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Interpretation of Hashed: 5 years, 150 projects, 5700 times income

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How did South Korea's first encrypted VC Hashed come about?

Original title: "700,000 to 4 billion US dollars, how did South Korea's first encrypted VC become?" "

Original Source: The Block Podcast

Original Compilation: TechFlow Deep Tide

You know Hashed?

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

Hashed was founded in 2017 by four engineers from South Korea who spontaneously raised $700,000 to invest in crypto. 5 years on, over 150 investments, their funds under management total over $4B without any external LPs.

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

How did they achieve such rapid growth? How did Hashed grow from $700,000 to $4 billion in 5 years?

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

Summary

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

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

3. The first game produced by the Asian metaverse studio acquired by Hashed is "The League of Kingdoms", which was launched on Terra and has already received red With investment from institutions such as Shanxi Capital, Kim believes that the fun of games is very important, but it has not been discussed enough at present. Only real fun can bring a lasting positive feedback loop.

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

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

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

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

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

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

10. Regarding why investing in encrypted games, Kim said that the largest digital economy is obviously games and e-sports, and games are the largest and fastest growing economy. This could also be a crypto market that could be mass-adopted. It's really cool that people like Axie and the Sandbox team are serious about building games and IPs, rather than focusing on monetizing them.

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

12. Kim They are actively cooperating with the South Korean government and look forward to seeing more and more specific plans put forward by the new leader. South Korea had a chance to become the next crypto hub since '18, only to be swayed by the wrong sentiment from the government. Kim has been working to implement some ideas in the mainstream industry, and the wave of encryption is unstoppable.

The following is the full text of the conversation:

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

Kim: Frank, thank you for the invitation, probably because we were one of the few Invest in Web3 VCs.

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

Kim: Yeah, we have been investing in this field for the past 5 years and travel a lot , and now we have funded more than 100 founders, about 65% of the founders are in Asia, and the other half are mainly in the United States. We try to be local and grow from 0 to 1 with the founders so that we can really understand the local market. In this way, we can help them understand the target audience and help them understand what kind of business model Web3 can really play a role in these areas.

Kim:In the past period of time, a lot of funds have been crossing borders, some from Asia to the West, or there are A lot of the funding went to different jurisdictions like Puerto Rico, now we're doing the reverse, we go where the founders are coming up, we think those people are going to be in Southeast Asia and San Francisco, we've expanded our team in Bangalore, India, and now Four of us were there, three were in Singapore, most of the team was in Korea, and then the rest of the team was in the US. We have seen a lot of bottom-up talent grow, and I like that, many of them, although they don’t have papers or investment from well-known institutions or VCs, have also become new founders, which is very dynamic.

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

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

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

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

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

So soon as you mentioned, we've invested in over 100 founders globally and without any LPs, our funding Grow to over $4 billion in crypto assets, so we still have 100% ownership of the fund.

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

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

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

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

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

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

We realize that there are too many gaps in this industry, we don't want to just be ambassadors and wait for founders to solve these problems, we want to do more and start with Practice the way you actually build a product. We have engineers inside our fund, most of the engineers at the fund are building internal systems or trading systems or counting systems, but we thought, we can do more by having engineers in-house. Then we started thinking about how to create career opportunities for these engineers as they joined a fund. Because I was an engineer too, and a lot of us were engineers, and smart engineers thrive when they're together, not alone, and they're able to do a lot of different special projects.

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

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

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

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

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

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

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

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

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

The reason I care about identity is that when I am an Apm for some project or protocol, the IP address may be leaked, and the problem doesn't end there, sometimes, some Users actually use multiple different wallets to use the same protocol or different strategies. For example, like uidx, you may have different accounts in different wallets to play different projects. For example, in dydx, you can do different leverage or Risk modeling, so when those accounts leave, how do you know if they really left, or just switched wallets? Or are they just consolidating a strategist's wallet? So it's an interesting question.

