Hashed’s Value Add: Financing and Beyond
Genesis
Investors who believe in the disruptive potential of blockchain have put their money into the blockchain space. According to the Boston Consulting Group, blockchain-related venture capital funding reached $3 billion in 2018, from about $1 billion in 2017. However, a sharp price drop in major cryptocurrencies (including Bitcoin), as well as hacking, frauds, and other disappointing news have led to doubts about whether the industry can even have tangible results and survive in the long run.
Fighting these headwinds, blockchain companies and their investors must work together to reveal the true value of the technology. Of course, it will take some time proving what benefits this could bring to us, just like it took some time for the internet to prove its worth and to gain massive influence in many (perhaps all) different industries.
The Truth
Hashed strongly believes that blockchain technology will change the way we live our lives, as the internet has done in the past. However, many blockchain projects have not achieved the goals stated in their white papers so far. According to research, almost 92% of blockchain projects have already failed.
One of the most significant reasons for their failure is the lack of pragmatism. We see a lot of blockchain projects that are either too idealistic or philosophical about what they want to achieve. An original set of values is a must for any great founder, but it is important for founders (whether they are in blockchain or not) to remember that they have to focus on building three important things: product, business, and company. Blockchain startup founders have done a good job of conceptualizing products, but many of them have failed to come up with proper roadmaps, detailed strategies/execution plans, and a strong team to develop sustainable business models and build an enduring company.
Our portfolio companies have great ideas and strong technology. There is, therefore, no doubt that they will be able to build excellent products/services. However, many of them struggle in recruiting top talents, marketing, finding partnerships, etc. to improve their business. The success of a business relies not only on technology, but also on various other aspects.
In realizing the innovation of our portfolio companies, we believe that the most significant way to do so is through value-add, or providing additional services to portfolio companies besides capital. Accordingly, we have established a Growth Team within Hashed that provides three core values to portfolio companies ensuring successful execution of their business and vision.
- Recruiting
- Community & Networks
- Tech & Operations
Now, let’s take a closer look at what some of those values are and how we are actually delivering them with some of the case studies.
Recruiting — Human Capital
The blockchain industry is certainly growing, and it needs more people to join in order to scale. For instance, according to Cointelegraph, a blockchain-focused media, global demand for blockchain engineers has gone up by 517% compared to the previous year.
However, this still does not sound agreeable yet to many blockchain companies since big and well-known enterprises with blockchain arms are the ones actually attracting most of these great talents. On top of this, people are still afraid of jumping into a new industry where everything seems ambiguous. As a result, blockchain startups struggle to find the right talent in this challenging job market.
Hashed recognized the problem and started providing solutions for portfolio companies with the following two powerful components.
1. Evangelizing: Inspiring people is never easy, but when it does, people follow. As mentioned above, the blockchain industry is in its early aughts, and many aspects of the business remain ambiguous, which serves as the biggest deterrent for people thinking of joining the industry. To solve this problem, Hashed, as one of the leaders in this space, aspires to educate people about blockchain and to share our vision from different perspectives. In this respect, we have hosted more than 30 events and published around 40 articles to give people a better understanding of what we see in the blockchain ecosystem. Those who hear us start studying on their own and showing great interest. A few even want to move into the blockchain industry. As a result of these efforts, we now have more than 6,000 people within our community who are strongly motivated and enthusiastic about blockchain. And we understand that many of them are potentially valuable candidates for our portfolio companies.
2. Recruiting Expert: We at Hashed truly believe that people are the most valuable assets for the success of portfolio companies. Acting on this belief, our Growth Team is closely working with a professional recruiter who has experience in both startups and large corporations. With profound knowledge in HR as well as blockchain, he has a keen eye for the right talent and is capable of motivating vacillating job candidates. At the same time, he also provides assistance to companies with HR consulting and counseling, which in turn helps him figure out exactly what they need.
Patty McCord, a former Chief Talent Officer at Netflix, states in her book Powerful:
“Building the muscle to hire great people is a huge competitive advantage”
Until our portfolio companies can build it themselves, Hashed is this muscle.
Community & Networks — Marketing
Marketing is an essential part of the business. Even if a company has a great product, it can never be successful without a proper marketing strategy on how to sell the product, how to attract users, and more. And this is certainly difficult work.
Blockchain startups face even more obstacles when establishing their marketing strategy because marketing for blockchain startups is much more complex than that of others. Blockchain startups need to simultaneously target users, developers, investors (token holders), and node operators, sometimes globally, from day one. We at Hashed recognize this challenge, and as such, help our portfolio companies in attracting each group.
One example is how Hashed has supported its portfolio companies to engage users for their products/services. There are two main obstacles to be found here:
- Market Size
- Expertise
Market Size
In the dapp (decentralized application) market, there are fewer than 500,000 users. In terms of active users, this number is even lower. The dapp market is growing rapidly; however, it is still an extremely small market compared to the traditional app market.
“How long will it take for blockchain?”
