Dialogue Hashed Partners: The Asian market will be the main force driving the next bull market

Interview: Fiona, Foresight News

Organizer: Kean, Foresight News

Compilation: Peng SUN, Foresight News

TL;DR

1. 60% of the projects invested by Hashed are in Asia, 40% in the United States, with only a small portion in Europe or Africa, mainly focusing on the US and East Asia time zones.
2. Hashed was founded in early 2017 with an initial capital of only $600,000, and the team consists of engineers and founders who had never worked in crypto VC or finance before.
3. Before its first fundraising at the end of 2020, Hashed had been investing its own money, and this investment tool is still being managed today. This approach ensures that when the invested projects appreciate, Hashed does not have to return funds like many LPs, resulting in a very substantial balance sheet.
4. UNOPND is a wholly-owned subsidiary of Hashed, dedicated to incubating and building consumer-centric companies in the Web3 space, aiming to build the metaverse as an application layer on top of the infrastructure projects in Hashed's portfolio, creating real Web3 use cases for consumers.
5. Hashed Emergent is a fund launched in 2022 focusing on emerging markets such as India, Africa, and the Middle East, with investment sizes generally ranging from $100,000 to $500,000. Weekly meetups and hackathons are held in emerging markets, and it is still in the experimental stage but has shown great results.
6. Hashed communicates with its invested projects weekly or even daily through Telegram, email, or phone, focusing on whether the team's product meets market and community needs and whether the demand side can achieve sustainable growth.
7. Hashed established Hashed Open Research, hiring former First Deputy Minister of Economy and Finance and former Chairman of the Financial Services Commission Yongbeom Kim to provide macroeconomic and policy research support for the invested projects, ensuring that founders build compliant and sustainable products in the right way.
8. Baek Kim believes that more groundbreaking innovations will emerge in the Asian market, especially during the next market expansion, which will mainly be driven by the Asian market in one or two years.
9. Baek Kim believes South Asian entrepreneurs need to be more proactive, daring to try and challenge all unknowns without seeking permission or overly worrying about regulations and consequences like in Japan, Korea, or China. Most South Asian countries will be major 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 engage in more digital social interactions. Third, decentralized organizations will last longer and be larger than existing organizations.
11. Currently, the FDV of public chains far exceeds the actual commercial value generated on these chains, and there is hope for technological innovation during the bear market to bridge the gap and build successful business models on public chains in the next cycle.
12. Baek Kim states that foreign crypto companies find it difficult to gain a foothold in the Korean market due to language barriers, intense international competition, and many local unicorns. Korea has very strict regulations regarding capital and currency flow and venture capital. However, the opportunity lies in the fact that the Korean market does not require evangelism, and companies can directly convert to BD clients.

Main Text:

What comes to mind when you think of Korea's blockchain industry and crypto market?

"Kimchi premium"? The Terra crash? "That guy" DK? Or the upcoming annual blockchain event KBW in Asia next month? In fact, compared to these, the big player in the Korean market that is often overlooked in the Web3 world, Hashed, deserves to be recognized and remembered.

Founded in 2017, this crypto VC has no founders with VC experience but 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 assets under management (AUM) once reached $4 billion. Although Hashed later confirmed a loss of over $3 billion in the LUNA crash, it was not knocked down. Over the past year, Hashed has been gradually recovering and actively exploring 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 are their views on the current and future of the crypto industry? What characteristics does the Korean market have? What efforts have been made in emerging markets? These questions linger.

Out of curiosity, Foresight News exclusively invited Hashed partner Baek Kim, an infectious crypto entrepreneur, to share with us the entrepreneurial development history of Hashed since 2017. From his interview, we can feel the pragmatism, global vision, and firm belief of Koreans in achieving large-scale adoption of crypto in the future. Before KBW2023 officially kicks off, let’s first follow Hashed's story to experience the style of Koreans and the Korean market.

1. Hashed: From 3 Engineers to 250 Employees

Foresight News: Can you share 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 zone differences?

Baek Kim (Hashed): We have about 30 employees responsible for the operation of investment tools, and they are distributed across Korea, Singapore, and the United States. In terms of team structure, we have an investment team (including 7 people including partners), a finance team, a legal team, and a platform team that includes portfolio support and research. Additionally, we have scientists and engineers.

