Interview with Hashed Partner: The Next Bull Market will be Driven Primarily by Asian Markets
Interview: Fiona, Foresight News
Organizer: Kean, Foresight News
Translator: Peng SUN, Foresight News
TL;DR
1. Sixty percent of Hashed's investments are in Asia, while 40 percent are in the United States. Only a small portion of projects are in Europe or Africa, with the main focus on the United States and the East Asian time zone.
2. Hashed was founded in early 2017 with an initial capital of $600,000. The team consists of engineers and founders who have never worked in cryptocurrency VC or finance before.
3. Before their first fundraising at the end of 2020, Hashed used their own money for investments, and this investment tool is still actively managed. This approach ensures that when the invested projects appreciate in value, Hashed does not need to refund them like many LPs do, resulting in a substantial balance sheet.
4. UNOPND is a wholly-owned subsidiary of Hashed, dedicated to incubating and building consumer-centric companies in the Web3 field. Its goal is to build the metaverse as an application layer on top of infrastructure projects in Hashed's investment portfolio, creating real use cases for consumers in the Web3 space.
5. Hashed Emergent is a fund launched in 2022, focusing on emerging markets such as India, Africa, and the Middle East. The investment size ranges from $100,000 to $500,000. Weekly meetups and hackathons are held in emerging markets, and the fund is currently in the experimental stage, with positive results.
6. Hashed communicates with its invested projects on a weekly or even daily basis through Telegram, email, or phone calls. The focus is on whether the team's product meets market and community needs, and whether the demand side can achieve sustainable growth.
7. Hashed has established Hashed Open Research and hired Yongbeom Kim, former Deputy Minister of Economy and Finance and former Chairman of the Financial Committee of South Korea, to provide macroeconomic and policy research support to its invested projects, ensuring that founders build compliant and sustainable products in the right way.
8. Baek Kim believes that there will be more groundbreaking innovations in the Asian market, especially in the next market expansion, mainly driven by the Asian market in 1 or 2 years.
9. Baek Kim believes that South Asian entrepreneurs need to be more proactive. They dare to try and challenge the unknown without seeking permission or being overly concerned about regulations and consequences, and most countries in South Asia will be the main markets for consumer adoption and retail.
10. Hashed's investment philosophy is based on three assumptions about the market: first, all assets will eventually be tokenized. Second, humans will engage in more social interactions in a digital manner. Third, decentralized organizations will last longer and scale larger than existing organizations.
11. Currently, the fully diluted value (FDV) of public chains is much higher than the actual business value generated on these chains. It is hoped that technical innovations will emerge during the bear market to bridge this gap and build successful business models on public chains in the next cycle.
12.Baek Kim said that foreign encryption companies find it difficult to gain a foothold in the Korean market. This is because there are language barriers, intense international competition, and many local unicorn companies. South Korea has strict regulations in terms of capital and currency circulation and venture capital. However, the opportunity lies in the fact that the Korean market does not require extensive promotion, and companies can directly convert to BD customers.
When it comes to the blockchain industry and the cryptocurrency market in South Korea, what comes to mind?
"Kimchi Premium"? Terra's collapse? "That Guy" DK? Or the upcoming Asian Blockchain annual event KBW next month? In reality, compared to these, the Korean market's often overlooked prominent player in the Web3 world, Hashed, deserves more recognition and remembrance.
This is a crypto VC firm founded in 2017, with no founders having prior VC experience. However, it has grown from a small company with only $600,000 in capital to a top-tier crypto investment firm with global influence. We know that Hashed's Asset Under Management (AUM) reached $4 billion before the Terra crash in 2022, and although Hashed confirmed losses of over $3 billion in the LUNA collapse, it wasn't taken down. Over the past year, Hashed has been gradually recovering and actively exploring new emerging markets and seeking new opportunities. So, what kind of institution is Hashed? What have they been focusing on in the past year or two? What is their view on the present and future of the crypto industry? What are the characteristics of the Korean market? What efforts have they made in emerging markets? These questions linger.
