Interview: Fiona, Foresight News
Edited by Kean, Foresight News
Compiled by: Peng SUN, Foresight News
TL;DR
1. 60% of Hashed’s investment projects are in Asia, 40% are in the United States, and only a small number of projects are in Europe or Africa. The main focus is still on the US and East Asian time zones.
2.Hashed was founded in early 2017 with only $600,000 in initial capital. The team consists of engineers and founders who have never worked in the crypto VC or financial fields before.
3. Before the first round of financing at the end of 2020, Hashed had been investing with its own money, and this investment tool is still managed today. This approach ensures that when the invested projects appreciate in value, Hashed does not have to return the money to them like many LPs do, so the balance sheet is very impressive.
4. UNOPND is a wholly-owned subsidiary of Hashed, dedicated to incubating and building consumer-centric companies in the Web3 field. It aims to build the metaverse as an application layer on top of the infrastructure projects in the Hashed portfolio to create real Web3 use cases for consumers.
5.Hashed Emergent is a fund launched in 2022 that focuses on emerging markets such as India, Africa and the Middle East. The investment scale is generally between US$100,000 and US$500,000. It holds meetups and hackathons in emerging markets every week. It is still in the trial stage, but the effect is very good.
6.Hashed communicates with the invested projects every week or even every day via telegram, email or phone, focusing on whether the team’s products meet market and community needs and whether the demand side can achieve sustainable growth.
7. Hashed established Hashed Open Research and hired Yongbeom Kim, former first deputy minister of the Ministry of Economy and Finance and former chairman of the Financial Services Commission of South Korea, to provide macroeconomic and policy research support for invested projects to ensure that founders build compliant and sustainable products in the right way.
8. Baek Kim believes that there will be more and more groundbreaking innovations in the Asian market, especially the next market expansion will be mainly driven by the Asian market in 1 or 2 years.
9. Baek Kim believes that South Asian entrepreneurs should be more proactive. They dare to try and challenge all unknowns without seeking permission or worrying too much about regulations and consequences like Japan, South Korea or China. Most countries in South Asia will be the main markets for consumer adoption and retail.
10.Hashed’s investment philosophy is based on three major assumptions about the market: First, all assets will eventually be tokenized. Second, humans will conduct more social interactions digitally. Third, decentralized organizations will last longer and be larger than existing organizations.
11. Currently, the FDV of public chains is far greater than the actual business value generated on these chains. We hope that technological innovation will emerge in the bear market to fill the gap and build a successful business model on the public chain in the next cycle.
12. Baek Kim said that it is difficult for foreign crypto companies to get a share of the Korean market. Because of language barriers, high international competition pressure, many local unicorn companies, and strict regulation of capital and currency circulation and venture capital in Korea. But the opportunity lies in the fact that the Korean market does not need to be preached, and companies can be directly converted into BD customers.
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When it comes to South Korea’s blockchain industry and crypto market, what comes to mind?
"Kimchi premium"? Terra crash? "That man" DK? Or the annual Asian blockchain event KBW coming next month? In fact, compared with these, Hashed, a big player in the Korean market that is often overlooked in the Web3 world, deserves to be recognized and remembered.
This is a crypto VC founded in 2017. None of the founders have ever had VC experience, but it has grown from a small company with only $600,000 in capital to a top crypto venture capital institution with global influence. We know that before the collapse of Terra in 2022, Hashed's asset management scale (AUM) reached $4 billion. Although Hashed later confirmed that it lost more than $3 billion in the collapse of LUNA, it was not defeated. Over the past year, Hashed has gradually recovered and actively explored emerging markets and looked for new opportunities. So, what kind of institution is Hashed? What has it been focusing on in the past one or two years? What do they think of the present and future of the crypto industry? What are the characteristics of the Korean market? What efforts have been made in emerging markets? These questions linger around.
