Hashed's investment philosophy is based on three assumptions about the market: All assets will eventually be tokenized; bigger.
Interview: Fiona, Foresight News
Organized 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 in Europe or Africa are mainly focused on the time zones of the United States and East Asia.
2.Hashed was founded in early 2017 with a capital of only 600,000 US dollars. The team is an engineer and founder, and has never worked in the crypto VC or financial field before.
3. Before the first financing at the end of 2020, Hashed has been investing with its own money, and this investment vehicle is still managed today. This method ensures that when the invested projects appreciate, Hashed does not have to return them like many LPs, so the balance sheet is very impressive.
4. UNOPND is a wholly - owned subsidiary of Hashed. It is committed to incubating and building consumer-centric companies in the Web3 field. Create real Web3 use cases.
5. Hashed Emergent is a fund focused on emerging markets such as India, Africa, and the Middle East launched in 2022. The investment scale is generally between US$100,000 and US$500,000. It will hold meetups and hackathons in emerging markets every week. Currently Still experimental, but works great.
6. Hashed communicates with the invested projects by telegram, email or telephone every week or even every day. The focus is whether the team's products meet the needs of the market and the community, and whether the demand side can achieve sustainable growth.
7. Hashed established Hashed Open Research, and hired Yongbeom Kim, the former first deputy minister of the Ministry of Economy and Finance of South Korea and the former chairman of the Financial Commission, to provide macroeconomic and policy research support for the invested projects to ensure that the founders build compliance in the right way with sustainable products.
8. Baek Kim believes that there will be more and more pioneering innovations in the Asian market, especially the next market expansion, which will be mainly driven by the Asian market in 1 or 2 years.
9. Baek Kim believes that entrepreneurs in South Asia should be more active. They dare to try and challenge all unknowns, without seeking permission or worrying too much about regulation and consequences like Japan, South Korea or China. Most countries in South Asia will be adopted by consumers and The main market for retail.
10. Hashed's investment philosophy starts from three assumptions about the market: First, all assets will eventually be tokenized. Second, humans will have more social interactions digitally. Third, decentralized organizations will last longer and be larger than existing organizations.
11. At present, the FDV of the public chain is far greater than the actual commercial value generated on these chains. It is hoped that technological innovation will appear in the bear market to make up for the gap, and a successful business model will be built on the public chain in the next cycle.
12. Baek Kim stated that it is difficult for foreign crypto companies to gain a share of the Korean market. Because of language barriers, high pressure from international competition, and many local unicorn companies, South Korea has very strict controls on capital and currency circulation and venture capital. But the opportunity is that the Korean market does not need to preach, and companies can directly convert into BD customers.
When it comes to the blockchain industry and encryption market in South Korea, what do you think of?
"Kimchi Premium"? Terra thunder? "That man" DK? Or the Asian blockchain annual 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, is more worthy of being recognized and remembered.
This is an encryption VC established in 2017. None of the founders had VC experience, but it has developed from a small company with only $600,000 in principal to a top encryption venture capital institution with global influence. We know that before the crash of Terra in 2022, Hashed's assets under management (AUM) had reached 4 billion US dollars . Although Hashed later confirmed that it lost more than 3 billion US dollars in the LUNA crash, it was not knocked down. Over the past year, Hashed has gradually regained its strength and is actively exploring emerging markets and looking for new opportunities. So, what kind of organization is Hashed? What have you been paying attention to in the past one or two years? What do they think about the present and future of the crypto industry? What are the characteristics of the Korean market? What efforts have you made in emerging markets? These questions linger around.
Out of curiosity, Foresight News exclusively invited Hashed partner Baek Kim, a very contagious crypto entrepreneur, who gave us a detailed account of Hashed's entrepreneurial development history since 2017. From his interviews, we get a sense of the pragmatism, global vision of Koreans and their firm belief in the future of crypto to achieve mass adoption. Before KBW2023 is officially held, let us follow the story of Hashed to experience the style of Koreans and the Korean market in advance.
1. Hashed: From 3 engineers to 250 employees
Foresight News: Can you share the team situation of Hashed first, such as team size and distribution? Are investments being made globally, and what methods of communication are used to account for jet lag?
Baek Kim (Hashed) : We have about 30 employees who are responsible for the operation of investment vehicles, and everyone is located in Korea, Singapore and the United States. In terms of team structure, we have an investment team (7 people including partners), finance team, legal team, and a platform team including portfolio support and research. In addition, we have scientists and engineers.
