Binance’s Yi He explains her crypto investment strategy

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

That may 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 immediately 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 market officer, a position she still holds. But she has experience from a decade-long career in crypto, including five years with Binance, which he co-founded in 2017.

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

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

Just recently, Binance became 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 founder Nischal Shetty has disputed this 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 Terraform-related holdings was almost entirely on paper, since it received the tokens as part of a $3 million investment.

Binance’s investments outside of crypto have also raised eyebrows and caused some head scratching. The company signed up for back Elon Musk’s troubled bid on Twitterand commits 500 million dollars to the takeover proposal.

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

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

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

But she acknowledged that Binance has struggled with public perception. The company has been accused of allowing criminals to use its services and struggled with regulatory challenges in major markets, including the United States

The company has essentially been banned in CZ and He’s native China, which blocked Binance.com since the year the company launched in 2017. Last year, Binance allowed trades involving the Chinese yuan after China declared crypto transactions illegal. It seems a painful irony to 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 often travels to Europe.

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

Her father died when she was young, which she said brought new challenges for her family, but “did [her] stronger.” Her mother wanted her to become a teacher as well, but he followed other paths.

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

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

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

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

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

Wang credits He with 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 largest crypto exchange, with more than $16 billion in daily trading volume. Coinbase is a distant second with daily trading volume of roughly $2.3 trillion, according to CoinMarketCap. (Binance acquired the market data site in 2020, another sign of its acquired 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 provides an unprecedented opportunity to identify those projects with the tenacity to thrive in tough market conditions,” CZ said.

Melody Brue, analyst at Moor Insights & Strategy, said he is known for being “strategic but aggressive.” This is also how Wang describes her, noting how he has emerged as an important female figure in “a very male-dominated space”.

“Many managers have underestimated her ferocity and will to win,” Wang said. “She’s learned to round off her rough edges, and people appreciate the continuity of her approach.” Wang said she can be “a difficult 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 has super high standards. She is ultimately tough but fair.”

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

“Instead of avoiding regulators, she has gone head-on and engaged them,” he said. “She knows that the winners in crypto will be regulated.”

It is an issue that is important to Han 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 necessary licenses: “It’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, that’s it [like buying] a bigger hole and you just keep losing money,” she said.

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

Patience will be key, he said: “It takes time to grow bigger. We are far from successful. Forward thinking, quick execution and risk awareness will eventually get us there.”