Even the world’s largest crypto exchange needs help from traditional VCs

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Crypto-anarchists may not like it, but money doesn’t buy everything. Sometimes, you just need the help of a traditional venture capitalist.

Binance is the fastest growing company in crypto — having risen to become the world’s largest crypto exchange based on trading volumes in under one year — but even it needs help from the old guard. Earlier today the exchange firm, which is officially headquartered in Malta, announced that it has landed an undisclosed investment from Vertex Ventures, a VC firm belonging to Singapore sovereign fund Temasek.

The deal is aimed at launching Binance’s fiat-to-crypto exchange in Singapore which is in beta right now but expected to launch fully, with regulatory compliance, before the end of this year.

VCs have long invested in crypto and crypto exchanges — $8 billion-valued Coinbase is the best example with phenomenal gains for backers — but Binance is not traditional. It is barely one year old, it operates in legal grey areas worldwide and it is seemingly not in need of money (even in this bear market) having made a $350 million profit in the last six months alone.

But this deal is about seeking legitimacy and the right partners.

Binance made its name offering fast crypto-to-crypto trades that make use of its BNB token to save on fees, but a big focus for this year is moving into fiat-based exchanges, as CEO Changpeng Zhao explained to TechCrunch in an interview last month. The company is aiming to open three crypto exchanges this year, with plans to raise the number to 10 next year. Aside from Singapore, it has announced a joint venture in Lichtenstein and gone public with plans to offer fiat in Malta, where it has been courted by the island nation’s pro-crypto administration.

The move in Singapore is particularly telling since it shows that, despite early rhetoric that crypto (and ICOs) would ‘rid’ the tech industry of venture capitals. Traditional money and networks are very much required if ambitious companies are to fulfill their promise, as I explained recently when I argued that professional investors now dominate ICOs. The writing has been on the wall with crypto companies using money to make startup investments and grow their own ecosystems — Binance is the most aggressive with a fund that’s said to be $1 billion and an ambitious accelerator program — and so these businesses themselves also need the connections that professional VCs can bring.

(The deal is also a blow to Vertex rival Sequoia, which ended up taking Binance to court over the breakdown of a proposed investment deal last year.)

(Left to right) Binance CEO Changpeng Zhao pictured announcing Binance’s acquisition of Trust Wallet with its founder Viktor Radchenko

Wei Zhou — the Binance executive leading the firm’s Singapore business — told TechCrunch that the deal is very much about opening doors.

“This partnership is not about capital but about finding a partner for Binance’s fiat exchange expansions. This partnership signifies the long-term commitment Binance has to build out the ecosystem in the [Southeast Asia] region,” Zhou said.

Vertex certainly brings a network and know-how. The firm was founded in 1988, it has five funds worldwide and offices in Southeast Asia, Silicon Valley, China, India, Israel, and Taiwan.

The firm’s current $210 million fund is the largest in Southeast Asia, and this deal is a joint one between Vertex China and its Southeast Asia/India sibling.

More importantly, as a fund under the Temasek banner — Singapore’s sovereign wealth fund — the deal gives Binance a very good seat at the table for working with authorities. The company has already shown its keenness in Singapore by taking slow steps and working with authorities to roll out its fiat exchange in Singapore slowly — small and slow rollouts are a departure from Binance’s usual ‘move fast and break things’ approach to business — so pairing up with Vertex mirrors that.

Zhao, the Binance CEO, has artfully dodged many questions about his company’s past — such as why it left Hong Kong, the reasons it declined to become regulated in Japan, why it runs to governments like Malta and Bermuda, and whether it has violated U.S. securities laws — but the newest, and perhaps best, response is to work with the establishment in recognized markets where it can be fully legally compliant.

Note: The author owns a small amount of cryptocurrency. Enough to gain an understanding, not enough to change a life

Posted in: Blogging

Oracle acquires DataFox, a developer of ‘predictive intelligence as a service’ across millions of company records

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Oracle today announced that it has made another acquisition, this time to enhance both the kind of data that it can provide to its business customers, and its artificial intelligence capabilities: it is buying DataFox, a startup that has amassed a huge company database — currently covering 2.8 million public and private businesses, adding 1.2 million each year — and uses AI to analyse that to make larger business predictions. The business intelligence resulting from that service can in turn be used for a range of CRM-related services: prioritising sales accounts, finding leads, and so on.

“The combination of Oracle and DataFox will enhance Oracle Cloud Applications with an extensive set of AI-derived company-level data and signals, enabling customers to reach even better decisions and business outcomes,” noted Steve Miranda, EVP of applications development at Oracle, in a note to DataFox customers announcing the deal. He said that DataFox will sit among Oracle’s existing portfolio of business planning services like ERP, CX, HCM and SCM. “Together, Oracle and DataFox will enrich cloud applications with AI-driven company-level data, powering recommendations to elevate business performance across the enterprise.”

Terms of the deal do not appear to have been disclosed but we are trying to find out. DataFox — which launched in 2014 as a contender in the TC Battlefield at Disrupt — had raised just under $19 million and was last valued at $33 million back in January 2017, according to PitchBook. Investors in the company included Slack, GV, Howard Linzon, and strategic investor Goldman Sachs among others.

Oracle said that it is not committing to a specific product roadmap for DataFox longer term, but for now it will be keeping the product going as is for those who are already customers. The startup counted Goldman Sachs, Bain & Company and Twilio among those using its services. 

The deal is interesting for a couple of reasons. First, it shows that larger platform providers are on the hunt for more AI-driven tools to provide an increasingly sophisticated level of service to customers. Second, in this case, it’s a sign of how content remains a compelling proposition, when it is presented and able to be manipulated for specific ends. Many customer databases can get old and out of date, so the idea of constantly trawling information sources in order to create the most accurate record of businesses possible is a very compelling idea to anyone who has faced the alternative, and that goes even more so in sales environments when people are trying to look their sharpest.

It also shows that, although both companies have evolved quite a lot, and there are many other alternatives on the market, Oracle remains in hot competition with Salesforce for customers and are hoping to woo and keep more of them with the better, integrated innovations. That also points to Oracle potentially cross and up-selling people who come to them by way of DataFox, which is an SaaS that pitches itself very much as something anyone can subscribe to online.

Posted in: Blogging