The story of Binance is incredibly unique. This isn’t an instance of a startup finding its own place in an established market sector, rather, Binance has pioneered the development of a brand new market, laying the foundations for the rapid rise of Web3. In the latest episode of the Scale Lab Podcast, we spoke to Binance CEO Changpeng Zhao about how the business has helped open up the world of Web3 and cryptocurrency, and the unique challenges and responsibilities of being at the forefront of a sector that is ready to revolutionise our daily lives.

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How do you build something that grows so fast in an environment where trust still needs to be established?

00:03:06 – “Trust is one of the key pillars for number one, our growth and number two, our stability.

“We started as a crypto-to-crypto exchange, meaning people would deposit Bitcoin via the blockchain, trade in Ethereum and then withdraw by the blockchain. Guess what? That works anywhere. The internet is no longer tied to a location, there’s no concept of a boundary.

“Our products are quite simple in the sense that there’s a green button to buy, there’s a red button to sell, and the rest is mostly just numbers. So it is quite easy for international users, I think we’re one of the very few platforms, thanks to blockchain technology, that grew in 180 countries from day one

“We launched our platform and there was a very high demand for trust. We were very transparent, very open, we protected the users very well, many times it cost us a lot of money but we made those decisions.”

Can you give us some examples of the big decisions you made that contributed to your global growth?

00:05:23 – “We started on July 14th, 2017, by September 4th of that year China issued a memo signed by seven ministers saying that crypto exchanges are no longer allowed in China.

“Anybody who’s done an ICO, if the price is below the ICO price, they need to return the money to investors. So this is six weeks into our launch, we did an ICO in July, and we raised $15m equivalent in Bitcoin. Luckily we issued a coin called BNB. At that point it was already six times the issuing price, and no one wants to return $6 for $1.

“But as an exchange platform, we helped facilitate four other ICOs. Because of that news, all of those token prices dropped and those projects didn’t have enough money to make the investors whole. So we asked how much do we have? We calculated a difference for the users on our platform. The difference was $6m.

“We said, should we use our money to cover this? It was a very quick meeting, I was actually on a train. That’s the single largest spend in our corporate history percentage-wise. That was more than 40% of our treasury in one go, but we said this is the right thing to do, we have to protect our users.”

These kinds of decisions must impact your company culture. What were the biggest lessons you drew from them at the time?

00:11:44 – “When the China incident happened, we had about 30,000 users already, but we were not profitable. A month after that situation, we went to 120,000 users and we became profitable.

“We learned that we’ve just got to protect our users and then the rest of the value will come. We don’t need to make money short term. Still today, our number one value inside the company is protecting users.

“For example, very recently there was an airdrop on a coin. Because we had 100 million users at that time, the trading started and finished 12 minutes later. So there’s a portion of users who didn’t get the balance and they couldn’t sell, and a bunch of users complained

“Our customer support teams asked if we should negotiate compensation with our users. Was it our fault? Yes, because our program did not finish in time. We said well, then we should compensate. It was going to cost us $28m but our principle is to protect our users.

“When you care about your users, many of the decisions will cost a lot of money. But in the long term, you also generate a lot of value and a lot of goodwill.”

When you look at the early days, how did you make decisions on people?

00:15:22 – “I knew I was weak in marketing, but our co-founder and CMO, she’s very strong. I had to convince her to join us and it was very expensive in terms of equity. But you know, those are the situations where you need this talent.

“At the time, she was working for one of the top Internet companies in China. If you say the top ten CMOs in China, she’s probably one of them. If female CMOs, she’s the top one. If you say under 30, she’s probably the only one. So I had to carve out a decent chunk of equity and do a lot of other stuff, but she joined and it was totally worth it.

“We like to hire people who are grassroots, more down to earth, more entrenched in the community, and who know what’s going on without having reports or data. We like to make decisions by talking to our users, so we like that type of street-smart mentality.

As a global company, how do you embed your culture as you continue growing?

00:21:00 – “We actually found out that working remotely didn’t decrease productivity. We have users from 180 different countries and our exchange never shuts down. So we actually need people to be online at different hours.

“We started hiring deliberately in different time zones. I was born in China, grew up in Canada, worked in Tokyo, and then New York. So Canada is also an immigrant country where many different nationalities and ethnicities are mixed together. I like that type of international mix. Having that background and mentality makes it easier for me to hire people internationally.

“When you work remotely, you can’t micromanage people, you have to manage by results. It’s actually more efficient.”

Can you give us a sense of the scale that you’re operating at now?

00:33:30 – “So employee-wise we have about 7000 people globally and that’s a small team for the scale of business we do. We have about 120 million users today and in 2021, our platform transaction volume was $34tn. I believe we hold more user assets than any bank in the world.”

So the phase you’re in, growing the market as a whole is actually more important than adding individual users?

00:35:24 – “We’re very lucky that we’re the dominant player in this space. So for us, taking market share away from a smaller exchange doesn’t move the needle. Maybe we’ll grow by 1% or 2%, but today, if we can help grow the industry by five or ten times, we will grow pretty much proportional to that.”

What are the strategies that you’ll deploy to grow that market?

00:38:13 – “In my view, the thing we need is education. It’s a fantastic technology and is a technology that if people don’t embrace, they’ll be left behind. We’re in a very fortunate situation where this is going to be a hugely explosive growth industry.

“Many people have misconceptions about our industry. The internet had similar problems, but we’re talking about money, so there’s a lot more pushback. There are a lot more negative narratives from traditional mainstream media, so we need to get the information out there. This technology is neutral. Technology is never criminal. There are criminals using this technology, but much less so than criminals using traditional money.

“There are many good people using this technology. There are tremendous benefits. You can help local economies, you can help local entrepreneurs to raise money, you can help local artists to sell their art globally using NFTs and you can do global investments.”

For a startup founder today, what advice would you give when it comes to raising capital?

00:46:42 – “I think if you’re an entrepreneur today and you’re not looking at tokens, you are missing out. You’re reducing your chances of success by at least 10x.

“Today in the Web3 space, any project with a decent founder, with a good team, even pre product, they can raise $10/20m. If you compare that to traditional VC fundraising, the first round is maybe $1m, the next one maybe $5m, and each run is like six months apart.”

What words of advice would you give to entrepreneurs trying to build something right now?

00:52:35 – “I think entrepreneurship is one of the most demanding things to do, but it’s also one of the most rewarding. So it has to be in your personality. You have to enjoy it.

“If you just want to make money, you usually do not have enough enjoyment or passion to last through all the other roadblocks. So you have to have a higher purpose.

“Manage risks, there is a very high rate of failure, so don’t push it all in. Don’t scale before you have product market fit. Don’t scale before you have that native churn.”

What was the purpose you found for yourself in this process?

00:54:01 – “I could retire and sit on a beach, play golf, but all of those things get boring very quickly. I realised that what I’m doing is already the most meaningful thing I could be doing with my life. We’re helping millions of people have access to better money, better technology.

“There’s nothing else I can do that’s more impactful, more meaningful for me. So I don’t view this as work, I feel very lucky to be in this position.”

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