Hashed Partner The next bull market will be mainly driven by the Asian market, and bottom-up innovation may emerge in Asia.

Hashed Partner Asian market to drive next bull market, with potential for bottom-up innovation in Asia.

The investment philosophy of Hashed is based on three assumptions about the market: all assets will eventually be tokenized; humans will engage in more social interactions in a digital manner; decentralized organizations will last longer and be larger than existing organizations.

Interview: Fiona

Editing: Kean

Translation: Peng SUN

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TL;DR

1. 60% of Hashed’s investments are in Asia and 40% in the United States, with very few projects in Europe or Africa. The focus is mainly on the United States and the East Asian time zone.

2. Hashed was founded in early 2017 with only $600,000 in capital. The team consists of engineers and founders who have never worked in crypto VC or finance before.

3. Prior to the first round of financing at the end of 2020, Hashed had been investing with its own money, and this investment tool is still being managed. This approach ensures that when the invested projects appreciate, Hashed does not have to return funds to them 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 field. Its goal is to build the metaverse as an application layer on top of infrastructure projects in Hashed’s investment 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. The investment size is generally between $100,000 and $500,000. Weekly meetups and hackathons are held in emerging markets, and it is currently in the experimental stage with good results.

6. Hashed communicates with its invested projects on a weekly or even daily basis through Telegram, email, or phone, focusing on whether the team’s product meets market and community demands, and whether the demand side can achieve sustainable growth.

7. Hashed has established Hashed Open Research and hired Yongbeom Kim, the former Deputy Minister of Economy and Finance of South Korea and former Chairman of the Financial Committee, 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 there will be more groundbreaking innovations in the Asian market, especially in 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 proactive. They dare to try and challenge the unknown without seeking permission or worrying too much about regulations and consequences, and most countries in South Asia will be the main markets for consumer adoption and retail.

10. The investment philosophy of Hashed is based on 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 be larger than existing organizations.

11. Currently, the FDV (Fundamental Data Value) of public chains is much greater than the actual commercial value generated on these chains. We hope that technological innovations will emerge in the bear market to bridge this gap and build successful business models on public chains in the next cycle.

12. Baek Kim mentioned that it is difficult for foreign crypto companies to gain a foothold in the Korean market. This is due to language barriers, intense international competition, and the presence of many local unicorn companies. Korea has strict regulations on capital and currency circulation as well as venture capital. However, the opportunity lies in the fact that there is no need to evangelize in the Korean market, and companies can directly convert to BD (Business Development) customers.

When it comes to the blockchain industry and the crypto market in Korea, what comes to your mind?

“Kimchi premium”? Terra collapse? “That guy” DK? Or the upcoming Asia Blockchain Week KBW? In fact, compared to these, Hashed, a major player in the Web3 world that is often overlooked in the Korean market, is more worthy of recognition and remembrance.

Hashed is a crypto VC (Venture Capital) firm established in 2017. None of its founders have previous VC experience, but 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 before the collapse of Terra in 2022, Hashed’s Assets Under Management (AUM) reached $4 billion. Although Hashed confirmed losses of over $3 billion in the LUNA collapse, it was not defeated. Over the past year, Hashed has been gradually recovering and actively exploring emerging markets and 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.

Out of curiosity, Foresight News has exclusively invited Baek Kim, a partner at Hashed. He is a charismatic crypto entrepreneur who will give us a detailed account of Hashed’s entrepreneurial development since 2017. From his interview, we will feel the pragmatism of Koreans, their global vision, and their firm belief in the widespread adoption of crypto in the future. Before the official KBW2023, let’s follow Hashed’s story and get a preview of the style of Koreans and the Korean market.

1. Hashed: From 3 Engineers to 250 Employees

Foresight News: Can you first share the situation of Hashed’s team, such as the team size and distribution? Do you invest globally, and what communication methods do you use to overcome the time difference?

