Q&A — 1: Primalbase ICO
- “How do you expect to make money by renting out an office space for all time for a token that will only be sold for 3 to 5 bitcoins?”
It’s pretty simple. We expect to use not a new model but a well-established one — a business model of Shared Workspaces, which is successfully implemented by such projects as WeWork, for example. Some people think that they are not “cash flow positive” but they are, and they keep opening up new places. This model works, it is verified, and there is no link to the brand — not only companies that are currently on the market can be successful. This model works because it is meaningful for landlords and for residents. It has proved its self-sufficiency and its economic appeal.
What kind of a problem arises when building coworking and shared workspaces for companies in classic commercial property economy? You initially need to cover capital expenditures and only after that you can start making your business model profitable. However, at the beginning you still have capex and you need to do something with it. You will spend some time offsetting the costs. But what people need is a finished infrastructure, already available services. In order to set them up you need money that you don’t necessarily have. For many projects, this is the problem preventing them from entering the market. Those who may be interesting do not always have the money. You also need to cover initial operational expenditures, capex for repairs and site setup, create a good level of service, a good product level, a good level of marketing. This always needs money at the beginning.
Then the model works in such a way that you get more money than you spend. Otherwise speaking, you have money left. What is very important is that the shared workspaces model works on certain volumes, so in case of Primalbase we are talking about hubs up to 2000 meters — a more or less optimal form when you do have insufficiently reduced risks, but the costs that can be reduced with the volume of the office space are reduced. This is an important point. Moreover, if you have several such places, you cut the costs by scaling. The money that remains you can spend further on opening new locations. Money that will be earned from the tenants will get reinvested in opening new places. The aggregate revenue is such that we collect more money than we need. We cover the current operating costs and the money is still left because we did not initially have a hole created by the capex. We do not need to recover capital costs.
To some extent, raising funds via ICO looks like we just get the money upfront for the services that we will provide later. In reality, it just helps us to form a set of stable tenants, which will help push the project further serving as a certain natural/organic marketing tool. Apart from setting up the infrastructure, we must build a community around Primalbase. If this is not interesting to anyone, if the community is not created, shared workspaces do not work.
With the help of the ICO we are solving two essential problems:
1) We cover the initial capex/opex for the infrastructure and setup of the teams.
2) We build the core community. If you have these two problems solved, you are unstoppable.
Everything is quite simple with 3–5 BTC. We base this amount on the expenditures we need to make to implement our business model. We understand the cost very well in view of the cost of the same product, the same service that are already on the market. The amount of money that people would spend on the same services a year they would spend on our lifetime token.
The price of the token is formed on the basis of two factors:
1) The money we need to implement our project and our business model to reach the required level.
2) And on the other hand, the market dictates this price to us.
We cannot say — let’s sell the token for 15 BTC. It would certainly be more money but the thing is that we do not need more money. The value of PBT that we set (5 BTC) includes contributions from our expenses and the market of current services. We must follow the logic of the market, be present there, fit in so that Primalbase would be attractive to our investors and users.
Now we have a very good balance of what we get, and we can implement this project quickly enough. What does the real estate show? If you have money, you move very quickly. If you have problems with the cash flow, you will have further problems with P&L (profit and loss) and with all the following things.
Subsequently, Primalbase looks quite attractive in the market. To say that 3–5 BTC is expensive is not right — it’s cheap. If you look at what our colleagues from WeWork offer, this is a good price.
You should also keep in mind that Primalbase will have a strong community with the segment focusing on Blockchain projects. We do not confine ourselves to them but if you think of Blockchain, you should think of Primalbase. The value of these contacts, exclusive infrastructure for the Blockchain community is possibly higher but we must be on the market because this project is at the intersection with the real estate and should not be overestimated. We needed a good balance, and we found it — PBT costs 5 BTC.
What is the idea of 3 BTC? We say, guys, we cost 5 BTC — this is the value of PBT. Some people think that it is always more convenient for an end user to cost less — but it is not true. We know that loyalty and speed are good in the current time and for the current project. And we say that we know that 5 BTC is a good price but it can be difficult for some of those we would like to see joining in. For those who know that he or she will benefit, who doesn’t have any doubts and has already made a decision, we would like to make an offer — 3 BTC for 1 PBT on the first day of ICO.
This does not mean that PBT costs less. It is simply a kind of a reward for those who are with us from the the very early start. We want to make them stand out. The level of loyalty is about the community, it’s important.
Those who joined the Primalbase community among the first ones are people who are imbued with our Blockchain ideas — they have some Blockchain projects, and they already know what they are going to do. They invest in themselves.
Moving fast in the project is very important. What is the Blockchain industry? Two months in Blockchain equal 2 years in classic finance now. And we say, guys, we are for the speed. We understand what it is.
