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

Binance.US, the American 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 firm’s first external financing, and it 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’s goals of equality and financial opportunity for all.

For breaking news, expert insights into the latest market developments, and exclusive interviews subscribe today to our premium research service, Forbes CryptoAsset and Blockchain Advisor.

Binance.US CEO Brian Shroder, who was appointed CEO after the short-lived four-month tenure of his predecessor Brian Brooks, a former Acting Comptroller of the Currency, expressed pride in how the round was constructed and what it portends for the future of Binance.US. “When you look at the general research of who is actually using crypto, it disproportionately skews to people of color, LGBT, and Latinos. That is precisely why during this fundraising round, 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 based services such as trading APIs. It has licenses to operate in 45 states with plans to be available to the entire country by the end of the year.

Click here to read Forbes’ rankings of the 60 best crypto exchanges in the world.

The funds come at an opportune time for the firm, as the venture capital industry remains extremely frothy for crypto companies despite the market’s sluggish start to the year. Even after the March recovery, the total crypto market capitalization has still lost over $100 million in 2022. Still, venture firm Paradigm raised a $2.5 billion fund in November, Haun Ventures recently hauled in $1 billion for her first fund, and Andreessen Horowitz is rumored to be closing a massive $4.5 billion fund.

The raise will also help the company build out its headcount, which has doubled since Schroeder came to 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 shop, providing staking services that let investors earn passive income akin to interest payments on certain holdings.

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

“The question that we’re posing to ourselves is how we can do something better, faster, cheaper and with improved customer experience, because I am not interested in just offering a follow-on service. When we launch something we’re going to do it because we want to be the winners.”

While Binance.US plans to put these funds to work, competition continues to tighten, especially in the U.S. Market leader Coinbase, which went public last April via the largest direct listing in history, processed $3.9 billion in spot volume over the past 24 hours and in 2021 earned a net profit of $3.6 billion on $7.3 billion in revenue. Conversely, Binance.US processed $384 million. Coinbase is also making significant headway in diversifying its revenue away from trading fees to subscription services such as custody, which are comparatively expensive especially for retail traders.

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

Additionally, newer firms like Crypto.com and FTX.US, the U.S. affiliate of FTX.com, the Bahamian-based exchange led by fellow crypto billionaire Sam Bankman-Fried are earning mindshare and building a trading base through massive nine-figure sponsorship deals. In November, Crypto.com paid $700 million for the naming rights to the building formerly known as the Staples Center and FTX has signed up celebrity endorsers such as Tom Brady, Stephen Curry, David Ortiz, Naomi Osaka, and Kevin O’Leary.

As part of the raise, Binance.US will be adding two additional members of its three person board. One will be brought on to represent the seed investors and the other will be an independent. Binance.com CEO Changpeng Zhao remains on the board.

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

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