The Binance.com ICO Experience, Lessons and Advices

(July 2, 2017, by Changpeng Zhao)

The Binance ICO just finished a few hours ago, and it was a huge success! It was far beyond anything I could have possibly imagined. We raised roughly $15MM USD equivalent in crypto currency in 16 days (from the time we decided to do the ICO, including preparation time). But money is just a small part of it. We also “raised” 20,000 registered seed users. People who invested both monetarily and emotionally in Binance. We attracted a large amount of user funds to the site, and these funds will be ready to trade when the site launches. We got tons of PR in our core target market, making the Binance brand known, while getting investment at the same time. What more can a new platform ask for?

An ICO is a valuable tool if you use it correctly. We didn’t plan all of it. This is our first and only ICO. We learned and adjusted our strategy along the way. We were able to execute quickly every time we made an adjustment. We got lucky in a lot of places. We also stepped on a few mines, luckily nothing too major.

I will share our Binance ICO experience and a few pieces of advice for people who are doing or thinking of doing an ICO. This should also help our investors and community understand our thought process, and why we did things the way we did.

If you don’t know what an ICO is, please read about it here.

If you want to do an ICO, my first piece of advice is: find something you are truly passionate about. Ask yourself two questions: 1, if I could only do one thing for the next 10 years, what would it be? And 2, if there is one thing you must do in this life, what would it be? If they are the same, then you probably found it. If not, keep asking and don’t do an ICO just yet.

For me, I have been wanting to do a pure crypto exchange from the day I learned about Bitcoin. After joining blockchain.info in 2013, we discussed the idea at length. We decided the timing wasn't right and didn’t pursue it. After leaving OKCoin in early 2015, the idea surfaced again, still we decided the market was still too immature. Bitcoin was trading around $213 at the time. 

But now, the time is now or …

In May, when I was talking to myself, I asked: we have an excellent exchange system; we have an awesome team; we have experience in crypto and fiat exchanges; we have industry resources; we have a little bit of reputation in the market; and we have the funds (we were going to fund the project ourselves and/or through VCs). Now the timing is right, if we don’t do this now, in a few years, will I ask myself “If I don’t do this, what else would I want to do in life?” 

For me, it was a no brainer. I must do this. I don’t have a choice. I shared my thoughts with the team. They were unanimously on board! So, we started.

Move Quickly

Once we made a decision, we moved quickly. Moving quickly has its many advantages, and a few drawbacks. When you are moving quickly, you can’t do things as perfectly as you wish. And often, you don’t have time to wait for people to decide or respond. You simply have to move forward. I will explain this in specific situations later.

Talk to People

I guess this applies to all startups, but even more so if you want to do an ICO. You will get a lot of questions and criticism about your business idea, model, team, ability, etc from the public. Flush it out with friends first, especially people who have done ICOs.

I talked to Da Hongfei first, founder of AntShares/NEO, and a long time friend of mine. He was very supportive of the idea, and we discussed different business models. He gave a ton of good advice. At the time, I was still thinking of the traditional VC route, not ICO. We didn’t talk too much about an ICO, my first mistake. I should have grilled him more on how to do ICOs. AntShares is the first very successful ICO in China.

I talked with Matt Roszak, he was immediately supportive of the idea as well. In fact, he coined the phrase: Let’s “build a world-class crypto exchange”. I also wished I had asked him more about ICOs, but I didn’t at the time, another mistake.

I talked with lots of people. All of them gave direct and honest feedback. They were all supportive. I knew I was on the right track.

The final tipping point was the potluck dinner Chandler Guo kindly invited me to in Chengdu, on Jun 14th. There, I bumped into my old friends Roger Ver, Zane Tackett, Zhao Dong, Vincent Zhou and the whole bunch… That night, after dinner, I told our team, we will do an ICO.

Spend Time on the White Paper

Most ICO projects don’t have a product. The white paper is everything. Raising $15MM USD (or more) using a 20 page document is an extremely good deal, so spend time on it. Make it good.