Baek Kim (Hashed): We have about 30 employees responsible for the operation of investment tools, and we are all distributed across offices in Korea, Singapore, and the United States. In terms of team structure, we have an investment team (including 7 partners), a financial 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 our investment projects are in Asia, 40% are in the United States, and we also have some investments in Europe, but our main focus is on the United States and the East Asian time zone. For example, if it is 8:00 in the morning in Korea, it is 3:00 in the afternoon in San Francisco or Los Angeles. Therefore, there is enough overlap between now and lunchtime in Korea or Singapore for internal communication. We use other time periods for external meetings or personal research. Therefore, if we increase meetings with time zones in Europe, we will definitely need to make some changes. But so far, our communication has been good. Of course, we have teams in different time zones to handle different matters. This arrangement ensures coverage of various markets and provides services to the portfolio around the clock if there are any urgent events in the market or in the investment portfolio.

Foresight News: Can you talk about the relationship between Hashed and Hashed Emergent, 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 others.

In early 2017, we founded Hashed. Initially, Hashed was more like an angel team composed of engineers and founders, because I, Simon, and Ryan were all engineers and founders. We started in Korea, so we had the opportunity to meet many early crypto pioneers and founders visiting Korea, such as Vitalik, etc. Then many teams came to Korea, and we held events and technical lectures for them, providing them with help in terms of market 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 believed we could handle most of the funds better. At that time, there were only a few funds, and Polychain had not yet been truly established. So, for us, it was a good time to build a platform. As angel investors, we could not scale, but we believed that a fund platform and brand like Hashed would become global.

That was the starting experience of Hashed. As you know, when we established the fund, we only had $600,000 in capital. Because we were all engineers and founders and had never worked in crypto VC or finance before, we didn’t know how to build a venture capital fund or even a cryptocurrency fund. But we realized that the opportunity had come, so we wanted to do something more meaningful. Therefore, we initially invested with our own money, and by the end of 2020, we hadn’t raised a penny.

Therefore, before raising funds, our main investment tool was still being managed by ourselves. But this also means that when the invested projects appreciate, we don’t have to return money to them like many LPs do. We have a very substantial balance sheet, but we know that we can do more with our resource network, time, and capital, rather than just investing and waiting for the company’s return or growth.

UNOPND is born this way. It is a wholly-owned subsidiary of Hashed and a venture studio dedicated to incubating and building consumer-centric companies in the Web3 field. One of UNOPND’s focus areas 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 shooter game for the general public, which has just completed a round of funding. 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 the first music video through DAO voting, with a participation rate of about 37%, and the number of views on YouTube reached about 32 million in just one or two days. Therefore, we have long been very interested in IP content in the metaverse. Our strategy is to build the metaverse as an application layer on top of Hashed’s investment portfolio, including Layer1, wallets, key management, or developer tools, to create a positive feedback loop, that is, to build distribution channels and achieve consumer adoption and market entry. We are providing support for infrastructure builders and creating true Web3 use cases for consumers.

Therefore, the purpose of UNOPND’s establishment is for this reason. UNOPND now has about 130 to 140 people, and Nathan serves as the marketing director, who has worked for companies such as MakerDAO and is responsible for community support and other work.

Originally, we didn’t expect UNOPND to grow to the scale 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 with a focus on emerging markets, based in Bangalore, India, with investment sizes generally between $100,000 and $500,000. Currently, the Hashed Emergent team has 15 people, covering India, Africa, and the Middle East. Our goal is to focus on driving the adoption and practical use cases of Web3. We believe that emerging markets will have a huge impact, and there will be a significant gap between ETH Africa Hackathon, ETH India Hackathon, and some good projects funded by US funds.

In addition, in these emerging markets, there are many innovative and talented entrepreneurs, but due to limited visibility, lack of resources, and fewer investment opportunities, they may fail to raise funds. We see this as a huge market that can help us grow faster. Obviously, this is a very challenging task, and the chances of successful investments may be low, but we hope to enter these markets as early as possible, just like participating in local meetups in the early stages of the crypto market.