The problem of time difference is related to the region of investment. At present, 60% of our investment projects are in Asia, 40% are in the United States, and we also have some investments in Europe, but we mainly focus on the time zones of the United States and East Asia. For example, if it's 08:00am Korea time and it's 3pm San Francisco or Los Angeles time on my side, there's enough overlap between now and lunchtime in Korea or Singapore for us to communicate internally. Then we use other time slots to have external meetings or do some personal research and so on. So if we add meetings with time zones like Europe, we're definitely going to have to change that. But so far, we've had a decent way of communicating. Of course, we will have a team in different time zones to handle different things. If there are some emergencies in the market or the projects in the portfolio, this arrangement can ensure that each market is covered and the portfolio is served 24/7.
Foresight News: Can you tell us about the relationship between Hashed, Hashed Emergent, and UNOPND, and what specific businesses they are responsible for?
Baek Kim (Hashed) : Hashed has a total of more than 250 employees, and the total number of people in the entire ecosystem is about 670, including Hashed Emergent, UNOPND and so on.
In early 2017, we started Hashed. Initially Hashed was more of an angel team of engineers and founders, because me, Simon, and Ryan had all been engineers and founders before. We first 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 a lot of teams came to Korea and we held events and technical talks for them and gave them some help with the market and token economics. That's when we realized that this could be a great opportunity to grow the industry together. At the same time, we're investing because we feel we can handle most of the money better. There were only a few funds at the time, and Polychain hadn't really been established yet. So, for us, it was a good time to build the platform. Because as an angel investor, it is impossible to expand the scale, but we believe that the fund platform and brand like Hashed will be global.
This is how Hashed got started. As you know, we started the fund with only $600,000 in principal. Because we are both engineers and founders and have never worked in crypto VC or finance before. We didn't know how to start a VC fund, or even a cryptocurrency fund, but we realized that there was an opportunity, so we wanted to do something more meaningful. So we started investing with our own money, and by the end of 2020 we hadn't raised a dime.
So, until we raised money, we only had our primary investment vehicle, which we still manage. But it also means that we don't have to give them money back like many LPs do when the projects we invest in appreciate. We have a very strong balance sheet, but we know we can use our network of resources, time and capital to do more than just invest and wait for returns or growth from the company.
This is how UNOPND was born. This is a wholly-owned subsidiary of Hashed and a venture capital studio dedicated to incubating and building consumer-centric companies in the Web3 space. One of the focuses of UNOPND is Web3 games, and now it has invested in many Web3 games. Among them, League of Kingdoms is an Ethereum-based mobile game that has received additional financing from a16z Crypto and Sequoia Asia. The second game is Derby Stars, which is a P2E horse racing game on Polygon, which also received additional financing from Galaxy Interactive and Jump Crypto; we have a game company that is doing an MMOFPS game, which is a mass-market The multiplayer online FPS shooting game, this game has just completed a round of financing. The last one is Modhaus, which is a Web3 Kpop music label, where NFT holders can vote on the form of idol music, who can watch songs, and more.
Modhaus previously had a successful first music video voted by the DAO with ~37% participation and ~32 million views on YouTube in the first day or two. Therefore, we have long been very concerned about IP content in the Metaverse. 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, to build distribution channels, realize consumer Adoption and go to market. We are enabling infrastructure builders to create real Web3 use cases for consumers.
So that's what UNOPND was created for. UNOPND now has about 130 to 140 people. Nathan is the marketing director. He has worked in companies such as MakerDAO and is responsible for community support and other work.
We didn't initially imagine that 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 that we launched last year, based in Bangalore, India, with investment sizes typically between $100,000 and $500,000. Currently, Hashed Emergent has a team of 15 people covering India, Africa and the Middle East. Our goal is to focus on driving Web3 adoption and real use cases. We believe emerging markets will have a huge impact and there will be a huge gap between ETH Africa Hackathon, ETH India Hackathon and some good projects invested by US funds.
Furthermore, there are many highly innovative and talented entrepreneurs in these emerging markets, but due to factors such as limited visibility, lack of resources, and few investment opportunities, they will fail because they cannot raise funds. We think it's a huge market that allows us to grow faster. Obviously, this is a very tough challenge and the odds are probably low, but we want to get in on these markets as early as we did in crypto, with local meetups.