Curiosity led Foresight News to exclusively invite Baek Kim, a partner at Hashed. He is an influential crypto entrepreneur who detailed Hashed's entrepreneurial development since 2017 in his interview with us. From his interview, we will feel the pragmatism, global vision, and strong belief in the widespread adoption of crypto in the future that Koreans possess. Before the official KBW 2023, let's follow the story of Hashed and get a taste of the Korean people's style and the Korean market.
1. Hashed: From 3 Engineers to 250 Employees
Foresight News: Can you share some information about the Hashed team, such as the team size and distribution? Do you invest globally, and what communication methods do you use to address time differences?
Baek Kim (Hashed): We have about 30 employees responsible for the operation of investment tools, and we are distributed in offices in South Korea, Singapore, and the United States. In terms of team structure, we have an investment team (including 7 partners), a finance team, a legal team, and a platform team that includes investment portfolio support and research. In addition, we also have scientists and engineers.
The time difference is related to the region of investment. Currently, 60% of the projects we invest in are in Asia, 40% in the United States, and we also have some investments in Europe, but we mainly focus on the United States and the East Asian time zones. For example, it is 8:00 AM in Korea, and it is 3 PM in San Francisco or Los Angeles, so there is enough overlap with lunchtime in Korea or Singapore for us to communicate internally. Then, we use other time periods for external meetings or personal research, etc. Therefore, if we increase meetings in time zones like Europe, we will definitely have to make changes. But so far, our communication method is still good. Of course, we arrange a team in different time zones to deal with different things. This arrangement ensures coverage of various markets and provides services to investment portfolios around the clock when there are emergencies in the market or in the portfolio.
Foresight News: Can you talk about the relationship between Hashed, Hashed Emergent, and UNOPND, and the specific businesses they are 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, and so on.
In early 2017, we founded Hashed. Initially, Hashed was more like an angel team composed of engineers and founders because Simon, Ryan, and I were engineers and founders. We started in South Korea, so we had the opportunity to meet many early cryptocurrency pioneers and founders visiting Korea, such as Vitalik, etc. Then many teams came to Korea, and we held events and technical lectures for them and provided them with assistance in markets and token economics. At that time, we realized that this could be a great opportunity to develop the industry together. At the same time, we were also doing investments because we felt 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 angel investors, we couldn't scale, but we believed that a fund platform and brand like Hashed would be global.
This is the Hashed starting experience. As you know, when we established the fund, we only had a capital of $600,000. Because we are all engineers and founders, we had never worked in crypto VC or finance before. We didn't know how to establish a venture fund, let alone a crypto fund, but we realized the opportunity was here, so we wanted to do something more meaningful. Therefore, we initially invested with our own money and by the end of 2020, we hadn't raised any funds.
Therefore, before raising money, we only had our primary investment tool, which we are still managing. But this also means that when the invested projects appreciate, we don't have to give them refunds like many LPs do. We have a very substantial balance sheet, but we know we can leverage our network, time, and capital to do more than just investing and waiting for the company's returns or growth.
This is how UNOPND was born. It is a wholly-owned subsidiary of Hashed, and it is a venture studio dedicated to incubating and building consumer-centric companies in the Web3 space. One of UNOPND's focuses is Web3 gaming, and it has already 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 working on an MMOFPS game, a multiplayer online FPS shooting game for the general public, which has just completed a funding round. The last one is Modhaus, a Web3 Kpop music label where NFT holders can vote on the form of idol music and who can access the songs, and so on.
Modhaus previously had its first music video successfully selected through DAO voting, with a participation rate of about 37% and reached approximately 32 million views on YouTube in just one or two days. Therefore, we have long been very focused on IP content in the metaverse. Our strategy is to build the metaverse as an application layer on top of the Hashed investment portfolio, including Layer 1, wallets, key management, or developer tools, to create a positive feedback loop, which is to build distribution channels and achieve consumer adoption and entry into the market. We are providing support for infrastructure builders and creating real Web3 use cases for consumers.