Out of curiosity, Foresight News exclusively invited Hashed partner Baek Kim, a highly contagious crypto entrepreneur, to tell us in detail about Hashed's entrepreneurial history since 2017. From his interview, we can feel the pragmatism, global vision and firm belief of Koreans in the future of large-scale adoption of crypto. Before KBW2023 is officially held, let us follow Hashed's story to experience the style of Koreans and the Korean market in advance.
1. Hashed: From 3 engineers to 250 employees
Foresight News: Could you please share some information about the Hashed team, such as team size and distribution? Do you invest globally? What communication methods do you use to solve the time difference problem?
Baek Kim (Hashed): We have about 30 people running our investment vehicles, and we are based in Korea, Singapore, and the U.S. In terms of team structure, we have an investment team (7 people including partners), a finance team, a legal team, and a platform team that includes portfolio support and research. We also have scientists and engineers.
The time difference is related to the region of investment. Currently, 60% of our investment projects are in Asia, 40% in the United States, and there are some investments in Europe, but the main focus is still on the US and East Asian time zones. For example, it is 08:00 am in Korea time, and it is 3 pm in San Francisco or Los Angeles time here, so there is enough overlap from now to lunch time in Korea or Singapore for us to communicate internally. Then, we use other time periods to hold external meetings or do some personal research, etc. Therefore, if we increase meetings with time zones such as Europe, we will definitely have to change. But so far, our communication method is pretty good. Of course, we have a team in each time zone to handle different things. If there are some emergencies in the market or projects in the portfolio, this arrangement can ensure that various markets are covered and the portfolio is served 24 hours a day.
Foresight News: Can you talk about the relationship between Hashed, Hashed Emergent and UNOPND, and what specific businesses each is responsible for?
Baek Kim (Hashed): Hashed has more than 250 employees, and the total number of people in the entire ecosystem is about 670, including Hashed Emergent, UNOPND, etc.
We founded Hashed in early 2017. Initially, Hashed was more of an angel team of engineers and founders, because Simon, Ryan, and I were all engineers and founders before. We started in Korea, so we had the opportunity to meet many early crypto pioneers and founders who visited Korea, such as Vitalik and others. Then many teams came to Korea, and we held events and technical talks for them, and provided them with some help in marketing and token economics. At this time, we realized that this could be a great opportunity to grow the industry together. At the same time, we were also doing investments because we felt that we could handle most of the funds better. There were only a few funds at the time, and Polychain had not really been established yet. So, for us, it was a good time to build a platform. Because as an angel investor, you can't scale up, but we believe that a fund platform and brand like Hashed will be global.
This is how Hashed started. As you know, we started the fund with only $600,000 in capital. Because we were all engineers and founders, we had never worked in crypto VC or finance before. We didn't know how to build a venture capital fund, or even a cryptocurrency fund, but we realized that the opportunity had come, so we wanted to do something more meaningful. So we started by investing our own money, and by the end of 2020 we hadn't raised a penny.
So before we raised money, we only had our main investment vehicle, which we still manage. But this also means that when the projects we invest in appreciate in value, we don’t have to return money to them like many LPs do. We have a very impressive balance sheet, but we know that we can use our resource network, time and capital to do more than just invest and wait for the company to return or grow.
That’s how UNOPND was born. It’s a wholly owned subsidiary of Hashed and a venture studio dedicated to incubating and building consumer-centric companies in the Web3 space. One of UNOPND’s focuses is Web3 games, and it has invested in many Web3 games. Among them, League of Kingdoms is an Ethereum-based mobile game that has received additional funding from a16z Crypto and Sequoia Asia. The second game is Derby Stars, a P2E horse racing game on Polygon, which has also received additional funding from Galaxy Interactive and Jump Crypto; we have a game company that is making an MMOFPS game for the masses, which is a multiplayer online FPS shooting game for the masses, and this game has also just completed a round of financing. The last one is Modhaus, a Web3 Kpop music label where NFT holders can vote on the format of idol music, who can view songs, etc.