The time zone issue is related to the regions we invest in. Currently, 60% of our invested projects are in Asia, 40% in the United States, and there are some investments in Europe, but we mainly focus on the US and East Asia time zones. For example, if it is 8:00 AM in Korea, it is 3:00 PM in San Francisco or Los Angeles, so there is enough overlap from now until lunch time in Korea or Singapore for us to communicate internally. Then, we hold external meetings or do some personal research during other time slots. Therefore, if we increase meetings with Europe or other time zones, we will definitely need to make some changes. But so far, our communication methods have been quite good. Of course, we arrange a team in different time zones to handle different matters, ensuring coverage across markets and providing round-the-clock service for our portfolio in case of any urgent events in the market or projects.

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 over 250 employees, and the total number in the ecosystem is about 670, including Hashed Emergent, UNOPND, and others.

We founded Hashed in early 2017. Initially, Hashed was more like an angel team made up of engineers and founders, as I, Simon, and Ryan had all been engineers and founders before. We started in Korea, so we had the opportunity to meet many early crypto pioneers and founders visiting Korea, such as Vitalik, etc. Many teams came to Korea, and we organized events and technical lectures for them, providing some market and tokenomics assistance. At that time, we realized that this could be a great opportunity to develop the industry together. Meanwhile, we were also investing because we felt we could handle most of the funds better. At that time, there were only a few funds, and Polychain had not really established itself. So, it was a good time for us to build a platform. Being an angel investor does not allow for scaling, but we believed that a fund platform and brand like Hashed would be global.

That’s how Hashed started. As you know, we only had $600,000 in capital when we established the fund. Since we are all engineers and founders who had never worked in crypto VC or finance before, we didn’t know how to build a venture fund, let alone a cryptocurrency fund. But we realized the opportunity was there, so we wanted to do something more meaningful. Therefore, we initially invested our own money, and by the end of 2020, we hadn’t raised a penny.

So, before raising money, we only had our main investment tool, which we are still managing. But this also means that when the invested projects appreciate, we do not have to return funds to them like many LPs. We have a very substantial balance sheet, but we know we can do more with our resource network, time, and capital, not just invest and wait for returns or growth from companies.

This is how UNOPND was born. It is 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 focal points is Web3 gaming, and it has already invested in many Web3 games. Among them, League of Kingdoms is a mobile game based on Ethereum 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 gaming company working on an MMOFPS game, which is a mass-market multiplayer online FPS shooting game that has just completed a round of financing. The last one is Modhaus, a Web3 Kpop music label where NFT holders can vote on the form of idol music and who can watch the songs, etc.

Modhaus previously successfully selected its first music video through DAO voting, with a participation rate of about 37%, and the views on YouTube reached about 32 million in the first couple of days. Therefore, we have long been very focused on IP content within the metaverse. Our strategy is to build the metaverse as an application layer on top of Hashed's portfolio (including Layer1, wallets, key management, or developer tools, etc.) to create a positive feedback loop, which is to build distribution channels, achieve consumer adoption, and enter the market. We are supporting infrastructure builders to create real Web3 use cases for consumers.

Thus, the purpose of UNOPND's establishment is based on this. UNOPND now has about 130 to 140 people, with Nathan serving as the marketing director, who previously worked at MakerDAO and was responsible for community support and other tasks.

We initially did not expect UNOPND to grow to the scale it is today; we just 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, located in Bangalore, India, with investment sizes generally 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 promoting the adoption and practical use cases of Web3. We believe that emerging markets will have a huge impact, and there will also be a significant gap between hackathons like ETH Africa, ETH India, and some good projects funded by US funds.

Moreover, in these emerging markets, there are many innovative and talented entrepreneurs, but due to limited visibility, scarce resources, and fewer investment opportunities, they may fail due to the inability to raise funds. We see this as a huge market that can allow us to grow faster. Clearly, this is a very daunting challenge, and the probability of success may be low, but we hope to enter these markets early, just like participating in the early crypto market, attending local meetups.