Actually, we host events in emerging markets every week. Whether it’s visiting the Indian Institute of Technology campus 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, even though funds claim they want to support these founders and regions. This is our first step, and although it’s still in the experimental stage, the results are very good. So far, Hashed Emergent has completed 25 investments in these emerging markets.

II. Empowering from 0 to 1: Guided by market demand and compliance

Foresight News: In addition to direct investment, how does Hashed usually empower investment projects and what ways are taken to help these projects achieve growth from 0 to 1?

Baek Kim (Hashed): As a Web3 investor, I believe that many fields are constantly evolving. Because at the founding of Hashed, we believed that we could help people understand token economics, the technology of the smart contract layer, consensus mechanisms, and market conditions.

We believe that the crypto gaming industry is going through 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 projects we invest in on a weekly or even daily basis through Telegram, email, or phone calls to stay informed about the specific situation. That’s why we have a considerable 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. This depends on whether the project is at the infrastructure layer or the application layer. If it’s Layer1, there are quite a wide range of market entry methods when building the ecosystem and the economy. If it’s an application layer project, it will be similar to Web2, and it may focus more on consumer feedback and market competition.

Therefore, we try to provide them with very detailed assistance because our fund is very focused on adoption. Specifically, whether it’s applications, games, protocols, or infrastructure, we provide support, with a focus on whether the team’s product meets market and community needs and whether the demand side can achieve sustainable growth. Other support definitely revolves around macro markets, policies, and laws, as risk investment and risk growth in the crypto field require a lot of risk management. We need to properly guide founders to build compliant and sustainable products in the right way, rather than having short-term thinking or difficulty adjusting in later stages due to policy changes.

We now have four lawyers. These lawyers are not necessarily only lawyers in the crypto field but lawyers who work closely with our founders. Obviously, we cannot provide specific legal advice, but we can help them find directions and get the right assistance. In addition, we also have a subsidiary called Hashed Open Research, which is our newly established Web3 policy think tank, with the recent addition of Yongbeom Kim, the First Vice Minister of the Ministry of Economy and Finance in Korea. Yongbeom Kim previously served as the Chairman of the Financial Services Commission of Korea and was responsible for writing guidelines and monitoring the financial market during the bull and bear market periods in 2017 and 2018. So he joined us full-time, not as a part-time consultant. Yongbeom Kim has done a lot of macroeconomic research and holds a Ph.D. in macroeconomics from George Washington University. He has worked at the World Bank for 10 years. Therefore, he provides a lot of research and support for our investment portfolio.

Foresight News: South Korea, Japan, the European Union, the United Kingdom, the United States, and many other countries worldwide are formulating regulations on cryptocurrency. As a venture capitalist, how do you view cryptocurrency regulation?

Baek Kim (Hashed): I have been working in San Francisco recently and have not directly participated in the cryptocurrency regulation work of any specific country. However, our team in South Korea does collaborate closely with educators, evangelists, managers, 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 persistent efforts to achieve meaningful progress.

Three, “The Asian market will be the main force driving the next bull market”

Foresight News: From your personal experience, what differences do you see between the US market and the Asian market?

Baek Kim (Hashed): There are significant differences between Asian countries and Southeast Asian countries, making it difficult to generalize. The same applies to African countries, as they also differ from one another. However, from our perspective, the US market and the European market have been driving development and innovation in many fields, especially innovations centered around Ethereum.

The Asian market has primarily focused on speculation and retail trading, with significant trading volumes in spot trading and leveraged trading. However, as more infrastructure builders and project teams emerge in Asia, this situation is gradually changing. We believe that as our market matures, there will be more groundbreaking innovations happening in the Asian market, particularly in the next market expansion, which will be driven mainly by the Asian market in 1 or 2 years. This will come from emerging super applications or use cases, as well as different experiments and iterations, which are already happening.