Modhaus previously successfully voted on its first music video by DAO, with a participation rate of about 37%, and about 32 million views on YouTube in the first one or two days. Therefore, we have been very focused on IP content within the Metaverse for a long time. Our strategy is to build the Metaverse as an application layer on top of the Hashed portfolio (including Layer1, wallets, key management or developer tools, etc.) to form a positive feedback loop, that is, building distribution channels, achieving consumer adoption and entering the market. We are supporting infrastructure builders to create real Web3 use cases for consumers.
Therefore, UNOPND was established for this purpose. UNOPND now has about 130 to 140 people, and Nathan is the marketing director. He has worked in companies such as MakerDAO, responsible for community support and other work.
We didn’t initially envision UNOPND would grow to the size it is today, we just saw the opportunity and have been guiding the company’s growth through the balance sheet.
Hashed Emergent is an emerging markets focused fund we launched last year, based in Bangalore, India, with investments typically ranging from $100,000 to $500,000. Currently, the Hashed Emergent team has 15 people covering India, Africa, and the Middle East. Our goal is to focus on driving adoption and real-world use cases for Web3. We believe that emerging markets will have a huge impact, and there will be a huge gap between the ETH Africa hackathon, ETH India hackathon, and some of the good projects that US funds invest in.
In addition, there are many talented and innovative entrepreneurs in these emerging markets, but they fail because they cannot raise funds due to limited visibility, lack of resources, fewer investment opportunities, etc. We think this is a huge market that can allow us to grow faster. Obviously, this is a very difficult challenge and the probability of winning may be low, but we hope to enter these markets as early as possible, just like participating in the early crypto market and attending local meetups.
We actually host events in emerging markets every week. Whether it's visiting the IIT campus or visiting Nairobi, Kenya, Africa, we host meet ups and hackathons every week to show that Hashed Global is really helping local communities. There's a lot of narrative about emerging crypto markets on Twitter, but I don't think anyone is really jumping in, especially funds, even though they say they want to support these founders and regions. This is our first step, and it's still in the experimental stage, but it's working very well. To date, Hashed Emergent has completed 25 investments in these emerging markets.
2. Empowerment from 0 to 1: Market demand and compliance oriented
Foresight News: In addition to direct investment, how does Hashed usually empower the invested projects, and what methods does it take to help these projects achieve growth from 0 to 1?
Baek Kim (Hashed): As a Web3 investor, I think a lot of areas are still evolving because when Hashed was founded, we thought we could help people understand token economics, the technology at the smart contract layer, consensus mechanisms, and the market.
We believe that the crypto game is going through a very turbulent and chaotic iteration process. Therefore, for us, the first thing is to maintain good communication with the founders. We communicate with most of the projects we invest in weekly or even daily by telegram, email or phone to grasp the specific situation. That's why we have a large platform team, not just an investment team. The platform team must not only consider technology and product design, but also team building and think about how to enter the market. It depends on whether the project is an infrastructure layer or an application layer. If it is Layer1, there is a fairly wide range of market entry methods when building an ecosystem and building an economy. If it is an application layer project, it will be like Web2, and may pay more attention to consumer feedback, market competition, etc.
Therefore, we try to provide them with very detailed help because our fund focuses on adoption. Specifically, whether it is an application, game, protocol or infrastructure, we will support it, and the focus is on whether the team's product meets the needs of the market and the community, and whether the demand side can achieve sustainable growth. Other support is definitely around the macro market, policy and legal aspects, because venture capital and venture growth in the crypto field require a lot of risk management, and we need to really ensure that founders build compliant and sustainable products in the right way, rather than short-term thinking or even difficulty in adjusting later due to policy changes.
We now have 4 lawyers. These lawyers are not necessarily just crypto lawyers, but lawyers who work closely with our founders. Obviously, we can't give definitive legal advice, but we can help them find their way and get the right help. In addition, we have a subsidiary called Hashed Open Research, which is our newly established Web3 policy think tank, which has recently been joined by Yongbeom Kim, the first deputy minister of the Ministry of Economy and Finance of South Korea. Yongbeom Kim was the chairman of the Financial Services Commission of South Korea, and he was responsible for writing guidelines and paying attention to financial markets during the bull and bear markets in 2017 and 2018. So he joined us full-time, not as a part-time consultant. Yongbeom Kim does a lot of macroeconomic research, has a PhD in macroeconomics from George Washington University, and worked at the World Bank for 10 years. So he provides a lot of research and support for our portfolio.