The Binance team pulled 2 consecutive all-nighters on our whitepaper. We produced both English and Chinese versions. The white paper went through 4 revisions from v0.1 to v0.4. We sent every revision to anyone who we think could help us review it. We got tons of good advice and feedback from people.

Don’t copy and paste some standard blockchain, de-centralization, asymmetric encryption, 51% attack text. Write your own text. Explain your project.

Also, once your white paper is distributed, don’t change major items, especially your business model, or benefits of the coin you are offering. Every change will make a number of people unhappy, and they will complain.

Explain Your Team in Detail

Without a product, the team is key. Tell people as much as you can about your team. Binance has a strong team. We spent a lot of effort describing our team. Make your team shine.

Now, there are a lot of people asking me to review their white papers, when I see two-line descriptions of team members, I stop reading the white paper.

Put a photo in there. Give people a face to remember. Put a LinkedIn profile link in, make sure it is up-to-date. Give as much info as possible.

Get Solid Angel Investors and Advisors

We finished our whitepaper v0.2 on Jun 16th. I sent it out to all the people who I wished to become our angel investors and advisors. Within 12 hours, all of them replied yes. That’s why we have a large list of investors/advisors. This helped us a lot! Get as many as you can.

There were some moments in these 12 hours that I will never forget.

One advisor, a prominent figure in the crypto space said, “it’s CZ’s project, I must support it”, then proceeded to send me a decent chunk of ETH immediately. This is before we had set a valuation. Needless to say, I was deeply moved.

Another investor, he sent the Binance white paper to his wife, his wife responded, “can’t understand a thing. But we should invest. CZ is always lucky”. I couldn’t stop laughing when he showed me that.

When it comes to getting advisors on-board, you need to build relationships and credibility over time. I don’t know of any shortcuts. Also, if you ask someone to be your advisor, please show your white paper to them first. I get people asking me to be their advisors frequently now, and often I have no clue what their project is. Obviously, I always say no.

Get an Investment Banker Advisor

Not all advisors are equal. Some are very helpful!

As soon as I asked Chandler Guo to be our advisor, he said yes, and offered to be our “investment banker” for the ICO. As soon as he said that, I said yes. I didn’t know what an “investment banker” for an ICO is. But I know and trust Chandler. And I know whatever help he was offering would be valuable. That turned out to be a really good decision. His help was instrumental in the success of our ICO.

Getting Seed Users

On Jun 23, after lots and lots of people asking me to “reserve a chunk” of the ICO for them, it dawned on me, we are in hot demand. After a quick 10 minute discussion with the team, we decided on a new strategy. We will do a “register first to get BNC quota” program, then a lottery draw, all on our very own site, which was yet to be built, and needed to be production ready for registration in 24 hours, allocated sells in 48 hours, and lottery draw in 72 hours. The team didn’t hesitate at all, they just went straight to work, and didn’t go home for the next few nights.

A day later, on June 24th at 8PM, when we opened the registration. 9,000 people rushed in!

Getting Customer Support

By this time, we had 10 WeChat groups, holding up to 500 investors each, plus 2 QQ groups each one holding up to 2000 investors. And we had 3 people in our marketing team, doubling as customer support. They were just overwhelmed. 

Luckily, on the evening of June 26th, I got a phone call from my old friend, Mr. Shi, CEO of Zhong Shen Cultures Exchange. Zhong Shen is one of the earliest clients/partners of BijieTech, a company I started 2 years ago. Mr. Shi had got wind that I started Binance.com and wanted to invest, and get involved in anyway possible. I said we need customer support. He said he will send his team tomorrow morning. I said ok. The entire conversation look less than 3 minutes!

The next morning, a full experienced exchange customer support team showed up in our office, and went to work. Order was restored in all of our WeChat and QQ groups. ZenDesk was set up in the next day or so. I no longer needed to follow every thread in those fast rolling groups.

