Dialogue with Hashed Partner Kim: From $700,000 to $4 billion, how did Korea’s No. 1 crypto VC grow?

Original source: The Block

Original source: The Block

Original compilation: TechFlow volunteers

Do you know Hashed?

As far as the encryption industry is concerned, his reputation in the VC circle may not be as prominent as a16z\Paradigm, but in terms of growth, there may be few rivals.

Hashed was founded in 2017 by four engineers from South Korea who spontaneously raised $700,000 to invest in crypto. Five years on, and over 150 investments, their combined capital under management is over $4 billion without any external LPs.

Compared with a VC with a high starting point like a16z\Paradigm, Hashed can be regarded as starting from scratch, growing savagely from the bottom up.

This article comes from The Block podcast interview "The Scoop". Hashed partner Baek Kim and host Frank Chaparro introduced how Hashed is shaping the future of encrypted games. It was compiled and compiled by TechFlow volunteers.

TL;DR

1、first level title

2、In the past period of time, a lot of funds have been cross-border, looking for a better environment. Hashed chose to go to places where outstanding founders often appear, such as Southeast Asia and San Francisco. They have seen a lot of bottom-up talents grow.

3、Hashed has two major investment directions, one is decentralized stable currency, and the other is games and metaverse. After investing in Axie infinity, they began to try to understand how encryption technology can reshape the Southeast Asian market and emerging markets, and change people's lives. They saw the inner vision of how metaverse and games can help solve problems.

4、The first game produced by the Asian metaverse studio acquired by Hashed is "The League of Kingdoms", which was launched on Terra and has received investment from institutions such as Sequoia Capital. Kim believes that the fun of the game is very important, but there is no such game yet. Get enough discussion, and only real fun can lead to a lasting positive feedback loop.

5、Kim believes that the current Hashed may be an evolutionary direction of VC - becoming its own DAO. Hashed operates capital without an LP, which is some form of governance, and an index of portfolio assets so that it can focus on what is best for long-term growth.

6、For the continuous development of the game, Kim believes that it depends on the content of the game, which is a unique opportunity to create original IP. You can see that in Axie and other companies that start from nothing, without any distribution channel, but they grow out of the community.

7、Kim has been thinking about how to create an economic model that encourages people to use certain accounts or identity activities. Builders should care enough about these identities, but also pay attention to incentives or design new functions around this user behavior. Solving this problem also solves the problem of identity privacy.

8、For bridges, Kim believes that only when each "city" becomes attractive enough can it attract builders to build highways to connect these cities, because there is a great demand for commuting at that time. The usage experience of the current bridge is quite limited, and is mainly on the authentication layer of the asset, rather than the actual usage experience.

9、The construction of the token model and token governance is also the direction of Hashed's thinking. Many new products are replicating the same token model, and Kim hopes to introduce an easy-to-understand model meaning to help users focus on the actual fun, so as to deeply experience a part of the game and the metaverse itself.

10、How to bring the Metaverse into everyday life? Kim thinks this needs to be event-driven, like going to VR concerts, galleries, etc. Seamlessly switching between different metaverses and real life is what Kim and the others care more about. How to use this economy as another form of economic activity or social income, Kim believes that Web3 is a very important basic tool.

11、Regarding why investing in encrypted games, Kim said that the largest digital economy is obviously games and e-sports. Games are the largest and fastest-growing economy, and this may also be an encrypted market that can be adopted on a large scale. It's really cool that people like Axie and the Sandbox team are serious about building games and IPs, rather than focusing on monetizing them.

12、Kim believes that their biggest mistake is the conservative investment in Layer1. Now, Kim is investing money and participating in the ecosystems of different Layer1s to support new early founders building in these different new Layer1s.

Kim and the others are actively cooperating with the South Korean government and look forward to seeing more and more concrete plans from the new leader. South Korea had a chance to become the next crypto hub since 2018, only to be swayed by the wrong sentiment of the government. Kim has been working to implement some ideas in the mainstream industry, and the wave of encryption is unstoppable.

The following is the full text of the conversation:

Kim：Frank: I'm Frank, the news director of The block, thanks for listening. Today we have a guest Kim, who is a partner of The Hash Block. Although we met in the office in New York not long ago, I invited him to the show this time, hoping to give me a chance to be the protagonist. Glad to have you here, I think you got some sort of really great innovation award because I think you're one of the best VC firms out there, it's incredible how you did it.