Therefore, UNOPND was established for this purpose. UNOPND currently has around 130 to 140 people, with Nathan serving as the Chief Marketing Officer. He has previously worked at companies like MakerDAO, responsible for community support and other work.
We didn't initially expect UNOPND to grow to the size it is today, but we saw the opportunity and have been guiding the company's development through the balance sheet.
Hashed Emergent is a fund we launched last year, focusing on emerging markets and based in Bangalore, India. The investment size ranges from $100,000 to $500,000. Currently, the Hashed Emergent team consists of 15 people and covers India, Africa, and the Middle East. Our goal is to focus on driving the adoption and practical use of Web3. We believe that emerging markets will have a significant impact, and there will be a significant gap between ETH Africa hackathon, ETH India hackathon, and some good projects funded by American funds.
In addition, in these emerging markets, there are many innovative and talented entrepreneurs. However, due to limited visibility, lack of resources, and limited investment opportunities, they may fail due to the inability to raise funds. We believe this is a huge market that can accelerate our growth. Obviously, this is a very challenging task, and the probability of successful investment may be low, but we hope to enter these markets as soon as possible, just like early participation in the crypto market, attending local meetups.
In fact, we hold events in emerging markets every week. Whether it's visiting the campus of the Indian Institute of Technology or visiting Nairobi, Kenya in Africa, we hold meetups and hackathons every week to showcase how Hashed Global is truly helping local communities. There are many narratives about emerging crypto markets on Twitter, but I don't think anyone is really getting involved, especially funds, despite claims that they want to support these founders and regions. This is our first step, although it is still in the experimental stage, the effect is very good. So far, Hashed Emergent has completed 25 investments in these emerging markets.
2. Empowering from 0 to 1: Guided by Market Demand and Compliance
Foresight News: In addition to direct investment, how does Hashed typically empower the projects it invests in, and what methods does it take to help these projects achieve growth from 0 to 1?
Baek Kim (Hashed): As a Web3 investor, I believe many fields are evolving. Because when Hashed was founded, we believed that we could help people understand token economics, the technical aspects of smart contract layers, consensus mechanisms, and market conditions.
We believe that crypto games are going through a very turbulent and chaotic iterative process. Therefore, for us, it is important to maintain good communication with the founders. We communicate with most of the projects we invest in on a weekly or even daily basis through Telegram, email, or phone calls to stay updated on specific situations. That's why we have a platform team in addition to the investment team, as the platform team needs to consider not only technology and product design, but also team building and market entry strategies. This depends on whether the project is at the infrastructure layer or the application layer. If it is Layer 1, there are quite extensive market entry methods when building ecosystems and economies. If it is an application layer project, it will be similar to Web2, with more emphasis on consumer feedback and market competition.
Therefore, we try to provide them with very detailed help because our fund is very focused on adoption. Specifically, whether it is applications, games, protocols, or infrastructure, we will support them, focusing on whether the team's products meet market and community needs, and whether the demand side can achieve sustainable growth. Other support is definitely focused on macro market, policy, and legal aspects because investment and growth in the crypto field require a lot of risk management. We need to ensure that founders build compliant and sustainable products in the right way, rather than being short-term and difficult to adjust due to policy changes.
We now have four lawyers. These lawyers may not necessarily be lawyers in the crypto field, but they are lawyers who work closely with our founders. Obviously, we cannot provide specific legal advice, but we can help them find direction and get the right help. In addition, we also have a subsidiary called Hashed Open Research, which is our newly established Web3 policy think tank. It is joined by Yongbeom Kim, the First Vice Minister of the Korean Ministry of Economy and Finance. Yongbeom Kim previously served as chairman of the Korean Financial Commission and was responsible for writing guidelines and focusing on the financial market during the bull and bear markets in 2017 and 2018. So he joined us full-time, not as a part-time advisor. Yongbeom Kim has done a lot of macroeconomic research. He holds a Ph.D. in macroeconomics from George Washington University and previously worked at the World Bank for 10 years. Therefore, he provides a lot of research and support for our investment portfolio.
