Binance Labs, the venture capital arm of the world’s biggest crypto exchange, launched a US$500 million fund to invest in digital-asset projects, the latest capital injection into an industry that’s reeling from plunging prices and the collapse of the TerraUSD stablecoin. 

The announcement followed Andreessen Horowitz’s US$4.5 billion raise for a crypto fund last week, the industry’s largest to date, bringing the Silicon Valley investment firm’s total digital-asset-focused efforts to US$7.6 billion. The recent rout in cryptocurrency markets have been no deterrent for some venture capitalists, who still see promises in the boom-and-bust industry. 

“The best founders will still come into the space and build the most meaningful projects,” said Ken Li, an executive director at Binance Labs. 

The new fund is backed by institutional investors such as DST Global Partners and Breyer Capital, as well as family offices and corporations. It will invest in blockchain and web3 projects across incubation, early-stage venture and late-stage growth through a mix of token and equity investments, Li said in an interview. 

Binance Labs has invested in crypto-based game developers such as The Sandbox and STEPN, as well as blockchain startup Aptos Inc. In 2018, it made a US$3 million investment in Terra, the foundational blockchain for Do Kwon’s Luna token and TerraUSD algorithmic stablecoin, which suffered from a high-profile collapse in May, leading to massive losses for investors. At the time, Changpeng Zhao, the founder and chief executive officer of Binance, sought to distance his company from the failed project, tweeting that Binance Labs invested in “hundreds of projects” over the last four years and “a few of them have fallen by the wayside.” 

“Terra is both a wake-up call for the industry as well as a lesson,” Li said. The new fund from Binance Labs will pay close attention to tokenomics and whether crypto projects have sustainable business models when making investments, according to Li. 

He said that the current market downturn has hurt valuations for later-stage startups, but that early-stage projects haven’t been affected yet. He said that he isn’t concerned about innovation declining within the industry.

“If I reflect back to the previous cycle, it was actually during the crypto winter that a lot of the founders started the projects that eventually became well-known in 2020 and 2021,” he said.