Frank, thank you for your invitation, probably because we are one of the few VCs who invested in Web3 in the early stage.

Kim：Frank: As far as I know, you mainly work in Asia and your headquarter is in California. So what is your daily work like? Do you travel all day? Recently, many VCs have come to our program, but the topics of conversation are basically different. Some people talk about the metaverse, some people talk about NFT, and some people talk about different Layer1s. Perhaps the content of the subsequent chats will be the mysterious oriental landscape.

Yeah, we've been investing in this space for the last 5 years, traveling a lot, and now we've funded over 100 founders, about 65% of the founders are in Asia, and the other half are mostly in the US. We try to be local and experience growth from 0 to 1 with the founders so that we can really understand the local market. In this way, we can help them understand the target audience and help them understand what kind of business model Web3 can really play a role in these areas.

In the past period of time, a lot of funds have been crossing borders, some from Asia to the West, or a lot of funds have gone to different jurisdictions, such as Puerto Rico, and now we reverse, we go where the founders show up , we think these people will be present in Southeast Asia and San Francisco, we have expanded our team in Bangalore, India, now we have four people there, three people in Singapore, most of the team is in Korea, and then other team members are in the United States. We have seen a lot of bottom-up talent grow, and I like that, many of them, although they don’t have papers or investment from well-known institutions or VCs, have also become new founders, which is very dynamic.

Kim：Frank: I don't think it's wrong to go to Puerto Rico, because maybe that's my next step, hahaha. I would like to know about the size and scope of the company, you mentioned that you have invested in more than 100 projects, how do you invest in it? And what is their scope?

Regarding our structure, this is really interesting, we worked on this 5 years ago. We didn't really know why we were VCs or how to structure a portfolio. All four initial partners of our fund have backgrounds in software engineering and computer science, and we just want to help our selected project founders not lose their way in Web3.

It's pretty scary to start doing something with encryption in 2016 and 2017, frankly, because you can't even tell who's legitimate and who's a fraud. So it is particularly important for us to start helping the founders of the project. Fortunately, we know two powerful founders of Web2.

The first project we invested in was Terra Money in 2017, we helped realize their project design, and helped them raise funds, and now they have grown into the largest decentralized stable currency.

We have two major investment directions, one is decentralized stable currency, and the other is games and metaverse. Our first investment in gaming was Axie infinity in 2018, when we were their first advisor, we met them in Ho Chi Minh City, Vietnam, where we were trying to learn more, Southeast Asian markets and emerging markets How advanced encryption technology can become easier and change the way people live. This was before SLP and Play2Earn economics, but since then we've also really seen the underlying vision of how the metaverse and games can help solve problems.

So pretty quickly as you mentioned we've invested in over 100 founders globally and our funding has grown to over $4 billion in crypto assets without any LPs so we still own 100% Fund ownership.

Now we have full control over liquidity to support our founders, whether running governance, or providing the best experience for retail investors. Now we have acquired a game studio in Asia from a top listed company, which is a metaverse studio and also our subsidiary.

Our team has now grown to about 80 people, mostly engineers and designers. They build games on the basis of existing public chains, such as Terra, Solana, Polygon and ETH. The first game they launched is "The League of Kingdoms, one of the fastest growing games. They just raised funding from a16z Crypto and Sequoia Capital. It's the first game to launch on Terra, and it's built with money raised from America's top gaming fund. We are working hard to establish a positive feedback loop so that this game can be the first game that provides fun and liquidity governance, and can continue to run on this basis. I think that the fun of games is very important and interesting, but it is not discussed enough at present, and only real fun can lead to long-lasting positive feedback loops.

Kim：Frank: Let's recap, from $700,000 to $4 billion, while you're not the only VC with high growth, it's pretty impressive, especially when I think about how I was introduced in 2017 and 2016 When some of your funds are now only a few million dollars in size, I am even more shocked by your growth in scale. I agree with what you said about the positive feedback loop being supportive of the market everyone is worried about a bear market these days but you're reinvesting the money these big funds make into the ecosystem and I think it's a very long run , which helps support the long-term stability of the market.