Foresight News: Countries around the world, including South Korea, Japan, the European Union, the United Kingdom, and the United States, are all formulating cryptocurrency regulations. As a VC, how do you view crypto regulation?
Baek Kim (Hashed): I have been working in San Francisco recently and have not directly participated in the crypto regulation of any country, but our team in South Korea does work closely with educators, evangelists, managers, researchers, and professors to ensure a comprehensive understanding of the industry and make meaningful changes in the right direction. However, the regulatory process is slow and requires perseverance to make meaningful progress.
III. "The Asian Market Will Be the Main Force Driving the Next Bull Market"
Foresight News: Based on personal experience, what do you think are the differences between the US market and the Asian market?
Baek Kim (Hashed): Asian countries and Southeast Asian countries are all very different, so it is difficult to summarize, and African countries are also different from each other. But from our perspective, the US market and the European market have been driving the development and innovation in many areas, especially the innovation around the core of Ethereum.
Asian markets have always been dominated by speculation and retail trading, with a large volume of spot and leverage trading. However, this situation is gradually changing as more infrastructure builders and project teams emerge in Asia. We believe that as we become increasingly mature in the market, there will be more groundbreaking innovations happening in the Asian market, especially in the next market expansion, which will be primarily driven by the Asian market in 1 or 2 years. This will come from emerging super applications or use cases, from different experiments and iterations, which have already happened.
I believe the United States will be the largest financial market and also the largest purchasing power and VC market. It will continue to set the tone for VC investments, financial and security laws, which will also have a close impact on Europe. Many Asian countries are also paying attention to these legislative measures. However, we believe that many bottom-up innovations may come from Asia.
In addition, we found distinct differences between the US and Asian founders. While the US, like Europe, is more focused on Crypto Native protocols, many of which are projects related to privacy, scalability, consensus, and cross-chain. Asia, on the other hand, is more focused on DeFi, gaming, NFTs, and consumer applications. We believe this situation will continue because it is challenging for the US or European markets to launch any consumer-facing applications.
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 proactive. They are willing to try and challenge all unknowns without seeking permission or worrying too much about regulations and consequences like Japan, Korea, or China.
Therefore, I think this has led to a lot of actual construction. Let's see what will happen. Overall, in the long run, the purchasing power and GDP growth rates of most countries in South Asia are much faster than those of other developed countries. This will be the main market for consumer adoption and retail.
Foresight News: What is the current situation of the cryptocurrency market in Korea? Any advice for projects and ordinary users who want to enter the Korean market?
Baek Kim (Hashed): For many Web3 teams, companies, or protocols, the Korean market is straightforward and direct, but it is difficult to get a piece of the pie here.
There are many reasons, such as language barriers and intense international competition. Traditionally, the Korean market is very unique, as it is one of the few places where American international companies do not dominate the local market, whether it's automobile companies, smartphones, TVs, music, or internet browsers like Google. At least for Korean users, internet service providers' services are much more complex. E-commerce platforms like Amazon do not work in Korea; Korea has its own local e-commerce platform called Coupon, as well as many other suppliers. Therefore, this is an interesting country where many local innovations can thrive. For example, despite only providing services in the Korean market, Coupon went public on the New York Stock Exchange with a market value of around $60 billion.
This is a rather interesting market, as it is one of the few countries in a highly concentrated small country region with multiple unicorn companies. This means that Korea has concentrated funds, education, and training time in the field of technology. I think that because of this, many Layer 1, gaming, or encryption protocol discoveries find Korea to be straightforward and direct compared to other markets, as it is clear who you need to do BD. Nexon is one of the largest game publishers and has turned its main game into a Web3 game called MapleStory, which has over 100 million active users.
