In emerging markets, we focus on necessities, must-have items: Tak Lee

Venture capital firm Hashed Emergent's CEO Tak Lee on why India's Web3 startups are building necessities, not luxuries

Tak Lee, chief executive and managing partner of Hashed Emergent, the venture arm of South Korean blockchain investment firm Hashed, is backing Web3 startups across India and Africa at a time when crypto regulations remain uncertain and investor enthusiasm has cooled. Unlike developed markets focused on digital collectibles and speculative projects, Lee's fund targets infrastructure, decentralised finance and enterprise blockchain solutions addressing real-world needs in emerging economies. In a face-to-face interview with Peerzada Abrar, Lee discusses his firm's 20-plus Indian investments, how it underwrites regulatory risk, and why institutional adoption signals blockchain's mainstream arrival. Edited excerpts:

 

Hashed Emergent backs Web3 startups in emerging markets. How many Indian companies have you invested in, and what specific sectors are you bullish on—DeFi, gaming, creator economy, enterprise blockchain?

 

We've done over 20 investments in the last four years. India is known for a very diverse set of domains. Our portfolio here is distributed across infrastructure, entertainment and finance.

 

You operate across Bengaluru, Lagos, Dubai and Seoul. What unique Web3 opportunities exist in emerging markets that don't exist in the US or Europe? Why is India a priority?

 

The difference between our target markets and markets like the US or Korea is that many projects coming out of developed markets are more good-to-have or luxury items like NFTs (non-fungible tokens) or similar things.

 

But in emerging markets, we focus on necessities, must-have items.

 

For example, creating a wallet in a country where 90 per cent of people already have credit cards versus creating a wallet in a country where a major portion of people are unbanked—what impact will it have?

 

People in newer generations will enjoy much more wallet access that you can get only with the internet than traditional banking access.

 

Another is exchange rate volatility. In countries where exchange rates fluctuate, people want to hold money in stablecoins. These are must-have hedging instruments they need.

 

India's crypto regulations are uncertain, yet you're investing heavily in these markets. How do you underwrite regulatory risk, and what returns do you expect given these headwinds?

 

Our main job is not to predict when regulators will change their mind. As a fund, we have the longest fund life globally—a 9 plus 1 plus 1 year fund life, which is the longest in the blockchain industry. Our job is to incubate the ecosystem while keeping risks under control.

 

Out of these 20-plus investments, only one company is domiciled in India and the rest are domiciled outside the country.

 

Web3 on-chain markets don't have borders. Even though the team and leaders may be here and we meet them in person, their target markets may not be Indian users.

 

So we mix our portfolio. Some startups focus on on-chain markets from day one. Some still focus on Indian markets from day one, depending on their business model. We try to have a diverse spectrum of portfolio companies. That's how we underwrite regulatory risk.

 

That's also why we have more than four or five investments in the US—all Indian teams—but they target global on-chain markets from day one. We are still in the deploying phase and it's too early to talk about returns.

 

After FTX's collapse and the 2022 crypto winter, limited partner (LP) appetite for crypto VC funds cooled. How has fundraising been for Hashed Emergent, and are LPs still bullish on emerging market Web3?

 

FTX was a big event, but I think the bigger event was ETF (exchange-traded funds) approval. Bitcoin ETF trading in the stock market, Stablecoins Act, Comprehensive Crypto Act, and so on.

 

FTX was unfortunate, but blockchain as an industry is really stepping up. That’s why we have more institutions coming in.

 

Stablecoins are a no-brainer product with strong product-market fit. Blockchain is entering the mainstream.

 

What does Hashed Emergent provide portfolio companies beyond capital?

 

We provide business strategy, research, recruitment, CFO-as-a-service. We provide business strategy, research, recruitment, CFO-as-a-service. Even post-token launch, treasury management is a big part. We usually have many more headaches than a typical Web2 fund.

 

What are the biggest obstacles Indian Web3 founders face? How are you helping them navigate these?

 

Regulatory ambiguity, lack of local VCs, and crypto-banking infrastructure are all bottlenecks in a big way.

 

Regulatory ambiguity is the biggest one because it causes many other issues. Local VCs are hesitant because of regulation.

 

We help by giving founders access to offline dialogue early on, but you can't guarantee that what you hear offline will reflect in policy tomorrow.

 

So we help them hedge risk by sharing case studies. We advise them to target other markets first before the Indian market opens up.