In fact, we hold events in emerging markets every week. Whether visiting the Indian Institute of Technology campus or Nairobi in Kenya, we hold meetups and hackathons weekly to showcase how Hashed Global is genuinely helping local communities. There are many narratives about emerging crypto markets on Twitter, but I believe no one has really invested in it, especially funds, despite their claims of wanting to support these founders and regions. This is our first step; although it is still in the experimental stage, the results have been very good. So far, Hashed Emergent has completed 25 investments in these emerging markets.

2. Empowerment from 0 to 1: Market Demand and Compliance-Oriented

Foresight News: Besides direct investment, how does Hashed typically empower the projects it invests in, and what methods do you use to help these projects achieve growth from 0 to 1?

Baek Kim (Hashed): As Web3 investors, I believe many areas are continuously evolving. Because at the beginning of Hashed, we thought we could help people understand tokenomics, the technology of the smart contract layer, consensus mechanisms, and market conditions.

We believe that crypto gaming is undergoing a very turbulent and chaotic iterative process. Therefore, for us, the first thing is to maintain good communication with the founders. We communicate with most of the invested projects weekly or even daily through Telegram, email, or phone to keep track of specific situations. This is why we have a fairly large platform team, not just an investment team. The platform team needs to consider not only technology and product design but also team building and how to enter the market. It depends on whether the project is infrastructure or application layer. If it is Layer1, there are quite a few market entry methods when building ecosystems and economies. If it is an application layer project, it will be more focused on consumer feedback, market competition, etc., just like Web2.

Therefore, we try to provide them with very detailed help because our fund places great emphasis on adoption. Specifically, whether it is applications, games, protocols, or infrastructure, we provide support, focusing on whether the team's product meets market and community needs and whether the demand side can achieve sustainable growth. Other support certainly revolves around macro markets, policies, and legal aspects, as venture capital and risk 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 adopting short-term thinking due to policy changes, making it difficult to adjust later.

We currently have 4 lawyers. These lawyers are not necessarily just crypto lawyers but are closely working with our founders. Obviously, we cannot provide clear legal opinions, but we can help them find direction and obtain the right assistance. Additionally, we have a subsidiary called Hashed Open Research, which is our newly established Web3 policy think tank, due to the recent addition of Yongbeom Kim, the former First Deputy Minister of Economy and Finance of Korea. Yongbeom Kim was the Chairman of the Financial Services Commission and was responsible for drafting guidelines and focusing on financial markets during the bull and bear markets of 2017 and 2018. So he is a full-time member of our team, not a part-time consultant. Yongbeom Kim has conducted a lot of macroeconomic research and holds a Ph.D. in macroeconomics from George Washington University, having worked at the World Bank for 10 years. Therefore, he provides a lot of research and support for our portfolio.

Foresight News: Countries around the world, including Korea, Japan, the EU, the UK, and the US, are formulating cryptocurrency regulatory frameworks. 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 work of any country, but our team in Korea has indeed been closely collaborating with educators, evangelists, regulators, researchers, and professors to ensure a comprehensive understanding of the industry and make changes in the right direction. However, the regulatory process is slow and requires persistence to achieve meaningful progress.

3. "The Asian Market Will Be the Main Force Driving the Next Bull Market"

Foresight News: From your personal experience, how do you think the US market differs from the Asian market?

Baek Kim (Hashed): There are significant differences between Asian countries and Southeast Asian countries, making it difficult to summarize, and African countries also differ. But from our perspective, the US and European markets have been driving development and innovation in many areas, especially around Ethereum core innovations.

The Asian market has traditionally been dominated by speculation and retail, with significant trading volumes in spot and leveraged trading. However, as more infrastructure builders and project teams emerge in Asia, this situation is gradually changing. We believe that as we mature in the market, more groundbreaking innovations will occur in the Asian market, especially during the next market expansion, which will mainly be driven by the Asian market in one or two years. This will come from the continuously emerging super applications or super use cases, stemming from various experiments and iterations, which is already happening.

I believe the US will remain the largest financial market, as well as the largest purchasing power and VC market. It will continue to set the tone for VC investment, financial laws, and security laws, which will closely impact Europe. Many Asian countries are also paying attention to these legislative initiatives. However, we believe that many bottom-up innovations may come from Asia.