Foresight News: South Korea, Japan, the European Union, the United Kingdom, the United States and other countries around the world are formulating cryptocurrency regulatory laws. As a VC, what do you think of crypto regulation?
Baek Kim (Hashed): I am currently based in San Francisco and am not directly involved in crypto regulation in a particular country, but our team in Korea does work closely with educators, evangelists, managers, researchers, and professors to ensure a comprehensive understanding of the industry and changes are made in the right direction. However, the regulatory process is slow and requires persistence to make meaningful progress.
3. "Asian markets will be the main force driving the next bull market"
Foresight News: Based on your personal experience, how do you think the US market is different from the Asian market?
Baek Kim (Hashed): Asian countries and Southeast Asian countries are very different, so it is difficult to summarize. African countries are also different. But from our perspective, the US and European markets have been driving development and innovation in many areas, especially around the core of Ethereum.
The Asian market has always been dominated by speculation and retail, with large volumes of spot and leveraged trading. However, this is gradually changing as more infrastructure builders and project teams emerge in Asia. We believe that as we become more mature in the market, there will be more and more groundbreaking innovations in the Asian market, especially the next market expansion, which will be mainly driven by the Asian market in 1 or 2 years. This will come from the emergence of super applications or super use cases, from different experiments and iterations, which has already happened.
I believe the US will be the largest financial market, the largest purchasing power and VC market. It will continue to set the tone for VC investment, financial laws, security laws, and this will also have a close impact on Europe. Many Asian countries are also paying attention to these legislative initiatives. But we believe that a lot of bottom-up innovation may come from Asia.
In addition, we found a clear difference between American and Asian founders. The United States, like Europe, is more focused on Crypto Native protocols, many of which are privacy, expansion, consensus, and cross-chain projects. Asia is more focused on DeFi, games, NFTs, and consumer applications. We believe this situation will continue because it is difficult to launch any consumer-oriented applications in the US or European markets.
Foresight News: How do you view the overall situation of the Southeast Asian market?
Baek Kim (Hashed): Very similar, but I think South Asian entrepreneurs are a little more aggressive, they dare to try and challenge all the unknowns without seeking permission or worrying too much about regulations and consequences like in Japan, Korea or China.
So I think that's driving a lot of actual construction, and let's see what happens. In general, in the long run, purchasing power and GDP in most countries in South Asia are growing much faster than other developed countries. This will be a major market for consumer adoption and retail.
Foresight News: What is the current status of the Korean crypto market? For project developers and ordinary users who want to enter the Korean market, is there anything you need to remind everyone?
Baek Kim (Hashed): The Korean market is straightforward for many Web3 teams, companies, or protocols, but it is difficult to get a piece of the pie here.
There are many reasons, such as language barriers and great international competition. Traditionally, the Korean market is very unique. It is one of the few places where American international companies do not dominate the local market. Whether it is car companies, smartphones, televisions, music or Internet browsers such as Google, they cannot really work in Korea. The services of Internet providers are much more complicated, at least for Korean users. E-commerce like Amazon does not work in Korea. Korea has its own local e-commerce called Coupon, and there are many other providers. Therefore, it is an interesting country where many local innovations will be greatly developed. For example, despite only providing services in the Korean market, Coupon is listed on the New York Stock Exchange and has a market value of about 60 billion US dollars.
It’s a pretty interesting market because it’s one of the few countries that has multiple unicorns in a very concentrated area of a small country. This means that Korea has concentrated funding, education, and training time in the tech sector. I think because of this, many layer 1s, games, or crypto protocols find Korea to be pretty straightforward compared to other markets because it’s clear who you need to do the BD. Nexon is one of the largest game publishers, and it made its main game into a Web3 game called MapleStory, which has over 100 million active users.
