Blockchain VC Hashed forecasts emergence of protocol economy

Blockchain-focused venture capital firm Hashed says it is determined to show how pervasive the digital ledger technology is in our society – through investments. 

Despite having what some considers a niche investment area, Hashed is a major industry player by funding size. Its assets under management (AUM) exceeds 400 billion won ($324 million.) 

Late last year, the company created Hashed Venture Fund II worth 240 billion won. A number of conglomerates and game publishers invested in the fund, including Naver Corp., Krafton Inc., Wemade Co., SK Inc., LG Corp., Com2uS Corp., fashion labels F&F Co., and Musinsa Co., as well as entertainment juggernaut Hybe Co. 

Prior to founding Hashed in 2017, CEO and managing partner Simon Seojoon Kim cut his teeth in the South Korean venture capital ecosystem by building and selling a couple of technology startups. The name Hashed comes from hashing, the process of translating a given key into a code in programming. 

Kim co-founded edutech startup Knowre, which got acquired by one the largest education companies in Asia called Daekyo Co. He was also involved with Next Match, the operator of a popular dating app dubbed Amanda. Fashion company Meta Labs bought the developer in 2018 in an effort to strengthen its online operations. 

As a graduate of the prestigious Seoul Science High School and having majored in computer science at the Pohang University of Science and Technology (POSTECH,) he was exposed to the concept of cryptocurrency from early on. 

Kim got the conviction that digital assets will become the future of currency when one of the co-founders of Ethereum, Vitalik Buterin, visited South Korea in 2015. That is when 1 ether was worth a dollar, as opposed to $2600 now. 

In March 2018, SoftBank Ventures Asia recruited Kim as a partner.

PROTOCOL ECONOMY

During an interview with The Korea Economic Daily, Kim forecasted the world will enter what he dubs a protocol economy from the current platform economy. 

As it stands now, an entrepreneur defines how his company will be run and evalutes the members accordingly. In the future, everyone will be able to enjoy the fruits of their labor in a decentralized system based on their levels of contribution, he explained.

“In a platform economy, an employee gets compensated by the upper management’s arbitrary regulations – regardless of how hard he or she has worked,” Kim said. “But in a protocol economy based on Blockchain, the revenues are fairly distributed in accordance with regulations coded by computers.”

Kim elaborated that on platforms like Coupang, Baedal Minjok by Woowa Brothers Corp., and Google’s YouTube where there are blurred lines between producers and consumers, everyone in the ecosystem is contributing to the platform's construction.

“To give stock options to the right people, multiple people in the finance team have to work on contracts,” Kim said, adding that the digital ledger known as Blockchain can omit the need for such steps.

The type of startups that Hashed is looking to invest in are: Those that show rapid growth potential with the adoption of Blockchain; help shape the future of the financial ecosystem; and create value in the cyberspace. 

A case in point is PSX, an operator of unlisted stock trading platform. Hashed invested twice into the startup that claims to make it easier for angel investors and accelerators to sell their capital and safer for investors of unlisted stocks.

Hashed is pursuing an alternative exchange in the port city of Busan with PSX, much like the Long-Term Stock Exchange (LTSE) based in Silicon Valley. 

“Even though unicorns are emerging up left and right in South Korea, not many of them are looking to get listed on the Korean bourse,” Kim said. “It makes sense that there should be an exchange for people who understand the startup ecosystem.”

One of the newer investments for Hashed is a corporate card issuer named Gowid.

Despite having innovative business models, a lot of startups struggle to get corporate credit cards prior to generating revenue. The real opportunity for Gowid is data.

“The credit data of startups will be a big advantage in understanding and developing the startup ecosystem,” said Kim.

BELIEF IN BLOCKCHAIN

Hashed will continue to focus its investments in Blockchain startups.

Kim’s aim is for the traditional conglomerates that have invested in the Hashed funds to learn the Blockchain model and distribute it far and wide. 

“When we launched the blockchain venture fund, the most common response was that it would narrow down the scope of investment too much,” he recalled. “That was the same response that VCs that invested in internet companies had to hear back in the early 2000s.”

Just as we do not describe a company as an internet company anymore, the Blockchain sector will also do away with such a label, said Kim. The premise is the digital ledger technology will be so pervasive that adding the word blockchain would not add value to the description. 

Kim is hopeful that South Korea's new President-elect Yoon Suk-ryeol will bring fresh perspectives to the digital asset industry. 

The former prosecutor said he will allow domestic issuance of cryptocurrencies and establish a government agency dedicated to promoting the digital industry. Yoon said the Seoul agency will work as a control tower for cryptocurrencies and non fungible tokens (NFTs.)

"Even though South Korea has formiddable legacy as a digital powerhouse, the Blockchain industry's development is being stalled by regulations," said Kim, adding that he hopes for deregulations to keep up with global trends.

Write to Jong-Woo Kim at jongwoo@hankyung.com
Jee Abbey Lee edited this article.