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

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

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

Kim: I think we're seeing early signs of it, we're starting to see people More net worth in the space than they have in real life, or not backed by real banks in real life, but through crypto tools. What we're trying to focus on in this transition is how do we bring the metaverse into everyday life because when you look at virtual reality or any kind of virtual reality or what it's called an experience, it's event-driven and I It’s saying that people go to see certain concerts in VR, or people go to this particular gallery in VR space, or people keep sending money to be part of a project or an initiative that a brand is doing, or to see history Nubby, this is all great, we do it in life too, right?

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

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

Kim: Nowadays, we can see that there are not many projects specifically for bridges, but I think The main reason is that the premise of connecting different cities is that each city must become attractive enough to attract builders to build highways to connect these cities, because at that time there was a great demand for round trips.

Now is the stage where we start to frame our problem, if you look at SandBox, it's still mostly an empty land and speculative investment activity, we're just Somehow see it working with brands and game studios as they get footage on Sand to build interactive experiences. The bridge will become more and more important as there will be more activity on the Sand, and every builder that facilitates the project will find a way to really make it easier for people to participate, and I think concrete support will emerge as well. But the current bridge experience is already quite limited, and is mainly on the authentication layer of the asset, rather than the actual usage experience.

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

Kim: Yes, another aspect we really think about is these metaphysical token models. For example, thinking about how Uniswap started, in the process I think we have seen the struggle for justice, the role of these tokens and the true meaning of governance tokens. I think the same thing is happening with games and Web3 issues, and many new products I see today are copying the same Token model.

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

Frank:You foresaw the development of this trend a long time ago, basically in any before people. I remember the press reporting that you bet on Axie in 2018, what did you see at the time that no one else noticed?

Kim: I think we're lucky that we made the argument about gaming very early on in crypto funds , and choose to invest our own money in the founders, it's not easy, we do it to really drive adoption of crypto, the reason why we choose gaming as the second pillar, after decentralized stablecoins , because it's really hard to go from digital to offline, why don't we stay in the digital age?

And the largest digital economy is obviously gaming and e-sports, gaming is the largest and fastest growing economy and is very attractive to participants, so we think this Probably a big market for crypto adoption, but all the games you saw in the industry in 2018 and 2019 were very speculative gambling types like Tron Legacy Bats or American Night games, that's not sustainable at all, and if I look back at what we've actually gotten from other funds, I think it gets a lot of questions like why are we investing in games? Why should we invest in Axie, Sandbox? Because these teams came out of nowhere, they weren't in the main target area of the country, and gaming seems to be a small part of the crypto industry, but the Axie team and the Sandbox team are the few that we've come across that are very sincere about building games and IP, rather than someone who cares too much about how to monetize games with crypto, I think it's really cool to see how they've built their community over the past few years.

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

Kim: It's hard to say, we only have 5 years in the encryption industry, every year, Not even a quarter, and there are some unexpected events and events of a different style.

As a fund, we want to maintain plasticity, adaptability and rapid learning. Our main vision is to transfer many assets to digitization and make them tokenized As the amount of capital and economies of scale grow spatially, the question of how we interact with it comes back to identity privacy, and today we say we have 7 billion people in the world, and we can Having 10x the population in the space, that's a much larger population and user base than what we currently have as physical users, and that's something you're going to dig into, actually look like a bigger and more fluid economic activity, What kind of services does a larger population need, or what kind of interactive experiences can we deliver sustainably? That's a slight hint from future signals.

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

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

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

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

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

Korea may be the No. 1 market or the next crypto financial center since '18, but the govt is really taking the wrong sentiment and there's a lot of firepower to fight back, I think a lot of governors are trying to see that again because more commercial opportunities are a huge risk for companies or retail investors and we've been working with Terra especially on our legal team and our finance team A person from the Blue House, we have been doing a lot of work to promote the implementation of some ideas in the encryption mainstream industry.

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

Frank: So who do you think will win?

Kim: It's not an either/or because we are official consultants, There's been a lot of consulting through our studio, so we're actually co-building a lot of these games, we're helping them design a lot of these things, and one of the things I'm really concerned about is they don't really screw these up, Because I don't want them to miss out on an opportunity for an entire country or an industry, like a big game company launching the wrong way, they just kill everyone else's opportunity, we just want to make sure they follow the rules of governance.