Additionally, we find a clear distinction between American and Asian founders. The US, like Europe, focuses more on Crypto Native protocols, many of which are privacy, scalability, consensus, and cross-chain projects. In contrast, Asia focuses more on DeFi, gaming, NFTs, and consumer applications. We believe this situation will continue because it is challenging for any consumer-facing application launched in the US or European markets.

Foresight News: How do you view the overall situation in the Southeast Asian market?

Baek Kim (Hashed): Very similar, but I think South Asian entrepreneurs need to be more proactive; they dare to try and challenge all unknowns without seeking permission or overly worrying about regulations and consequences like in Japan, Korea, or China.

Therefore, I believe this drives a lot of actual construction; let’s see what happens. Overall, in the long run, most South Asian countries will experience faster growth in purchasing power and GDP compared to other developed countries. This will be the main market for consumer adoption and retail.

Foresight News: What is the current state of the crypto market in Korea? What should projects and ordinary users looking to enter the Korean market be aware of?

Baek Kim (Hashed): For many Web3 teams, companies, or protocols, the Korean market is quite simple and straightforward, but it is challenging to gain a foothold here.

There are many reasons, such as language barriers and intense 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, TVs, music, or internet browsers like Google, which cannot really succeed in Korea. At least for Korean users, the services provided by internet providers are much more complex. E-commerce platforms like Amazon do not work in Korea; there are local e-commerce platforms like Coupon and many other suppliers. Therefore, it is an interesting country where many local innovations can achieve significant growth. For example, although it only serves the Korean market, Coupon is listed on the New York Stock Exchange with a market value of about $60 billion.

This is a rather interesting market because it is one of the few countries where multiple unicorns have emerged in a very concentrated small country region. This means Korea concentrates funding, education, and training time in the tech sector. I believe that is why many Layer1, gaming, or crypto protocols find Korea straightforward compared to other markets, as it is clear who you need to do BD with. Nexon is one of the largest game publishers, and it has turned its main games into Web3 games with over 100 million active users.

All Layer1s are competing. SK is one of the largest conglomerates, and it wants to transfer some loyalty programs and cash back to Web3. Krafton and Battleground also want to do something with Web3, and all public chains are competing for this. Samsung has wallets and phones, which has also sparked competition among many public chains. Therefore, who you need to do BD with is very clear, and you can expect good economic returns. In many other markets, you have to explore both evangelism and nurturing, and the ecosystem is a very, very long game. But in Korea, companies can directly convert to BD clients. Therefore, I think this is why many Layer1 founders like Solana, NEAR, Avalanche, Polygon, zkSync frequently visit Korea for BD.

Another part is the bottom-up process, where technical talents and highly educated individuals are turning to Web3, trying to persuade, educate, and encourage them to build on these protocols or join as team members. In fact, over the past 4 or 5 years, many talents have been limiting themselves, and they have been more like bystanders in the crypto industry. For example, even grandmothers and the younger generation know about cryptocurrencies and local Korean tokens, but there are not many full-time workers in the crypto industry. I believe this situation is changing now, and we are starting to see more real talents joining the industry, not just as retail crypto investors. So I am very optimistic about this; although there is still a long way to go, I am confident that it will develop in a good direction.

In terms of regulation, it remains 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.

However, this does not mean that Korea is an easy market for foreigners or crypto projects to enter, as Korea is one of the countries with the strictest regulations regarding capital and currency flow and venture capital.

Therefore, for foreigners, entering the Korean market directly like American companies entering the EU market is not easy, but it is indeed very active now.

4. Change and Constancy: The Future of the Industry in 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 postponed the issue of accepting external funds for a long time at the beginning of our establishment. When we invest our own money, although the internal financial risk is high, we can take full responsibility and obligation for the results and make more decisions ourselves.

However, when you have an LP in your fund, the situation changes. We raised $120 million in our first fund in December 2020 and another $200 million in December 2021. Most of our LPs are publicly listed companies, large conglomerates, and international companies, so there are not many individuals or founder funds to operate the business. Therefore, this is quite a responsibility, with both empowerment and limitations.