All Layer 1s are in competition. SK is one of the largest conglomerates and wants to move some loyalty programs and cashback to Web3. Krafton and Battleground also want to do something with web3, and all public chains are competing for it. Samsung has wallets and phones, causing a lot of competition among public chains. Therefore, the target for who you need to do BD with is very clear, and you can expect a good economic return. In many other markets, you have to explore in both preaching and fostering, and the ecosystem is a very, very long game. But in Korea, companies can directly convert into BD customers. So I think that's why many Layer 1 founders like Solana, NEAR, Avalanche, Polygon, zkSync, and others frequently visit Korea for BD.
Another part is a bottom-up process where technical talent and highly educated individuals are shifting towards Web3, trying to persuade, educate, and encourage them to build on top of these protocols or join as team members. In fact, over the past 4 to 5 years, many talents have limited themselves and have been more spectators of the crypto industry. For example, even everyone from the older generation to the younger generation knows about cryptocurrencies and local Korean tokens, but there aren't many full-time workers in the crypto industry. I think this situation is changing now, and we are starting to see more genuine talents join this industry, not just as retail cryptocurrency investors. So I am very optimistic about this, and although there is still a long way to go, I have confidence that it is developing in a positive direction.
In terms of regulation, it is still an opaque gray area, but through Hashed Open Research and many other efforts, we have been conducting a lot of education to ensure that the Korean market becomes one of the key centers for Web3.
But this does not mean that Korea is an easy market to enter for foreigners or cryptocurrency projects because Korea is one of the strictest countries in terms of capital inflows and outflows, currency inflows and outflows, and venture capital regulations.
Therefore, for foreigners, it is not easy to enter the Korean market directly like US companies entering the EU market, but it is indeed active now.
IV. Change and Unchange: The Future of the Industry through Hashed's Eyes
Foresight News: What is Hashed's 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 delayed accepting external funds for a long time when we first started. When we invest with our own money, although there is a high internal financial risk, we can take full responsibility and obligations for the results and make more decisions.
But when you have an LP in your venture capital fund, things are different. In December 2020, we raised $120 million in our first fund, and in December 2021, we raised another $200 million. Most of our LPs are publicly traded companies, large joint enterprises, and international companies, so there aren't as many people or founder funds to operate the business. Therefore, this is a considerable responsibility with both authorizations and restrictions.
Overall, over the past six or seven years, we have been continuously adjusting, making mistakes, learning, and growing as investors. In addition, even though the founders are engineers and entrepreneurs, we can now hire top talent globally. Therefore, we have recruited many technical and financial talents in places like the United States, South Korea, Singapore, or India, enabling us to better team up and build a stronger platform.
This is the overall structural change. I believe that overall, we are more like a fund with strong iteration and high flexibility. The only thing that remains unchanged is our belief in this market, in the widespread adoption of Web3, and our ongoing focus on outstanding entrepreneurs for long-term partnerships of 5 to 10 years.
Our investment philosophy starts from three assumptions about the market: firstly, all assets will eventually be tokenized. Secondly, humans will engage in more social interactions in a digital manner. Thirdly, decentralized organizations will last longer and scale bigger than existing ones. Obviously, these are very ambitious assumptions, but I believe they still apply to our investment decisions and industry research methods.
Foresight News: What changes have occurred in Hashed's investment focus since last year, and what specific tracks and areas are currently more focused on?
Baek Kim (Hashed): In terms of regions, Hashed's investment focus has not undergone significant changes because we have always adopted a global strategy. We will continue to invest with the same strategy but will hire local employees to better support the founders we work with. In terms of investment focus areas, we have always centered around infrastructure and gaming. Gaming is not necessarily because we enjoy playing games. What matters more is that we believe gaming is the best way to achieve widespread adoption of cryptocurrency and blockchain infrastructure. Because we believe more LP and content are the means to achieve widespread adoption, we believe gaming provides the best content and LP for the next decade. If you pay attention to many emerging young generations, Gen Z, and Gen Alpha, you will find that the popularity of superheroes like Superman is rapidly declining.
