Partner of South Korea’s largest crypto fund Hashed All assets will eventually be tokenized, and the next bull market will be driven by the Asian market.
Partner of South Korea's largest crypto fund Hashed All assets will be tokenized and the next bull market will be driven by the Asian market.
Interview: Fiona, Foresight News
Editing: Kean, Foresight News
Translation: Peng SUN, Foresight News
TL;DR
1. 60% of Hashed’s investments are in Asia and 40% in the United States, with only a small portion in Europe or Africa. The main focus is still on the United States and the East Asian time zone.
2. Hashed was founded in early 2017 with an initial capital of only $600,000. The team consists of engineers and founders who have never worked in crypto VC or finance before.
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3. Prior to its first fundraising at the end of 2020, Hashed had been investing with its own money, and this investment tool is still managed today. This approach ensures that when the invested projects appreciate, Hashed does not have to return funds to them like many LPs, so its balance sheet is very impressive.
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 true 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, but the results are very good.
6. Hashed communicates with its invested projects through Telegram, email, or phone on a weekly or even daily basis, 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 and hired Yongbeom Kim, former Deputy Minister of Economy and Finance of South Korea and former Chairman of the Financial Services Commission, to provide macroeconomic and policy research support for 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, which will be primarily driven by the Asian market in 1 to 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 worrying too much 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 have more digital interactions. Third, decentralized organizations will last longer and be larger than existing organizations.
11. Currently, the FDV (Fully Diluted Value) of public chains is much greater than the actual business value generated on these chains. It is hoped that technological innovation 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 said that it is difficult for foreign cryptocurrency companies to get a share of the Korean market. This is because of the language barrier, intense international competition, and the strict regulations on capital, currency circulation, and venture investment in Korea. However, the opportunity lies in the fact that the Korean market does not require preaching, and companies can directly convert into BD customers.
When it comes to the blockchain industry and cryptocurrency market in Korea, what comes to mind?
“Kimchi premium”? Terra’s collapse? “That guy” DK? Or the upcoming annual Asian blockchain event KBW next month? In fact, compared to these, Hashed, a major player in the Web3 world that is often overlooked in the Korean market, is worth knowing and remembering.
Hashed is a crypto VC founded in 2017. None of its founders have previous VC experience, but it has developed from a small company with only $600,000 in capital to a top-tier global crypto venture capital firm. 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. In the past year, Hashed has been gradually recovering and actively exploring emerging markets and seeking new opportunities. So, what kind of organization is Hashed? What has it been focusing on in the past year or two? What are their views 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 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 perspective, and their firm belief in the widespread adoption of crypto in the future. Before KBW2023 is officially held, let’s follow the story of Hashed to get a taste 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 address the time difference?
Baek Kim (Hashed): We have approximately 30 employees responsible for the operation of investment tools, and we are all located in offices in 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 our projects are in Asia, 40% 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 currently 8:00 AM in Korea, it is 3:00 PM in San Francisco or Los Angeles where I am. This means there is enough overlap for internal communication during lunchtime in Korea or Singapore. We use other time periods for external meetings or personal research, etc. Therefore, if we add meetings with time zones like Europe, we will definitely need to make some changes. But so far, our communication methods have been working well. Of course, we have a team in different time zones to handle different things. This arrangement ensures coverage of various markets and provides services to the portfolio 24/7 in case of emergencies in the market or within 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. At first, Hashed was more like an angel team composed of engineers and founders because myself, Simon, and Ryan were all engineers and founders before. We initially 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 hosted events and technical lectures for them, providing them with help in the 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 also made investments because we believed we could handle most of the funds better. At that time, there were only a few funds, and Polychain hadn’t really been established yet. So, for us, it was a suitable time to build a platform. Because as angel investors, we couldn’t scale up, but we believed that a fund platform and brand like Hashed would be globalized.
That was the starting experience of Hashed. As you know, when we established the fund, we only had a capital of $600,000. Because we were all engineers and founders, we had never worked in crypto VC or the financial field before. We didn’t know how to establish a venture capital fund or even a cryptocurrency 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 a single dollar.
Therefore, before raising money, our main investment tool was still the fund we manage. But this also means that when the invested projects appreciate, we don’t have to pay them back 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, not just investing and waiting for the company’s return or growth.
UNOPND was 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 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 that is developing an MMOFPS game, which is a multiplayer online FPS shooting game for the general public, and this game 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, and so on.
