunities “to pick from the rubble.” The Binance co-founder “has been through bear markets before and, like many VCs in crypto, sees the long view,” Brue added.

Patience will be key, He said: “It takes time to grow bigger. We are far from being successful. Forward thinking, fast executing and risk awareness will eventually take us there.”

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