You are right, sometimes, we even think of ourselves as a kind of evolution of VC, like we become our own DAO, because we operate our capital without LP, which is some form of governance , which is also an index of our portfolio assets, how we leverage that means a lot of responsibility, so we can actually focus on what is best for long-term growth. I think our joy is being able to not liquidate all of Terra LUNA, even when it touched a few cents during the past bear market, we believe in the vision of growing together to continue to run Validator, and continue to build the future of crypto on top of that.

Kim：Frank: Your team currently has 80 people, including engineers and maybe other professional designers and community managers. How did you get into this crypto space? You mentioned that you guys don't have a relevant entrepreneurial background, but now you guys are also starting to invest in games. How do you build something like this and then make it so successful that you have Sequoia and A16z visiting you.

I think we're lucky that all of us are founders and builders, and this is our first investment. We've had the privilege of working with the right founders in the right place, and we're very proud of that.

We realized there were so many white spaces in the industry, and we didn't want to just be ambassadors and wait for founders to address them, we wanted to do more and do it in a way that actually builds products. We have engineers inside our fund, most of the engineers at the fund are building internal systems or trading systems or counting systems, but we thought, we can do more by having engineers in-house. Then we started thinking about how to create career opportunities for these engineers as they joined a fund. Because I was an engineer too, and a lot of us were engineers, and smart engineers thrive when they're together, not alone, and they're able to do a lot of different special projects.

Sustainability is something we care a lot about in crypto because there are always bull and bear cycles where a lot of activity dies out and then a lot of excitement comes out in a bull market. But as a studio that is also a fund, we hope to continue to build and add value in bear markets.

We thought it would be the best structure to have a metaverse-style star studio where we could map out our long-term vision independent of our investment vehicles. So our studio has its own CEO, its own corporate development community, and engineers and designers to develop the product. They've been hiring in a very methodical way, and that number has grown to 80 people, which has become pretty sustainable.

Kim：Frank: To be precise, when we think of encrypted games, we often talk about one thing, which is the game cycle. You have incentives to bring people into the game, but those incentives don't always last, right? We've seen this with Ax infinity and many other games, how do you create sustainable forces that keep people engaged with the game for the long term?

I think it really depends on the content of the game, I think the current growth of encryption and Web3 is a very unique opportunity for our generation. This is a unique opportunity to create original IP success. Because when we look at the most successful stories in history, there's always been original content and original information, there's always been a Disney type knockoff, but they've never been number one in a new category, which is new intellectual property rights. I think that's what we're seeing with Axie and other companies that start with nothing, don't have any distribution channels, but they grow out of the community, so that's what we're looking for as investors and builders.

After this opportunity to truly create a sustainable community growth, we can think about what to offer to keep the community engaged. What will happen to the NFT community if there is an oversupply of NFTs and no support for utility or new content? This is what we were looking for and what drove our founders to really care about being a sustainable gaming or NFT community.

Kim：Frank: How much time do you spend playing The League of Kingdoms? Do you spend a lot of time playing it?

Not many. It's also a lot of fun, and I can hang out on the Discord channel and play games. I think this is unique to crypto games, even for Axie, we, as early investors, are part of the development of the game, but actually me as an avid gamer. I find it more fun in the community talking about my Axie, talking about the game, than actually playing the game, and I think the next step for this community is how to maintain where we are in terms of the industry.

Kim：Frank: This is indeed very interesting. Obviously, we've talked a little bit about the games that you make in this studio, some of the other trends impacting the VC market right now like Web3 and the Metaverse, where do you want to bet?

As you said, the metaverse project is a big part, and another aspect is related infrastructure, such as Web3 infrastructure, especially the infrastructure related to the scale of identity privacy.

The reason I care about identity is when I am an Apm for some project or protocol, the IP address can be leaked, the problem doesn't stop there, sometimes, some users actually use multiple different wallets for the same protocol or different Strategies such as uidx, you may have different accounts in different wallets to play different projects, for example in dydx, you can do different leverage or risk modeling, so when these accounts leave, how do you know they are real Did you leave, or did you just switch wallets? Or are they just consolidating a strategist's wallet? So it's an interesting question.