Overall, over the past six or seven years, we have continuously adjusted, made mistakes, learned, and continued to grow as investors. Additionally, although the founders are all engineers and founders, we can now hire top talents globally. Therefore, we have recruited many technical and financial talents in places like the US, Korea, Singapore, or India, enabling us to collaborate 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, with the only constant being our belief in this market and our belief in the large-scale adoption of Web3. We always focus on excellent entrepreneurs and engage in long-term cooperation with them for 5 to 10 years.

Our investment philosophy is based on three major assumptions about the market: first, all assets will eventually be tokenized. Second, humans will engage in more digital social interactions. Third, decentralized organizations will last longer and be larger than existing organizations. Clearly, 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 from last year to now, and what specific tracks and fields are you currently more focused on?

Baek Kim (Hashed): In terms of regions, Hashed's investment focus has not undergone significant changes, as 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 invested around infrastructure and gaming. Gaming is not necessarily because we enjoy playing games. More importantly, we believe gaming is the best way for cryptocurrency and blockchain infrastructure to achieve large-scale adoption. Because we believe that more LPs and content are the way to achieve large-scale adoption, we believe gaming provides the best content and LP for the next decade. If you pay attention to many of the emerging younger generations, Generation Z and Generation Alpha, you will find that the popularity of IPs like Superman is rapidly declining.

Nowadays, many new movie animations are made from game character IPs. Therefore, we believe that the next generation of IP content will come from these interactive metaverses or games. If cryptocurrency can become part of this wave, it will create large-scale adoption for billions of people. Right now, I think the only content in the crypto industry is price volatility. What you consume and see is just candlestick charts. I believe 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 gaming and IP.

Foresight News: Where do you think the competition and growth points for public chains will manifest in the future? What are the reasons for your optimism about public chains?

Baek Kim (Hashed): I still have a very optimistic view of public chains, but the actual adoption results are 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 inflationary incentives to artificially support capital entry, thereby attracting users and developers.

I think the reason lies in the lack of real demand to build use cases and the choice to execute hundreds of thousands of people or some type of mechanism using infrastructure that only applies to specific targets.

This situation is not uncommon; most chain games have already been impacted by marketing and brand competition. Therefore, I hope that during this current bear market, many technological innovations will emerge to solve the problems we have already recognized. In that case, in the next cycle, we can focus more on specific use cases and specific industry categories and see how successful projects are built on public chains. I believe the economic value above 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 most valuable companies, the total value of all businesses built on AWS is much larger. In contrast, in today's public chain market, the FDV of public chains far exceeds the actual commercial 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 my time at EthCC in Paris, I found that many people were excited, believing the bull market was about to arrive. But I am a bit worried because everyone seems to be a bit too excited too early; the market is not mature, and no substantial changes have occurred. I am quite pessimistic about the current market because it largely depends on the development of macroeconomics and policies, especially in the second half of this year.

Foresight News: Last question, we hope to have more people participate in Crypto, but most industry conferences forget this mission and are basically gatherings within Web3. So for you, how do you encourage and help non-Web3 users enter the Crypto and Web3 fields?

Baek Kim (Hashed): I really enjoy conveying new ideas and thoughts. Our focus is not limited to Web3; robotics, healthcare, or AI are all very popular today. Personally, I just want to do some trivial things to the best of my ability or collaborate with the committees around me.

Therefore, I have guided and sponsored many blockchain clubs at universities and colleges. Three or four years ago, when my alma mater Carnegie Mellon University’s blockchain club was just established, there were only 5 to 10 people. But now it is one of the largest clubs, with a registration number reaching 200. I also established an innovation scholar program at my alma mater, which is a scholarship for students who want to become entrepreneurs. Now, the core members of this club mainly focus on cryptocurrencies and Web3, and many other institutions and communities I have helped are in similar situations.

Many of my former colleagues, bosses, and mentors come from gaming backgrounds. Amazon is also very interested in this area. So, I am just someone people think knows someone who has been in cryptocurrency for a while, even though I don’t know exactly what they do. But when they start their first learning journey or get to know Crypto, I should probably reach out to them proactively. Because I am genuinely happy to do so.

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 do Hashed. But years later, he also wanted to explore the crypto field, so he joined Circle as a product director. After he left, I helped him start a new company, and Hashed eventually led the investment in this round. So, I am very happy to help some people who helped me early in my career.