In fact, we host events every week in emerging markets. Whether visiting the IIT campus or visiting Nairobi in Kenya, Africa, we host weekly meet ups and hackathons to demonstrate that Hashed Global is truly helping local communities. There is a lot of narrative on twitter about the nascent crypto market, but I don't think anyone is really invested in it, especially the funds, despite the funds claiming that they want to support these founders and regions. That's our first step, and while it's still experimental, it's working really well. To date, Hashed Emergent has completed 25 investments in these emerging markets.
2. Empowerment from 0 to 1: Oriented by market demand and compliance
Foresight News: In addition to direct investment, how does Hashed usually empower the projects it invests in, and what methods are adopted to help these projects achieve growth from 0 to 1?
Baek Kim (Hashed) : As a Web3 investor, I think there are many areas where development continues. Because at the beginning of Hashed, we thought we could help people understand token economics, smart contract layer technology, consensus mechanisms, and market conditions.
We believe that crypto games are going through a very turbulent and chaotic iterative process. So for us, it starts with maintaining good communication with the founders. We communicate weekly or even daily with most of our pitches by cable, email or phone to stay on top of things. That's why we have a large platform team, not just an investment team. The platform team should not only consider technology and product design, but also team building and how to enter the market. It depends on whether the project is an infrastructure layer or an application layer. If it is Layer1, then there are quite a wide range of market entry methods when building an ecosystem and building an economy. If it is an application layer project, like Web2, it may pay more attention to consumer feedback, market competition, etc.
So we try to help them in a very granular way because our fund is very focused on adoption. Specifically, whether it is an application, game, protocol or infrastructure, we will support it. The focus is whether the team's products meet the needs of the market and the community, and whether the demand side can achieve sustainable growth. The other support is definitely around the macro market, policy and legal aspects, because venture capital and venture growth in the crypto space requires a lot of risk management, we need to really ensure that founders build compliant and sustainable products in the right way, not because Policy changes lead to short-term thinking and even difficult adjustments in the later stage.
We now have 4 lawyers. These lawyers are not necessarily just lawyers in the crypto space, but lawyers who work closely with our founders. Obviously, we cannot give definitive legal advice, but we can help them find their way and get the right help. Additionally, we have a subsidiary that is Hashed Open Research, our newly established Web3 policy think tank, thanks to the recent addition of Yongbeom Kim, First Deputy Minister of Economy and Finance of South Korea. Yongbeom Kim served as the chairman of the Financial Services Commission of Korea, where he was responsible for writing guidelines and keeping an eye on the financial markets during the bull and bear markets of 2017 and 2018. So he joined us full-time, not part-time as a consultant. Yongbeom Kim does a lot of macroeconomic research, is a Ph.D. in macroeconomics from George Washington University, and worked for the World Bank for 10 years. As such, he provides a great deal of research and support for our portfolio.
Foresight News: South Korea, Japan, the European Union, the United Kingdom, the United States, etc. are all enacting regulations on cryptocurrency regulation. As a VC, how do you view encryption regulation?
Baek Kim (Hashed) : I was recently based in San Francisco and was not directly involved in a country’s crypto regulation, but our team in Korea did work closely with educators, evangelists, administrators, researchers, and professors to ensure that Gain a comprehensive understanding of the industry and make changes in the right direction. However, the regulatory process is slow and requires perseverance to make meaningful progress.
3. "The Asian market will be the main force driving the next round of bull market"
Foresight News: From personal experience, how do you feel 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, and African countries are also different. But from our perspective, the US market and the European market have been driving development and innovation in many areas, especially around the core of Ethereum.
Asian markets have been dominated by speculation and retail, with heavy volumes in spot and leveraged trading. However, this is gradually changing as more infrastructure-level builders and project teams emerge in Asia. We think that as we become more mature in the market, there will be more and more groundbreaking innovation happening 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 emerging super applications or super use cases, from different experiments and iterations, which has already happened.
I believe that the United States will be the largest financial market, as well as the largest purchasing power and VC market. It will continue to set the tone for VC investments, financial laws, security laws, which will also have a close impact on Europe. Many Asian countries are also eyeing these legislative moves. But we believe that a lot of bottom-up innovation is likely to come from Asia.
Furthermore, we found clear differences between American and Asian founders. The United States, like Europe, pays more attention to Crypto Native protocols, many of which are privacy, expansion, consensus, and cross-chain projects. Asia is more focused on DeFi, games, NFT and consumer applications. We believe this will continue because it will be difficult to launch any consumer-facing application in the US market or the European market.
