Binance US to raise “a couple hundred million dollars” in pre-IPO funding

  • Binance US will close its pre-IPO funding in about one or two months and it expects to bring in a couple hundred million dollars.
  • Previous funding rounds have been thwarted by investors’ concern about the power that CZ yields over the exchange and even led to the resignation of ex-CEO Brian Brooks.

Binance US, the American subsidiary of the world’s largest cryptocurrency exchange, is closing in on a pre-IPO funding round. According to Binance Global CEO Changpeng “CZ” Zhao, the subsidiary is looking at raising “a couple hundred million dollars.” Funding attempts haven’t panned out well for Binance US in the past, with CZ’s influence spooking several investors.

Speaking at a Bloomberg event, CZ revealed that despite the hurdles, raising money is critical for the American subsidiary. Despite being profitable, he believes that for any company that intends to go public, pre-IPO funding is a key factor.

From an IPO perspective, it’s better to have a few rounds of financing before that.

The funding comes at a time when cryptocurrency and blockchain companies are attracting investors in their hordes as the industry blows up. This year alone, mega funding rounds have brought in close to $4 billion for just 10 companies.

In July, FTX exchange raised $900 million at an $18 billion valuation, with Sequoia Capital and Coinbase Ventures among the notable investors. Circle, the company behind the popular USDC stablecoin, raised $440 million in May and announced it would go public via a SPAC deal that would value the firm at $4.5 billion.

Others include:

  • Ledger raising $380 million in June at a $1.5 billion valuation.
  • BlockFi raising $350 million in March at a $3 billion valuation.
  • Solana Labs raising $314 million in June through a private placement token sale.
  • Fireblocks raising $310 million in July at a $2 billion valuation.

Binance US is setting its sights just as high. While CZ didn’t disclose the specific numbers, he claimed it would be a few hundred million dollars.

Binance US previous funding attempts blew up

The funding round for Binance US will not be the first time the exchange attempts to raise funds. Earlier this year, a damning report by The New York Times revealed that the exchange had tried to raise money and failed. Investors were quite concerned about CZ and his influence on the American subsidiary, despite assurances from the then-CEO Brian Brooks that Binance US was an independent arm.

Brooks was the Acting U.S Comptroller of the Currency before joining Binance. In hiring him, CZ set out to appease regulators who had been wary of Binance for a long time.

And when he joined, Brooks did a lot to change the perception of Binance to U.S regulators and users. However, he ran into a ceiling on just how independent Binance US could be from the global parent. It was at this point that investors smelled a rat and withdrew their support.

One of the investors was GreatPoint Ventures, a VC firm that had never invested in a cryptocurrency firm. However, the leaders had confidence in Brooks and decided to invest in Binance US. But according to New York Times, when they realized that CZ controlled 90 percent of the firm, and was unwilling to relinquish his stranglehold on the exchange, they pulled out.

SoftBank, a renowned global leading investor in startups, was also weighing investing in Binance. However, CZ’s influence and regulatory issues for Binance Global pushed them away.

The Binance US board of directors is composed of CZ, its chief strategy officer Gin Chao and Joshua Sroge, the interim executive who took over after Brooks. This has spooked investors as well who believe that it must be more democratic if they are to invest in the exchange.

CZ has pledged to change this and expand it to nine people. Through the Binance US spokesperson Hazel Watts, he stated, “Board composition is an important factor in any fund-raising decision. CZ’s belief is that the board for Binance.US must be independent and operate with proper governance.”