2. “Why are you overselling the amount of office space you actually have available to you?”
At the moment only Amsterdam location is available but we are selling capacity. Of course, the amount of tokens we are selling exceeds the capacity of Amsterdam Werf, which is at the proof-of-concept stage. We are showing what it will look like, how it will operate. You can come visit the office at Helicopterstraat 25, 1059CE Amsterdam (please, reserve the time by calling +31 6 58723044).
It also motivates us a lot! If we established Primalbase in all locations, that would mean that we have done everything and we wouldn’t need any investments. If we decided to launch an ICO when all five locations are available, it would cost much more.
Kickstarting with shared workspace model it is crucial to create an infrastructure and community, once it’s done it will create a great cash flow in the long-term. It starts with infrastructure and loyalty — once you have it, you have an established foundation for your project. During an ICO Primalbase sets out to achieve two goals — build infrastructure and community. In our view, ICO is the best way to achieve this.
3. “Why do you need to keep 250 (20% or 1/5th) Primalbase tokens?”
We can create an excellent infrastructure, excellent workspaces, with very comfortable furniture, great kitchen and stuff. But the infrastructure is dead without people. It doesn’t really work without people, it is a multiplier. WeWork now is referred to as an IT project because they are focusing on the IT community, it is a significant revenue multiplier. It is not a real estate project only.
To start working with the community we need to add value. We are aspiring to make Primalbase both a home and Research and Development Laboratory for Blockchain projects. We will give away a part of our tokens (250 PBT) to those who we see as being active Primalbase Ambassadors, to equip them with a freedom to use a service all around the world. I am now referring to technology gurus Vitalik Buterin, Sasha Ivanov, and others who are recognized global leaders. I am also referring here to guys from Bitcoin community, Ethereum Foundation community, Waves community — those who truly believe that Blockchain has a potential to provide solutions to a range of problems.
One has to understand that Blockchain technology is about developers and researchers. If we are talking about Blockchain business, it is hard, almost impossible, to move forward if you don’t have developers. If you only have marketing tools, it isn’t enough, you have to have a technology — interesting, promising, the one which has a range of real-life applications. Any research and development projects deserve attention.
We would like to support talented developers from Bitcoin, Ethereum Core, Waves camps. We would like to give these teams an opportunity to get an instant access to infrastructure and community. What is Blockchain? It is a huge community. It allows people to make a connection, to understand each other.
Decentralized infrastructure can help boost decentralized technologies. At the moment the industry is mostly occupied by online projects. We hope that Primalbase will change it by providing blockchain developers with physical platform for working on their projects. They will be communicating not only online, but also offline, which will surely contribute to further development of technology.
Quite recently we have launched the Blockchain Institute, we find it very important for Blockchain developers to have their own infrastructure. It will bring benefits to those who purchase membership, and to those who will be provided our tokens as a contribution to development of their projects.
It doesn’t mean, however, that our team will be trading tokens on exchanges seeking to make profit, absolutely not. Tokens will be rented out for a certain period of time to prominent Blockchain tech ambassadors.
4. “How do you expect this to work?”
We have embarked on the business model which makes sense and is already works. And blockchain tech is accommodated quite well inside this model. It is not a sort of add-on to the Internet, it is not something which has been seasoned with Blockchain and got surrounded by a huge hype.
Actually it could be implemented without Blockchain, it is not needed in real estate industry, coworking spaces, etc. However, it does blend well in shared workspace, it is logical there, it significantly simplifies the processes. Why? Because it brings long-term benefits — allows for establishing long-term contracts and long-term membership. It simplifies the initial setup of membership core. We find it very important and we believe it is going to work. We want to implement it in such a way because it is important for us, those who develop blockchain technology and technologies in general.
Tech community consists of people who travel a lot. They need to be sure that in every city they have familiar infrastructure. It significantly facilitates the process. When there is an infrastructure you are used to, it helps a lot, it is convenient. There will be an infrastructure you are used to, there will be community members open for communication and collaborative work on existing tasks and problems.
It can serve as a platform for new interesting partnerships focused not only on Blockchain technology. We will see a lot of tech entrepreneurs, marketing, design, IT projects.
It is going to work, we see a huge support from our colleagues and it motivates us to do a lot more things. There is a huge potential — in the market, in the technology itself. Many ask why blockchain is going to work. We all see how fast technology is spreading across industries. Therefore there is a huge need for a well-developed infrastructure which is growing and maturing together with the technology.
5. “In every Primalbase there will be spaces for token holders and for everybody else, right? what will be the percentual relation of token-spaces and other spaces? and what if there’s no space left, when I wanna go to one of the bases?”