Nowadays, many new movies' animations are produced based on game characters' IP. Therefore, we believe that the next generation of IP content will come from these interactive metaverses or games. If cryptocurrencies can be part of this trend, it will create a large-scale adoption of billions of people. Currently, I believe the only content in the crypto industry is price volatility. What you consume and see are just candlestick charts. I think many people spend their time on exchanges or similar businesses rather than actual consumer spending. But we hope to drive the development of the crypto industry and infrastructure through games and IP.
Foresight News: What do you think are the aspects that reflect the competition and growth points of future public chains? What are the reasons for your optimism about public chains?
Baek Kim (Hashed): I still have a lot of faith in public chains, but the actual adoption results have been somewhat disappointing compared to expectations. I believe public chains should act like game publishers, providing infrastructure, marketing, and ecosystem support, etc. However, the challenge lies in how to coordinate and maintain this complex business model, as many public chains rely on inflation incentives to drive user and developer participation.
I think the reason for this lies in the lack of real demand to build use cases and the choice of infrastructure that only fits specific goals to execute millions of people or a certain type of mechanism.
This situation is not uncommon, as most blockchain games have already been affected by marketing and brand competition. Therefore, I hope that many technological innovations will emerge to solve the problems we have already realized in this bear market. In the next cycle, we can focus more on specific use cases, specific industry categories, and see how successful projects are built on top of public chains. I believe the economic value on top of the infrastructure should be much bigger than the valuation of the infrastructure itself (for Layer 1). I used to work as a software engineer at Amazon, and although Amazon is one of the most valuable companies, 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 commercial value generated on these chains.
Foresight News: How long do you think this bear market has been going on, and what kind of opportunity do we need to usher in the next bull market?
Baek Kim (Hashed): During my attendance at EthCC in Paris, I found that many people were excited, thinking that the bull market is about to come. But I am a bit worried because it seems that everyone is getting excited too early. The market is not mature yet, and no substantial changes have occurred. I am quite pessimistic about the current market because it depends largely on the development of the macroeconomy and policies, especially in the second half of this year.
Foresight News: Lastly, we hope to have more people participate in Crypto, but most industry conferences forget about this mission and are essentially gatherings within Web3. So for you, how do you encourage and help non-Web3 users enter the Crypto and Web3 space?
Baek Kim (Hashed): I really like to spread new ideas and new thoughts. Our focus is not limited to Web3, robots, healthcare, or AI are also popular nowadays. Personally, I just want to do some small things that may seem insignificant, or collaborate with committees around me.
Therefore, I mentor and sponsor many blockchain clubs in universities and colleges. Three or four years ago, when the blockchain club at my alma mater, Carnegie Mellon University, was just established, it only had 5 to 10 people. But now it is one of the largest clubs with a registered membership of 200 people. I have also established an Innovation Scholars Program at my alma mater, which is a scholarship program for students who aspire to be entrepreneurs. Now, the core members of this club mainly focus on cryptocurrency and Web3, and many other institutions and communities that I have helped are in similar situations.
Many of my former colleagues, bosses, and mentors come from the gaming industry. Amazon is also very interested in this field. So, here, I am just someone that people think knows someone who has been involved in cryptocurrency for some time, although I don't really know what he does. But when they begin their first learning journey or explore crypto, I should probably reach out to them proactively. Because I am genuinely happy to help.
I remember one thing, when I was an engineer at Amazon, I became a better product manager under the guidance of a senior vice president. Then I left Amazon to join Hashed. But years later, he also wanted to explore the crypto space, so he joined Circle as a product director. After he left, I helped him start a new company, and Hashed ultimately led the funding round. So, I am pleased to be able to help some people who helped me earlier in my career.