I believe the US will remain the largest financial market, as well as the largest market in terms of purchasing power and VC. It will continue to set the tone for VC investments, financial laws, 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 have found noticeable differences between American and Asian founders. Like Europe, the US is more focused on Crypto Native protocols, with many projects related to privacy, scalability, consensus, and cross-chain. Asia, on the other hand, pays more attention to DeFi, gaming, NFT, and consumer applications. We believe this situation will continue because it is challenging for the US or European markets to launch any consumer-oriented applications.

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

Baek Kim (Hashed): It is very similar, but I believe South Asian entrepreneurs are more proactive. They are willing to try and challenge all unknowns without seeking permissions or worrying too much about regulations and consequences, as in Japan, South Korea, or China.

Therefore, I believe this has driven a lot of practical construction, let’s see what will happen. In general, in the long run, the purchasing power and GDP growth rate of most countries in South Asia will be much faster than 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 South Korea? What do project parties and ordinary users who want to enter the South Korean market need to be aware of?

Baek Kim (Hashed): For many Web3 teams, companies, or protocols, the South Korean market is straightforward, but it is difficult to get a share here.

There are many reasons, such as language barriers and intense international competition. Traditionally, the South Korean market is very unique. It is one of the few places where international companies from the United States do not dominate the local market, whether it is automobile companies, smartphones, televisions, music, or internet browsers like Google. They cannot really gain traction in South Korea. At least for South Korean users, internet service providers’ services are much more complex. E-commerce platforms like Amazon do not work in South Korea. South 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, Coupon, which only provides services in the South Korean market, is listed on the New York Stock Exchange with a market value of about 60 billion USD.

This is a quite interesting market because it is one of the few countries in a highly concentrated small region that has multiple unicorn companies. This means that South Korea concentrates funds, education, and training time in the technology field. I think that’s why many Layer1, gaming, or cryptocurrency protocols find South Korea straightforward compared to other markets because it is clear who you need to do business development (BD) with. Nexon is one of the largest game publishers and has turned its main game, MapleStory, into a Web3 game with over 100 million active users.

All Layer1 protocols are competing. SK is one of the largest conglomerates and it wants to move some loyalty programs and cashbacks to Web3. Krafton and Battleground also want to do something with Web3, and all public chains are competing for this. Samsung has wallets and phones, which also attracts competition from many public chains. Therefore, the target for BD is very clear, and you can expect a good economic return. In many other markets, you have to explore in preaching and cultivation, and the ecosystem is a very, very long game. But in South Korea, companies can directly convert into BD customers. So, that’s why many Layer1 founders like Solana, NEAR, Avalanche, Polygon, zkSync, etc., frequently visit South Korea for BD.

Another part is the bottom-up process, where technical talents and highly educated talents are shifting towards Web3, trying to persuade, educate, and encourage them to build on top of these protocols or join as team members. In the past 4 to 5 years, many talents have been limiting themselves and have been more observers of the crypto industry. For example, even including the older generation and the younger generation, everyone knows about cryptocurrencies and Korean native tokens, but there are not many full-time workers in the crypto industry. I believe this situation is changing now, and we are beginning to see more real talents joining this industry, not just as retail cryptocurrency investors. So I am very optimistic about this, although there is still a long way to go, I have confidence that we are moving in the right direction.

In terms of regulation, it is still an opaque gray area, 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 this does not mean that Korea is an easy market for foreigners or crypto projects to enter, as Korea is one of the most heavily regulated countries in terms of capital inflow and outflow, currency inflow and outflow, and venture capital.

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

IV. Change and Invariability: The Future of the Industry in Hashed’s Perspective

Foresight News: What is Hashed’s investment methodology? How has it improved in 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 when we first started. When we invest with 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.