All Layer1s are competing. SK is one of the biggest conglomerates, and it wants to move some loyalty programs, cashbacks, to Web3. Krafton and Battleground also want to do something with web3, and all public chains are competing for this. Samsung has wallets and mobile phones, which also attracts a lot of competition from public chains. Therefore, it is very clear who you need to target for BD, and you can expect good economic returns. In many other markets, you have to explore both in preaching and in cultivation, and the ecosystem is a very, very long game. But in Korea, enterprises can be directly converted into BD customers. Therefore, I think this is why many Layer1 founders such as Solana, NEAR, Avalanche, Polygon, zkSync, etc. frequently visit Korea for BD.
The other part is a bottom-up process, where technical talents and highly educated talents are turning to Web3, trying to convince, educate and encourage them to build on these protocols or join as team members. In fact, in the past 4 or 5 years, many talents have limited themselves and are more of a bystander in the crypto industry. For example, even everyone from grandma's generation to the younger generation knows about cryptocurrencies and Korean native tokens, but there are not many full-time workers in the crypto industry. I think this situation is changing now, and we are starting to see more real talents joining the industry, not just retail cryptocurrency investors. So I am very optimistic about this, although there is still a long way to go, but I am confident that it will move in a good direction.
It’s still an opaque grey area when it comes to regulation, but through Hashed Open Research and many other efforts, we’ve been doing a lot of education to ensure the Korean market becomes one of the key hubs for Web3.
But this does not mean that South Korea is an easy market for foreigners or crypto projects to enter, as South Korea is one of the countries with the strictest regulations on capital inflows and outflows, currency inflows and outflows, and venture capital.
So it's not easy for foreigners to get direct access to the Korean market like US companies have direct access to the EU market, but it's certainly active these days.
4. Change and constancy: the future of the industry in the eyes of Hashed
Foresight News: What is the Hashed investment methodology and how has it evolved over the past few years?
Baek Kim (Hashed): We are all first-time professional investors, which is why we postponed accepting external funding for a long time when we were founded. When we use our own money to invest, although the internal financial risk is high, we can take full responsibility and obligation for the results and make more decisions ourselves.
But it's different when you have an LP in a venture fund. We raised $120 million in our first fund in December 2020 and another $200 million in December 2021. Most of our LPs are public companies, large conglomerates, and international companies, so there aren't that many people or founder funds to run the business. So it's a pretty big responsibility, both in terms of mandate and limitations.
Overall, over the past six or seven years, we have continued to pivot, make mistakes, learn, and continue to grow as investors. Also, despite the fact that the founders are engineers and founders, we are now able to hire top talent around the world. So, hiring a lot of technical and financial talent in places like the US, Korea, Singapore, or India has enabled us to work better as a team and build a stronger platform.
This is the change in the overall structure. I believe that, overall, we are more like a highly iterative and flexible fund. The only constant is our belief in this market and the belief in the large-scale adoption of Web3. We always focus on excellent entrepreneurs and work with them for a long time of 5 to 10 years.
Our investment thesis is based on three assumptions about the market: First, all assets will eventually be tokenized. Second, humans will conduct more social interactions digitally. Third, decentralized organizations will last longer and scale larger than existing organizations. Obviously, these are very ambitious assumptions, but I think they still apply to our investment decisions and the way we research the industry.
Foresight News: How has Hashed's investment focus changed from last year to now? What specific tracks and fields are you focusing on now?
Baek Kim (Hashed): In terms of regions, Hashed's investment focus has not changed significantly, as we have always taken a global strategy. We will continue to invest with the same strategy, but will hire locally to better support the founders they work with. In terms of investment focus areas, we have always invested around infrastructure and games. Games are not necessarily because we like to play games. It's more that we believe that games are the best way for cryptocurrencies and blockchain infrastructure to achieve mass adoption. Because we believe that more LPs and content are the way to achieve mass adoption, we believe that games provide the best content and LPs for the next decade. If you pay attention to a lot of the younger generations that are growing up, Generation Z and Alpha, you will find that the popularity of IPs such as Superman is declining sharply.