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 more aggressive, they dare to try and challenge all unknowns, without seeking permission or worrying too much about regulation and consequences like Japan, Korea or China.
So I think that's driving a lot of actual construction, let's see what happens. In general, most countries in South Asia are growing their purchasing power and GDP much faster than other developed countries in the long run. This will be the main market for consumer adoption and retail.
Foresight News: What is the current state of the crypto market in South Korea? For project parties and ordinary users who want to enter the Korean market, is there anything that needs to be reminded?
Baek Kim (Hashed) : For many Web3 teams, companies or protocols, the Korean market is straightforward, but getting a piece of the pie here is hard.
There are many reasons, such as language barriers and great international competitiveness. The Korean market has traditionally been very unique, and it's one of the few places where American international companies don't dominate the local market, whether it's car companies, smartphones, TVs, music, or internet browsers like Google, which don't really work in Korea . At least for South Korean users, Internet providers offer far more complicated services. E-commerce like Amazon doesn’t work in South Korea, Korea has its own local e-commerce called Coupon, and many other providers. So it's an interesting country where a lot of home-grown innovations are going to grow tremendously. Coupon, for example, is listed on the New York Stock Exchange and has a market capitalization of about $60 billion, despite only serving the South Korean market.
It's a rather interesting market because it's one of the few countries where there are multiple unicorns in a very concentrated area of small countries. This means South Korea concentrates funding, education and training time in the tech sector. I think because of that, a lot of Layer 1, gaming or crypto protocols are finding that Korea is straightforward compared to other markets because it's very clear who you need to do BD. Nexon, one of the largest game publishers, has made its main game the Web3 game MapleStory with over 100 million active users.
All Layer1s are competing. SK is one of the largest conglomerates, and it wants to move some of its loyalty programs, cashbacks, to Web3. Krafton and Battleground also want to use web3 to do something, and all public chains are competing for this. Samsung has a wallet and a mobile phone, which has also caused a lot of competition in the public chain. So it's very clear who you need to be in BD, and you can expect great financial returns. In many other markets, you're exploring both in evangelism and in nurturing, and the ecosystem is a very, very long game. But in Korea, companies can directly convert to BD customers. So I think that's why many Layer1 founders like Solana, NEAR, Avalanche, Polygon, zkSync, etc. frequently visit Korea for BD.
The other part is a bottom-up process where technical and highly educated people are turning to Web3 to try to convince, educate and encourage them to build on top of these protocols, or join as team members. In fact, in the past 4 or 5 years, many talents have set limits for themselves, and they are more of a bystander in the encryption industry. For example, everyone even grandmas and younger generations know about cryptocurrencies, Korean local tokens, but there are not many full-time workers in the crypto industry. I think that's changing now that we're starting to see more real talent joining the industry, not just as retail crypto investors. So I'm very optimistic about it, and while there's still a long way to go, I'm confident it's going in a good direction.
It is still an opaque gray area in terms of regulation, but through Hashed Open Research and many other efforts, we have been doing a lot of education to ensure that the Korean market becomes one of the key centers of Web3.
But that doesn’t mean South Korea is an easy market to enter for foreigners or crypto projects, as South Korea is one of the most regulated countries when it comes to capital in and out, currency in and out, and venture capital.
So it's not easy for foreigners to get direct access to the Korean market the way US companies have direct access to the EU market, but it's really active these days.
4. Change and unchanged: the future of the industry in the eyes of Hashed
Foresight News: What is the Hashed investment methodology? How has it improved over the past few years?
Baek Kim (Hashed) : We are all first-time professional investors, which is why we put off accepting external funding for a long time at the beginning of our establishment. When we invest with our own money, although the internal financial risk is high, we can take full responsibility and responsibility for the results and make more decisions by ourselves.
But it's a different story when you have an LP in your 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 are not as many people or founders funds to run the business. So it's a considerable responsibility, both empowering and limiting.
Collectively, over the past six or seven years, we've adjusted, made mistakes, learned, and continued to grow as investors. Additionally, we are now able to hire top talent globally, even though the founders are engineers and founders. Therefore, hiring a lot of technical and financial talent in places like the US, Korea, Singapore or India allows us to work better as a team and build a stronger platform.
