Initial Exchange Offerings are the latest twist on fundraising in the digital-asset world, with the online exchange Binance at the forefront. Zhao Changpeng, the co-founder and chief executive officer of the world’s largest crypto trading platform who goes by CZ, comments on the embryonic process.
How big in IEOs are you now, and how big do you want to get and how quickly?
CZ: The goal here is to help good projects. There are no specific targets on how quickly we have to grow or expand. We will just help good projects raise funds as we find them.
So far, we are carrying out roughly one project per month. Since January, Binance Launchpad has conducted three token sales to date, for promising blockchain startups including: Celer Network (about $4 million in BNB), Fetch ($6 million in BNB) and BitTorrent ($7 million in BNB and TRX).
How big do you think the IEO market as a whole could get?
CZ: I believe fundraising is a killer app for blockchain. This is something that most people didn’t realize until 2017. There are drawbacks with ICOs, namely too many scams and “empty” projects. But blockchain fundraising has many advantages over traditional VC fundraising. It will not go away.
I think it will get pretty big, definitely many times bigger than the VC industry in the future.
3. Is Binance the company that invented the IEO, or who is?
CZ: No, I didn’t come up with that acronym. I am not too sure who coined the term IEO. But now, people loosely associate Binance Launchpad with IEOs. We have not officially stated Binance Launchpad as an IEO. Back in 2017 when ICOs were hot, there were other “centralized ICO” websites. We borrowed the idea from there. Exchange-facilitated initial sales is not a new concept. The only minor tweak is using cryptocurrencies instead of fiat.
Why do you want to offer IEOs? What are the financial advantages to them? How much do you charge companies you are shepherding through the IEO process?
CZ: Again, our goal is to help good projects grow. This is important because as more solid projects grow, our industry will get bigger and stronger, which in term will be better for everyone else in this industry, including ourselves.
We help projects raise funds, yes. But it’s not only financial advantages. There are numerous significant other advantages. I will just name a few here:
We help projects raise awareness. Their name will be exposed to almost the entire blockchain industry by going through Binance Launchpad. We help projects raise users, as many of the early investors will become users. I would argue this is more important than funds. By going through our rigorous selection process, we help projects build credibility. Our community trust the Binance name. The project teams and founders can focus on building their product, instead of spending large amounts of time dealing with VC, pitch decks, board meetings, etc.
We also advise projects on their token economics, and lend them our experience in this process. Every project is unique, depending on the founders’ skills, experience, development status, etc. So the way we work with each project also varies a bit from project to project.
Further, IEOs also offer investors more advantages, namely having Binance doing the due diligence on projects is a big plus. It doesn’t mean every project will be super successful, but we will help filter out the pure scams.
Do you think IEO pose more or fewer regulatory compliance issues than ICOs? How do you hope to get around them?
CZ: Regulatory compliance does not change regardless of if you do an ICO or IEO. If you issue a token representing shares of your company, then it is a security (in most countries), and you need to do some work on compliance. We do not compromise on compliance standards regardless of it being an IEO or ICO. Regulatory adherence always remains a top priority to us as it will strengthen our position, reputation and build greater trust among our users, regulators and more.
It looks like a bunch of exchanges are going to be competing for IEOs. How much competition are you seeing, from whom, and what will it mean for the IEO market?
CZ: We don’t view them as competition. Other exchanges copying us is a strong validation of our model, and the highest form of compliment.
More importantly, we have limited bandwidth and are only able to find/help a small number of all good projects out there. The more we can help our entrepreneurs together with other exchanges, the better this industry will be. Again, when the industry gets bigger, everyone benefits. For this reason, we encourage others to copy our model. But the key here is they need to help good projects grow, not facilitate scams.
It’s all about helping the best entrepreneurs and growing the industry.