Nowadays, a lot of new movie animations are made from game character IPs. So we believe that the next generation of IP content will come from these interactive metaverses or games. If cryptocurrencies can be part of this wave, then this will create mass adoption by a billion people. Right now, I think the only content in the crypto industry is price fluctuations. All you consume and see is the candlestick chart. I think a lot of people spend their time on exchanges or similar businesses instead of actual consumer spending. But we hope to promote the development of the crypto industry and infrastructure through games and IPs.
Foresight News: In your opinion, where will the competition and growth points of public chains be reflected in the future? What are the reasons for being optimistic about public chains?
Baek Kim (Hashed): I am still very bullish on public chains, but the actual adoption results are somewhat disappointing compared to expectations. I believe that public chains should play the role of game publishers, providing infrastructure, marketing, ecosystem support, etc. However, the challenge is how to coordinate and maintain such a complex business model, as many public chains rely on inflationary incentives to artificially support capital joining in order to attract users and developers.
I think the reason for this is a lack of real demand to build use cases and choosing infrastructure that is only suitable for a specific purpose to execute millions of people or a certain type of mechanism.
This is not uncommon, as most blockchain games have been impacted by marketing and brand competition. Therefore, I hope that in this bear market, there will be a lot of technological innovation that can solve the problems we are already aware of. In this way, in the next cycle, we can focus more on specific use cases, specific industry categories, and see how successful projects are built on public chains. I believe that the economic value on top of the infrastructure should be greater than the valuation of the infrastructure itself (for Layer1). I used to be a software engineer at Amazon, and although Amazon is one of the companies with the largest valuation, the total value of all businesses built on AWS is much greater. In contrast, in today's public chain market, the FDV of public chains is far greater than the actual business value generated on these chains.
Foresight News: How long do you think this bear market has lasted, and what kind of opportunity do we need to usher in the next bull market?
Baek Kim (Hashed): During the EthCC in Paris, I found that many people were very excited and thought that the bull market was coming soon. But I am a little worried because everyone seems to be a little too excited too early. The market is not mature and no substantial changes have taken place. I am quite pessimistic about the current market because it still depends a lot on the development of the macro economy and policies, especially in the second half of this year.
Foresight News: Last question, we hope that more people can participate in Crypto, but most industry conferences have forgotten this mission and are basically gatherings within Web3. So for you, how do you encourage and help non-Web3 users to enter the field of Crypto and Web3?
Baek Kim (Hashed): I love to pass on new ideas and thoughts. Our focus is not limited to Web3, robotics, healthcare or AI are all hot right now. Personally, I just want to do my best to do some small things or work with the committee around me.
As a result, I mentor and sponsor blockchain clubs at many universities and colleges. When my alma mater, Carnegie Mellon University, started its blockchain club three or four years ago, it only had 5 to 10 people. But now it is one of the largest clubs with 200 registered people. I also set up the Innovation Scholars Program at my alma mater, which is a scholarship for students who want to become entrepreneurs. Now, the core members of this club are mainly focused on cryptocurrency and Web3, and many other institutions and communities I have helped are in a similar situation.
A lot of my former coworkers, bosses, and mentors started out playing games. Amazon is also very interested in this space. So, I'm just a person here that people think I know someone who has been in crypto for a while, even though I don't know exactly what he does, but when they start their first learning journey or learn about Crypto, I should probably reach out to them. Because I'm really happy.
I remember one thing, when I was an engineer at Amazon, I was mentored by my senior vice president to become a better product manager. Then I left Amazon to do Hashed. But years later, he also wanted to explore the crypto space, so he joined Circle as a product director, and after he left, I helped him start a new company, and Hashed ended up leading the round of financing. So, I'm happy to help some of the people who helped me early in my career.