Modhaus previously selected its first music video through DAO voting, with a participation rate of about 37%, and the number of views on YouTube reached about 32 million within a day or two. Therefore, we have long been very interested in IP content within 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 form a positive feedback loop, that is, to build distribution channels and achieve consumer adoption and entry into the market. We are providing support for infrastructure builders to create real 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.
Initially, we didn’t 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 with a focus on emerging markets, located in Bangalore, India, with investment sizes typically ranging 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 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 invested 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 allow us to grow faster. Obviously, this is a very challenging task, and the probability of successful investment may be low, but we hope to enter these markets as early as possible, just like participating in local meetups in the early days of the crypto market.
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 the local community. There are many narratives on Twitter about emerging crypto markets, but I don’t think anyone is really getting involved, especially funds, even though they claim to want to support these founders and regions. This is our first step, and although it’s still in the experimental stage, it’s been very effective. 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: Besides direct investments, how does Hashed typically empower the projects it invests in? What methods are used to help these projects achieve growth from 0 to 1?
Baek Kim (Hashed): As a Web3 investor, I believe many areas are continuously evolving. Because when Hashed was founded, we believed we could help people understand token economics, the technology behind 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, the first step 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 to stay up to date. That’s why we have a sizable platform team, not just an investment team. The platform team not only considers technology and product design but also team building and how to enter the market. This depends on whether the project is infrastructure-oriented or application-oriented. If it’s Layer1, there are quite a wide range of market entry methods when building the ecosystem and economy. If it’s an application layer project, it may focus more on consumer feedback, market competition, and so on, similar to Web2.
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 and 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 because risk investments 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, not because of policy changes that lead to short-term thinking and difficulties in adjustment later on.
We currently have four lawyers. These lawyers may not necessarily be lawyers in the crypto field, but they work closely with our founders. Obviously, we cannot provide clear legal advice, but we can help them find direction 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 Korean Ministry of Economy and Finance. Yongbeom Kim has served as the Chairman of the Financial Services Commission in Korea and during the bull and bear markets in 2017 and 2018, he was responsible for writing guidelines and monitoring the financial market. So he joined us full-time, not as a part-time consultant. Yongbeom Kim has done a lot of macroeconomic research and has 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 other countries worldwide are all formulating regulations on cryptocurrency regulation. 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 perseverance to make meaningful progress.
III. “The Asian market will be the main force driving the next bull market”
Foresight News: Based on your 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 different, so it is difficult to summarize. African countries also vary from each other. However, from our perspective, the US market and the European market have been driving the development and innovation in many fields, especially innovations centered around Ethereum.
The Asian market has always been dominated by speculation and retail trading, with a large volume of spot and leverage trading. However, as more infrastructure builders and project teams emerge in Asia, this situation is gradually changing. We believe that as the market matures, the Asian market will see more groundbreaking innovations, 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 that the US will be the largest financial market and 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 distinct differences between US and Asian founders. Like Europe, the US focuses more on Crypto Native protocols, many of which are projects related to privacy, scalability, consensus, and cross-chain. Asia, on the other hand, pays more attention to DeFi, gaming, NFTs, and consumer applications. We believe that this situation will continue because it is difficult for the US or European markets to launch any consumer-oriented applications.
Foresight News: How do you view the overall situation in the Southeast Asian market?
Baek Kim (Hashed): It is very similar, but I think South Asian entrepreneurs are more proactive. They are willing to try and challenge the unknown without seeking permission or worrying too much about regulations and consequences, as is the case in Japan, South Korea, or China.
Therefore, I believe this has driven a lot of actual construction, let’s see what happens. 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? Any reminders for project parties 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, 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. It is one of the few places where international companies from the United States do not dominate the local market. Whether it is automotive companies, smartphones, televisions, music, or internet browsers like Google, they cannot truly succeed in the Korean domestic market. At least for Korean users, the services provided by internet service providers are much more complex. E-commerce platforms like Amazon cannot operate 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, although Coupon only provides services in the Korean market, it is listed on the New York Stock Exchange with a market value of about 60 billion US dollars.
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 Korea has concentrated funds, education, and training time in the technology field. I think that’s why many Layer1, gaming, or cryptocurrency protocols find it straightforward and direct compared to other markets because it is clear who you need to do BD (business development) with. Nexon is one of the largest game publishers, and it has turned its main game into a Web3 game called MapleStory, which has over 100 million active users.