I think it's holding back some of the builders from getting to know our customers better and some of the ways that I've been thinking about is how do we create an economic model where we encourage people to take action in certain accounts or identities , we care enough about these identities that, as a builder, we can also focus on incentives or design new features around this user behavior. In my opinion, when this issue is resolved, we will truly understand what privacy means for the crypto industry.

Over the past 45 years, the industry has had a lot of big talking points about privacy, but nothing has really worked. I think the reason is that it's either completely private or not private at all. If we figure this out, this actually helps to fix issues in the game, which in a way provides a better user experience for the end user, which makes for more engaging games.

Kim：Frank: What's interesting about what you're saying is assuming you have this core entity, virtual reality or virtual reality games, right? It creates all these downstream, flywheels of economic growth that come from this core thing. So you if you have a good metaverse game, but if it's going to be successful, you need privacy tools, you need better design, you need better social tools, it's almost going to create this separate economy, Is it right? This will be parallel to the real world, how do you see this economic development?

I think we're seeing the early signs of it, we're starting to see people have more net worth in the virtual reality space than they have in real life, or in real life without real bank backing, but through crypto There are tools. What we're trying to focus on in this transition is how do we bring the metaverse into everyday life because when you look at virtual reality or any kind of virtual reality or what it's called an experience, it's event-driven and I It's saying people go to see certain concerts in VR, or people go to this particular gallery in VR space, or people keep sending money to be part of a project or an initiative that a brand is doing, or to see history. Nubby, this is all great, we do it in life too, right?

Because we go to different cities to watch certain content, but when we enter the metaverse, we are more concerned about how can we switch seamlessly? As you mentioned, how to use this economy as another form of economic activity or social income, I think Web3 is really a big foundational tool in this process.

Kim：Frank: So, which companies are you seeing breaking the gap between metaverses?

Today, we can see that there are not many projects specifically for bridges, but I think the main reason is that to connect different cities, the premise is that each city has to become attractive enough to attract builders to build highways Highways were used to connect these cities, because there was a great demand for commuting at that time. Now is the stage where we start to frame our problem, if you look at SandBox, it's still mostly kind of empty land and speculative investment activity, we're just kind of seeing it work with brands and game studios, in their Get footage on the Sand to build an interactive experience. As more and more activity is happening on the Sand, the bridge will become more and more important, and every builder who facilitates the project will find a way to really make it easier for people to participate, and I think there will also be concrete support that will emerge. But the current bridge experience is already quite limited, and is mainly on the authentication layer of the asset, rather than the actual usage experience.

Kim：Frank: The current bridge is really heavy. Kind of like the internet in the early 90s, it's not easy for the average person unless you abstract away its cryptographic complexity, the regular internet is in many ways a precursor to virtual reality, for the Metaverse project or just the Metaverse Thoughts per se What other downsides do you see?

Yeah, another aspect that we're really thinking about is these metaphysical token models. For example, thinking about how Uniswap started, in the process I think we have seen the struggle for justice, the role of these tokens and the true meaning of governance tokens. I think the same thing is happening with games and with Web3, a lot of the new products I see today are replicating the same token model.

Then another question is how to create an effective payment method? From Axie’s case, we’ve seen some of the difficulties and limitations of this model, and we’re thinking how can we actually have a simple token model? Even better structure? Thereby making it easier for people to understand what the model means, so they can focus on the actual fun of experiencing a part of the game and the Metaverse itself in depth.

Kim：Frank: You saw this trend developing a long time ago, basically before anyone I know. I remember the media reporting that you bet on Axie in 2018, what did you see at the time that others didn't notice?

I think we're lucky that we made the thesis about the game very early in the crypto fund and chose to invest our own money in the founders and it's not easy and we did it to really drive adoption of crypto , the reason why we choose games as the second pillar, second only to decentralized stablecoins, is because it is really difficult to go from digital to offline, why don't we stay in the digital age? And the largest digital economy is obviously gaming and esports, gaming is the largest and fastest growing economy and is very attractive to participants, so we think this may be a big market for crypto adoption, but in 2018 and 2019 All the games that you see in the industry are very speculative gambling type games like Tron Legacy Bats or American Night type of games, it's not sustainable at all if I look back at what we've actually done from other What did the fund get? I think it got a lot of questions, such as why should we invest in games? Why should we invest in Axie, Sandbox? Because these teams came out of nowhere, they weren't in the main target area of ​​the country, and gaming seems to be a small part of the crypto industry, but the Axie team and the Sandbox team are the few that we've come across that are very sincere about building games and IP, rather than someone who cares too much about how to monetize games with crypto, I think it's really cool to see how they've built their community over the past few years.