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

Overall, in the past six to seven years, we have been constantly adjusting, making mistakes, learning, and continuing to grow as investors. In addition, although the founders are all engineers and entrepreneurs, we are now able to hire top talents globally. Therefore, we have recruited many technical and financial talents in places like the United States, Korea, Singapore, or India, which allows us to better collaborate as a team and build a stronger platform.

This is the overall change in structure. 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 and our belief in the large-scale adoption of Web3. We always focus on excellent entrepreneurs and have long-term cooperation with them for 5 to 10 years.

Our investment philosophy is based on three assumptions about the market: First, all assets will eventually be tokenized. Second, humans will have more social interactions in digital form. Third, decentralized organizations will last longer and be larger than existing organizations. 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 from last year to now, and what specific tracks and areas 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 local employees to better support the founders we work with. In terms of investment focus areas, we have always focused on infrastructure and gaming. Gaming is not necessarily because we like playing games. More importantly, we believe that gaming is the best way to achieve large-scale adoption of cryptocurrencies and blockchain infrastructure. Because we believe that more LPs and content are the way to achieve large-scale adoption, we believe that games provide the best content and LPs for the next decade. If you pay attention to many growing younger generations, Gen Z and Gen Alpha, you will find that the popularity of superheroes like Superman is declining rapidly.

Today, many new animated films are made using game character IPs. 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 billion people’s large-scale adoption. Now, I think the only content in the cryptocurrency 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 consumption. But we hope to promote the development of the cryptocurrency industry and infrastructure through games and IPs.

Foresight News: In which aspects do you think the competition and growth points of future public chains will be reflected? What are the reasons for your optimism about public chains?

Baek Kim (Hashed): I am still very optimistic about public chains, but the actual adoption results are somewhat disappointing compared to expectations. I believe that public chains should play a role like game publishers, providing infrastructure, market promotion, ecosystem support, and so on. However, the challenge lies in how to coordinate and maintain this complex business model, as many public chains rely on inflation incentives to drive and support capital inflows, thereby attracting users and developers.

I believe the reason is the lack of real demand to build use cases and the choice of infrastructure that only applies to millions of people or certain types of mechanisms.

This situation is not uncommon, as most blockchain games have been impacted by marketing and brand competition. Therefore, it is hoped that in the current bear market, there will be many technological innovations that can solve the problems we have already realized. In the next cycle, we can focus more on specific use cases, specific industry categories, and see how successful projects are built on public chains. I believe that the economic value on top of the infrastructure should be greater than the valuation of the infrastructure itself (for Layer 1). 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 greater. In comparison, in today’s public chain market, the public chain’s Fully Diluted Valuation (FDV) is much larger than 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 attendance at EthCC in Paris, I found that many people were excited and believed that the bull market was coming soon. But I am a bit worried because everyone seems to be getting excited too early. The market is not mature yet, and there have been no substantial changes. I am quite pessimistic about the current market because it largely depends 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 participating in Crypto, but most industry conferences forget this mission and are basically internal gatherings of Web3. So, how do you encourage and help non-Web3 users to enter the Crypto and Web3 field?

Baek Kim (Hashed): I like to convey new ideas and thoughts. Our focus is not limited to Web3 only; robots, healthcare, and AI are also hot topics today. Personally, I just want to do my best to do something insignificant or collaborate with committees around me.

Therefore, I have guided and sponsored many blockchain clubs in universities and colleges. Three to four years ago, when the blockchain club at my alma mater, Carnegie Mellon University, was just established, it had only 5 to 10 members. But now it is one of the largest clubs with a registration of 200 people. I have 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 a similar situation.

Many of my former colleagues, bosses, and mentors come from a gaming background. Amazon is also very interested in this area. So here, I am just someone people think I know someone who has been involved in cryptocurrencies for a while, although I don’t know exactly what he does, but when they start their first learning journey or learn about Crypto for the first time, I should probably proactively contact them because I am really 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 work for 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 this round of financing. So, I am glad to be able to help some of the people who helped me in the early stages of my career.

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