All Layer1s are competing. SK is one of the largest conglomerates, and it 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, which also triggers competition among many public chains. Therefore, the target for whom you need to do BD is very clear, and you can expect good economic returns. In many other markets, you have to explore in both evangelism and cultivation, and the ecosystem is a very long game. But in Korea, companies can directly convert into BD customers. Therefore, I think this is why many Layer1 founders such as Solana, NEAR, Avalanche, Polygon, zkSync, etc., 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 convince, 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 limited themselves and have been more observers in the crypto industry. For example, even people from older and younger generations, including grandmothers, are aware of cryptocurrencies and local Korean tokens, but there aren’t 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 this industry, not just as individual crypto investors. So, I am very optimistic about this, although there is still a long way to go, I am confident that we are moving in the right direction.
In terms of regulations, 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 for Web3.
However, this doesn’t mean that Korea is an easy market to enter for foreigners or crypto projects because Korea is one of the countries with the strictest regulations 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 active now.
IV. Change and Unchange: The Future of the Industry in the Eyes of Hashed
Foresight News: What is the investment methodology of Hashed? How has it been 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 were first established. When we invest with our own money, although there is a high financial risk internally, we can take full responsibility and obligation for the results and make more decisions for ourselves.
But things are different when you have an LP in your venture capital fund. We raised $120 million in our first fund in December 2020 and another $200 million in December 2021. Most of our LPs are public companies, large conglomerates, and international companies, so there aren’t many individuals or founder funds to operate the business. Therefore, this is a significant responsibility with both authorization and limitations.
Overall, in the past six to seven years, we have continuously adjusted, made mistakes, learned, and continued to grow as investors. In addition, although the founders are all engineers and founders, we are now able to hire top talent globally. Therefore, we have recruited many technical and financial talents in places like the United States, Korea, Singapore, or India, allowing us to collaborate better as a team 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, our belief in the mass adoption of Web3. We always focus on excellent entrepreneurs and have long-term collaborations with them for 5 to 10 years.
Our investment philosophy 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 way. Thirdly, 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 undergone major 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 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 mass adoption of cryptocurrencies and blockchain infrastructure. Because we believe that more LPs and content are the way to achieve mass adoption, we believe that gaming provides the best content and LPs for the next decade. If you pay attention to many emerging generations such as Generation Z and Generation Alpha, you will find that the popularity of superheroes like Superman is declining rapidly.
Nowadays, many new movie animations are made from the IP of game characters. 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 wave, it will create mass adoption for billions of people. Right now, I think the only content in the cryptocurrency industry is price fluctuations. What you consume and see is just candlestick charts. I think many people spend their time on exchanges or similar businesses, rather than actual consumer spending. But we hope to promote the development of the cryptocurrency industry and infrastructure through gaming and IP.
Foresight News: In your opinion, what are the competition and growth points of future public chains? What are the reasons for being optimistic about public chains?
Baek Kim (Hashed): I still have a very positive view on public chains, but the actual adoption results have been somewhat disappointing compared to expectations. I think public chains should play a role like game publishers, providing infrastructure, marketing, and 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 inflationary incentives to drive capital participation in a human-driven manner, attracting users and developers.
I believe the reason for this 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 already been impacted by marketing and brand competition. Therefore, I hope that in this 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 and specific industry categories to 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 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 greater. In contrast, in today’s public chain market, the FDV of public chains is far greater than the actual business 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 participation in EthCC in Paris, I found that many people were excited and believed that the bull market was about to come. But I am a little 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 macroeconomics and policies, especially in the second half of this year.
Foresight News: One last question, we hope to have more people participate in Crypto, but most industry conferences forget about this mission and are basically gatherings within Web3. So, how do you encourage and help non-Web3 users 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 very popular now. Personally, I just want to do some insignificant things or work with committees around me as much as I can.
Therefore, I have mentored and sponsored blockchain clubs in many universities and colleges. Three or four years ago, when the blockchain club at my alma mater, Carnegie Mellon University, was just established, there were only 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 scholar program at my alma mater, which is a scholarship for students who want to become entrepreneurs. Now, the core members of this club are mainly focused on cryptocurrencies and Web3, and many other organizations and communities I have helped are in similar situations.
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 that people think knows 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 get to know Crypto, I should probably reach out to them proactively. Because I’m really happy to do so.