Kim：Frank: So in the next few years, maybe 5 years, what will the future look like?

It's hard to say, we've only been in the crypto industry for 5 years, and every year, or even less than a quarter, some unexpected events and events of different styles will happen. As a fund, we want to remain malleable and adaptable and fast to learn, our main vision is around moving many assets to digitization and making them work towards tokenization, with the volume of capital and economies of scale in the space growth, how we interact with it comes back to identity privacy, today we say we have 7 billion people in the world, we can have 10 times that population in virtual reality space than we currently have as physical users Having a much larger population and user base, that's something you're going to dig into, what actually looks like a larger more fluid economic activity, what kind of services does a larger population need, or what kind of services can we Does it provide an interactive experience to grow sustainably? That's a slight hint from future signals.

Kim：Frank: We talked about some of your successes, so what do you think were your biggest mistakes?

I think our biggest mistake, from an investment standpoint, is that we've been more conservative in investing in Layer 1, we want to be a founder-focused fund, we support every founder in that category and work really hard To support them, we did not invest in multiple different Layer1. When we see new founders come to us and show a game or app they are working on, I want them to tell us directly which Layer1 we should choose, we want a clear answer. But as we can see now, multichain is becoming quite clear. There are many different new Layer1s that are providing tangible added value to the ecosystem, something we were too careful to stay away from in the beginning stages, and now we are investing our money and participation in the ecosystem of different Layer1s to support new early startups People build in these different new Layer1s.

I always tell my friends that when you try to do anything in crypto you have to be a power user and when you become a power user you start to see huge gaps in the industry as you mentioned , the biggest gap as a power user is the bridge, it's kind of like being in a city where everything is like a one-way street and you have to figure out how to actually get to that point instead of making a quick turn to get there, and we've been very focused on that.

Kim：Frank: Let's go back to what's going on, in Asia, South Korea just elected a new very crypto-friendly president, although he's also more conservative, so, will this crypto-friendly president cause ripples in the crypto world ?

We have been designing and working closely with the government as advisors to map out some crypto strategies especially in terms of taxation and KYC. We achieved a great victory two years ago. We introduced TRIP into Korean financial law, which is a very good and tangible progress. But what is really exciting is that all the candidates for the presidential election are positive about encryption, they almost present it as a populist proposal, because in 17 and 18 South Korea was one of the fastest and largest markets for encryption software One, most adults have been exposed to crypto at some point. There are a lot of people who have made money from crypto, and there are a lot of people who have lost money from crypto, and crypto is actually important to their financial or personal lives, and this cannot be ignored by leaders, so we look forward to seeing new leaders Come up with more and more concrete plans.

South Korea may be the number one market or the next crypto financial center since '18 but the govt really took the wrong sentiment and there was a lot of firepower and I think a lot of governors are trying to see this again because more business Opportunity is a huge risk for a company or a retail investor, we've been working with Terra, in particular one of our legal team and our finance team is from the Blue House, and we've been doing a lot of work to push through some of the ideas in Crypto mainstream industry.

I think crypto is unstoppable and in South Korea right now in the crypto games that are happening right now it's interesting that all these public company public game publishers are building their own blockchain and developing games on top of it and they're pouring everything core IP and content to build Web3, so they're really restructuring their companies to fit what's going on, they think it's a future, and it's interesting to see public companies when the government itself is still in a gray area of ​​these things How is this done and actually issued tokens? They see a huge consumer appetite and a market opportunity on a global scale, and they're just moving forward, just keeping innovation happening.

Kim：Frank: So who do you think will win?

It's not an either/or because we're official consultants, a lot of consulting through our studio, so we're actually building a lot of these games together, we're helping them design a lot of these things, I really One thing to care about is they don't really screw these up because I don't want them to miss out on an opportunity for an entire country or industry, like a big game company launching the wrong way they'll just kill everyone else's opportunity , we just want to make sure they follow the rules of governance.