This is the change in the overall structure. I believe that in general, we are more like a highly iterative and highly flexible fund. The only constant is our belief in this market, the belief in the mass adoption of Web3, and we always pay attention to excellent startups , and have a long-term cooperation with them for 5 to 10 years.
Our investment philosophy starts from three assumptions about the market: First, all assets will eventually be tokenized. Second, humans will have more social interactions digitally. Third, decentralized organizations will last longer and be larger than existing organizations. Obviously, these are very ambitious assumptions, but I think they still apply to the way we make investment decisions and research the industry.
Foresight News: How has Hashed's investment focus changed from last year to the present, and which specific tracks and fields are currently more focused on?
Baek Kim (Hashed) : In terms of regions, Hashed's investment focus has not changed significantly because we have always adopted 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 don't have to be because we enjoy playing them. More importantly, we believe gaming is 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, and we believe gaming offers the best content and LPs for the next decade. If you pay attention to a lot of young people who are growing up, Generation Z and Generation Alpha, you will find that the popularity of IPs like Superman is declining sharply.
Today, animations for many new movies are produced by IPs of game characters. Therefore, we believe that the next generation of IP content will come from these interactive metaverse or games. If cryptocurrencies can be part of this wave, it will create mass adoption by a billion people. Right now, I think the only thing in the crypto industry is price volatility. What you consume and see is just candlestick charts. I think a lot of people are spending their time on exchanges or something like that rather than actual consumer spending. But we hope to promote the development of the encryption industry and infrastructure through games and IP.
Foresight News: In what aspects do you think the competition and growth points of the public chain will be reflected in the future? What are the reasons for being optimistic about the public chain?
Baek Kim (Hashed) : I am still very bullish on the public chain, but the actual adoption results are somewhat disappointing compared to expectations. I think the public chain should function like a game publisher, providing infrastructure, marketing and ecosystem support, etc. However, the challenge lies in how to coordinate and maintain this complex business model, because many public chains rely on inflation incentives to artificially support capital participation to attract users and developers.
The reason, in my opinion, is the lack of real need to build use cases, and the choice of infrastructure that is only suitable for a specific purpose to execute millions of people or a certain type of mechanism.
This situation is not uncommon, most chain games have been impacted by marketing and brand competition. So, hopefully, in this current bear market, there will be a lot of technological innovation that will 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 the public chain. In my opinion, the economic value 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 while Amazon is one of the most valued companies, the combined 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 commercial value generated on these chains.
Foresight News: How long do you think this bear market has gone, and what kind of opportunity do we need to usher in the next bull market?
Baek Kim (Hashed): During my participation in EthCC Paris, I found that many people were very excited and thought that the bull market was coming soon. But I'm a little worried because everyone seems to be excited too early, and the market is immature now, and no real changes have taken place. I am quite pessimistic about the current market, because it depends largely on the development of macroeconomics and policies, especially in the second half of this year.
Foresight News: The last question, we hope that more people can participate in Crypto, but most industry conferences have forgotten this mission, basically it is a gathering inside Web3. So for you, how do you encourage and help non-Web3 users enter the field of Crypto and Web3?
Baek Kim (Hashed) : I like to convey new ideas and ideas. Our focus is not limited to Web3, robotics, healthcare or AI are all hot right now. Personally, I just try to do the little things I can, or work with committees around me.
Therefore, I have directed and sponsored blockchain clubs in many universities and colleges. Three or four years ago, when my alma mater Carnegie Mellon University Blockchain Club was first established, there were only 5 to 10 people. But it's now one of the biggest clubs, with 200 signups. I also set up the Innovation Scholars program at my alma mater, which is a scholarship for students who want to become entrepreneurs. Right now, the core members of this club are focused on cryptocurrencies and Web3, as are many other institutions and communities I've helped.
Many of my former colleagues, bosses, and mentors came from gaming backgrounds. Amazon is also very interested in this piece. So, I'm just here that people think I know someone who's been in crypto for a while, and while I don't know what exactly he does, when they start their first learning journey or learn about Crypto, I Probably should reach out to them. Because I'm really happy.
One thing I remember, when I was an engineer at Amazon, I was mentored by the SVP to become a better product manager. Then I left Amazon to do Hashed. But many years later, he also wanted to explore the encryption field, so he joined Circle as a product director. After he left, I helped him start a new company, and Hashed eventually led this round of financing. So, I'm happy to be able to help some of the people who helped me earlier in my career.