Thank you, Zhong Shen and Mr. Shi!

Getting Funds In

In addition to raising funds for the project (the ICO), we also wanted to attract user funds to Binance. That was the rationale behind the lottery draw. This mechanism is standard in Chinese (and other) stock markets, and typically draws a large amount of funds to the exchange on the day of the draw. After the draw, a portion of the funds that didn’t win will be withdrawn, but a portion will stay. Those are the people/funds who are ready to trade on our exchange as soon as it goes live. This is almost more valuable to a new exchange than raising money ourselves.

If you read this far, I will share a few lessons we learned the hard way.

Don’t Use Multiple Coins for Your ICO.

The logic for supporting multiple coins in any ICO is to be available to a wider audience. We wanted to attract people who have ETH and BTC. We wanted to attract the loyal ANS/NEO community, etc. I read Vitalik’s post about problems with fixing the ICO price in multiple coins. Roger Ver also pointed that out at v0.1 version of the white paper. But I didn’t understand the full extent of the problems. We changed our white paper to say the BTC price will be calculated when we start our ICO, and thought this solved the problem. But this was not enough, and it still created many problems.

The price of ANS rose sharply during our ICO, making it an expensive option. The price of ETH dropped vs BTC in the last 2 weeks, making BTC less attractive as well. I won’t go into all the details, but…

If you are planning an ICO, I strongly recommend to do it in just one coin. With Binance (and a number of other platforms) available, people can easily convert whatever coin they have, to the coin you accept.

International Roadshow

When we first started, I had grand plans of doing an around-the-world roadshow, stopping in San Francisco, New York, Tokyo, Soeul, Beijing, Chengdu, ShenZhen, then back to our base in Shanghai. We also thought of using multiple ICO platforms in all of those regions and languages, targeting a worldwide audience. But as usual, grand plans don’t survive contact with reality.

We ended up doing 0 roadshows, and used 0 international ICO platforms.

I wish we had done better, but there are tradeoffs we had to make. This is one of the drawbacks of moving quickly that I mentioned earlier. As soon as the Binance white paper started circulating, people just went crazy wanting a piece of it. Every day, there were 300-500 new people adding me on WeChat, then saying to me, “could you please reserve a portion of the Binance ICO for me?" Some will added another phrase: "I want to buy N million”. As hot as it is, I knew if we don’t meet these peoples’ needs, things could cool down just as quickly. So, we had to move fast. There was no choice.

A 30 hr round trip to New York would be prohibitively expensive in time costs. In fact, a few hour trip to Beijing felt very expensive. So, other than joining a NEO conference, which I agreed to way back, I spent all my time in our own office during the ICO, stepping out only less than 3 hours a day to get some sleep.

We didn’t have enough time to coordinate with the western ICO platforms, sending an email then waiting for 12 hours just doesn’t work. Scheduling a call for a day or two later pretty much made the call irrelevant. Whatever we wanted to discuss would have already been done.

We also had a couple other issues in internationalization. Making an ICO/lottery site under extreme time pressure, in multiple languages, is not easy. We sent English email confirmations to Chinese users, and showed western users Chinese characters in captchas. We fixed those issues in a day or less after they were reported, but by then, whatever portions of BNC that was available for sell at the time has long been grabbed up.

I wish we had more time and people to take care of the western community more.

In Closing

That is about as much as I have time to write and share at the moment. It is 11PM on Sunday night. I hope this article has helped you in some way. 

Feel free to repost, reprint, and redistribute this article as you wish, provided you keep all references to Binance.com intact.

Lastly, on a personal note, there was one other great benefit of the Binance ICO. I lost 5 kilos in the past 3 weeks, successfully reaching my target weight. This is something I have tried for years without success, now this ICO helped me get there. Working hard has its benefits!

Thank you for all your support, together, we will make Binance.com a success!

Changpeng Zhao

Binance CEO