Mass adoption is what the industry really needs in order to attract more users, as the internet has done successfully a few decades ago. One of our endeavors in making this happen has been a collaboration with Klaytn (Kakao) and LINK (LINE). Kakao and LINE are the two biggest mobile platforms working on blockchain.
Hashed is a lead investor for Kakao’s public blockchain project Klaytn. Kakao is the dominant messenger in Korea with 50 million users and a 96% market share. Hashed also invested in LINK, the blockchain project created by LINE. LINE is a global messenger service with over 700 million users throughout Japan and Southeast Asia.
Hashed believes that both Klaytn and LINK can create footholds for mass adoption in the blockchain industry through their existing user base, partners, and business channels. And this can surely benefit some of our portfolio companies that want to access a broader user base.
Expertise
Companies in any industry have long been encouraged to build their marketing expertise. As a result, there are many captivating strategies, everything from offline event/promotion to data-driven performance marketing. However, this has not yet been the case for the blockchain industry.
For instance, Facebook and Google, the two giants of digital marketing, sometimes do not allow blockchain companies to run marketing campaigns/ads and sometimes even ban them. Moreover, many marketing agencies are also worried about getting into space and thus do not offer their services to blockchain companies (even if they do, services are very limited). One reason for this is that the industry has drawn heavy criticism, and they do not want to step on the toes of regulators and policymakers. There are thus hardly any rules regarding the marketing activities of blockchain companies, and the situation looks dire.
“Desperate diseases must have desperate cures.”
Our professional marketer within the Growth Team at Hashed has been hands-on with our founders to build suitable marketing strategies that they can quickly foster and apply. One idea is that they should focus more on working with wallet providers, dapp ranking sites, and, most importantly their (wallet providers and dapp ranking sites) communities rather than trying to find ways to use platforms like Facebook. Of course, Facebook has a massive number of users who could potentially become users of blockchain technology when the time finally comes (the era of mass adoption). However, in the current climate, we are dealing with a niche target who already understands blockchain and has no problem with using crypto. Therefore, we have concluded that wallet providers, dapp sites, and their communities could help portfolio companies to meet their target more effectively.
In pushing that forward, Hashed now works closely with combining more than 20 wallet providers and dapp sites. And the size of their total communities including Telegram, WeChat, Bihu, Medium, etc. exceeds 200,000. Also, by creating distinctive plans for each one of them (e.g: message, design, frequency, collaboration, etc), we were able to suggest suitable marketing approaches for our portfolio companies, and some of them actually delivered outstanding results. For instance, Nod Games (Crypto Sword and Magic), one of our blockchain game portfolio companies, applied this strategy and has become the number 1 game on EOS blockchain.
We are constantly optimizing marketing expertise to help our portfolio companies as the industry changes rapidly and believes that Hashed will gain ground on them.
Tech & Operations — Token Economics
The internet has birthed the theory of “Digital Economy”. Great founders have quickly adopted this idea and changed how people spend and earn their money. For example, Jeff Bezos created Amazon and reshaped how people purchase goods. According to TechCrunch, Amazon takes up almost 5% of retail revenue in the U.S. On the other hand, companies like Airbnb and Uber have created ‘Share Economy’ platforms. In the Fintech industry, the P2P lending system was formed and, as a result, people could borrow money without visiting a bank. As can be seen from these cases, because it creates value, designing the economy within the business model is crucial.
Token economics is one of the most important features of blockchain projects. Unlike traditional startup methodology, which founders can launch and modify, token economics is hard to change once it is in place.
Token economics is not just a trendy ICO phenomenon, but a core component of decentralization, blockchain’s most integral concept. Therefore, blockchain companies should focus on factors such as creating value, incentivizing contributors, and distributing tokens when setting up token economics at the very beginning.
However, setting up a token economy is hard work. Therefore, to support our portfolio companies, Hashed has a group of researchers who can provide a deeper knowledge of different token economics. For instance, Hashed’s research team has worked with the Klaytn team (a blockchain project of Kakao) for almost three months in designing their overall token economy and came up with a new concept together called “Proof of Contribution.” With Proof of Contribution, Klaytn will incentivize and stimulate participants in its economy by evaluating contributions and rewarding them accordingly. And this concept has brought on major partners such as LG, Netmarble, Celltrion, etc.
Besides Klaytn, our research team has worked with a number of other portfolio companies including Terra, Contents Protocol, and Carry Protocol. Along with our research team, Hashed will continue to strengthen our knowledge of token economics to maximize the value of our portfolio companies.
Moving Forward
Hashed also provides other kinds of support such as PR services, legal counsel, event hosting, etc. for portfolio companies. As the market grows and becomes more competitive, successful founders and their executives in search of funding will not have to look too hard. However, it is extremely important to note that funding alone does not guarantee success. As a leader of the blockchain industry, Hashed will keep adding a number of different values to portfolio companies. Through value-adding, we believe that Hashed will be able to maximize chances for the success of portfolio companies, achieving tangible results and surviving in the long run.
By Edward Hong, Growth Manager at Hashed
