Published: February 11th, 2020
VC activity across the crypto space has evolved significantly in the last 18 months.
Alongside established Silicon Valley names like Andreessen Horowitz and Pantera Capital, the VC arms of major cryptocurrency exchanges have been securing their own high-profile deals, raising funds, and participating in significant joint investments with more established rivals.
Crypto exchanges like Coinbase and Bitmex started launching their own VC firms in 2018, in part to address ongoing market uncertainty about the viability of crypto-based business models.
Exchange-backed VC firms, they said, would strengthen the sector by taking a long-term view, helping the most compelling companies in the space flourish, and using their investments to build strong relationships and spur development in the broader ecosystem.
They could leverage their track record and relative financial stability to help seed confidence in what was – and still is – seen as a volatile market, potentially bringing a wider pool of investors into the fold.
With 18 months of activity or more under their collective belts, this new category – crypto exchange VC funds – has established a foothold and taken shape. Given the market insight and expertise exchanges have access to through analysis of historical activity on their platforms, it’s a category worth paying attention to.
Looking at the largest exchanges by trading volume as well as the size of their investment portfolios, here is our list of the exchange venture capital funds to watch in 2020.
Top-five crypto exchange Binance launched what would eventually become its VC division – Binance Labs – in 2017. Initially structured as an incubator, it has grown to be one of the leading sources of startup capital for cryptocurrency and blockchain innovators.
Beginning with a $30 million investment in MobileCoin, Binance went on to launch its $1 billion Community Influence VC fund in June of 2018 to provide more support for blockchain and crypto startups.
Binance has also taken a flexible approach to startup investment that could involve creating new funds. The company has said its in discussions with other fund managers to identify these opportunities.
Binance Fund continues to focus on early-stage crypto and blockchain projects, and recently announced expansion to Berlin, Buenos Aires, Lagos, Singapore, and Hong Kong. Notable investments include OasisLabs, MobileCoin, Republic, Certik, Pivot, Terra, and more.
Coinbase is a top 10 cryptocurrency exchange with more than 30 million users and annual revenues exceeding one billion USD. Launched in May 2018, the exchange’s VC arm, Coinbase Ventures, has established itself as one of the best-known cryptocurrencies and blockchain venture capital funds, with over $300 million invested across its portfolio. Coinbase Ventures focuses on startups in cryptocurrency, blockchain, as well as the broader FinTech space.
Some of Coinbase’s investments include Near, Abacus, OpenSea, Dharma, Compound, Etherscan, Celo, TruStory, Elph, Reserve, BlockFi and more.
Currently one of the world's biggest exchanges by trading volume, peer-to-peer crypto exchange Bitmex has more than $34 billion worth of Bitcoin trading history to draw from when assessing investment opportunities. It launched its own Bitmex VC fund in late 2018, and while it was amongst the last of the big crypto exchanges to formally enter the VC space, the fund has lost no time making notable investments.
Portfolio companies include Bahrain-based Rain Financial, set to become the first licensed cryptocurrency exchange in the Middle East; FinFabrik, a Hong Kong-based Fintech startup developing capital markets software; and Philippine Digital Asset Exchange (PDAX).
China-based Huobi Capital is the investment arm of crypto exchange Huobi Global and focuses exclusively on blockchain and crypto investments. Despite Beijing’s ongoing crackdown on crypto within the country, by partnering with South Korea’s Kiwoom Securities and China-based NewMargin Capital on a new investment fund, the company has been able to invest in crypto- and blockchain startups including ThunderCore, Republic, Wallet Curve, Buxx, Terra, and Nervos Network.
OK Blockchain Capital is the VC arm of OKCoin, one of the most established cryptocurrency exchanges. Founded in 2013, the China-based trading platform enables trading of Bitcoin, Ethereum, and Litecoin. The company currently has operations in more than ten markets, including Hong Kong, Tokyo, Beijing, San Francisco, Seoul, and Luxembourg.
The exchange has dropped down the league table in terms of trading volume, due in part to China’s 2017 crackdown on Bitcoin, which forced the company to shift operations to Malta.
But it's VC division is going strong, and building an impressive portfolio of startups in the crypto and wider blockchain arena. Companies under investment include Perlin, Ankr, Merculet, and Vite.