There will be a few places, some will be rented out to tech entrepreneurs — these are traditional economic relationship. Some will be provided to Primalbase members holding PBT tokens setting crypto economic relationship in motion. If you want to use this service, you have two options — you have to own a token or rent it from someone else. There is certain property, a limited resource, and due to the fact that it is limited, its value is going to increase.
Here is how it is going to work. One will be able to book a space using a mobile app, so there will never be a situation that you showed up and can’t find a place to work. Current capacity allows to accommodate this amount of members — we guarantee excellent level of service.
This is one of our business tasks — we have to take into account needs of our community members and adapt accordingly. For instance, if it turns out that one workspace is more popular than others — let’s say the one in Singapore beats the one in London, or London is more popular than Amsterdam, we will think how to redistribute resources — to increase or decrease capacity.
6. “The business model is actually just renting out workspaces? You’re doing the ICO just for funding? Wouldn’t it be easier to get the money from somewhere else and not have 1000 external people profiting forever?”
We are coming back to business model. We are attracting investments for development of infrastructure. We could, of course, turn to one big investor but it is important to keep in mind that our mission is to facilitate development of blockchain technology, and it is a decentralized technology. Community relations is the foundation for it. The value of investments coming from a single body is decreasing if we compare it with investments coming from the community. We are trying to find a solution not only for building an infrastructure but for a community as well.
ICO is an efficient tool for this particular project. On the one hand it allows to connect digital token to a service, a very particular infrastructure. On the other hand, it is a financial tool, which is characterized by a high level of liquidity; it is accessible for trading and gives a certain degree of freedom to engage into economic relationship or stop it if there is a reason, and it is very convenient.
There is no point in talking about VC because VCs invest heavily into many projects of this kind. We are trying to give it a different meaning. Thus, everyone who recieve services becomes directly involved into business relationship and processes, it allows for more flexibility. Often projects of this kind start slowly, kickstarting with an ICO allows for much greater performance already at the beginning.
7. “Why so few coins, people won’t like owning 0.0001 of a token”
It is a matter of denomination. Why pumping up an artificial value? 1 token equals to 1 membership spot. Why are we creating splits? The reason lies in the fact that 1 token is not only one membership spot and access to the infrastructure, it is also a financial tool.
What is the meaning of crowdfunding campaign? Everyone has a chance to buy in even with a small account of stakes, and nevertheless be directly involved into development of the project. The entry threshold for buying into our project is significantly reduced. We don’t intend to create anything extra, if it is not needed.
Let’s say creating 10 000 tokens. I don’t understand what are the 10 000 tokens for — it is like having 10 000 keys. I need only one key, which opens all of the doors, I don’t need to have 10 000 of those. I have only one key which gives me access to all, it is my universal digital code.
But in order to ensure a greater flexibility for people who would like to join our project, we decided to create a certain split of 0.0001. Bitcoin has 8 digits after decimal point, while Primalbase has only 4, there is an explanation behind it, I don’t see the point in having such a division.
8. “What is your profit model with only a one time sale, and no more tokens to ever be created?”
Primalbase is not aiming to make profit trading tokens. Our objective lies in building an infratstructure. We are going to build traditional economic relationship with positive cash flow with tenants. I don’t think we will need to attract new investments some time in the future. We will be able to open new locations using the profit from renting office spaces.
9. “We need some technical details about the building/workspace.”
We have shown how we built an office in Amsterdam, and we are going to follow a similar approach. We aim to provide hosting for tech teams, to let them feel comfortable. The location is selected taking into consideration the following aspects: to make it convenient for tech teams, R&D labs, for development of tech projects of our tenants. It should be a very convenient location in general, we have certain criteria.
Why did we choose this particular location in Amsterdam? It is not a touristic part of the city, distanced from the city center because teams need a good working environment. At the same time it is not so far from the city center, it is a very promising area of the city in terms of infrastructure development. It is located on one of the main highways and it is very easy to get to and from the airport. There is a Ogilvy office nearby, a very cool hotel for students and interns having their placements in tech companies, for instance Google.
Location in Amsterdam represents a set of closed office spaces occupied by various project teams and companies. Besides, there are common areas, meeting rooms, kitchen zone, relaxation zone, server rooms, storage rooms, shared workspaces for entrepreneurs and rooms for group work.
10. “What are the codes of conduct members must follow?”
Codes of conduct are very simple — everyone should aspire to maintain it as a place comfortable for work, both for themselves, and other members. It is not very strict though, it doesn’t mean that we are going to impose sanctions or restrictions if one violates certain terms and conditions.
These are just common sense. We are all a part of community and our mission is to support each other, help each other when needed, be interested and motivated in helping each other. I don’t see a problem if we don’t create a strict set of rules and norms — in this particular case codes of conduct are defined by our members’ ideas about how this should work.
Although we reserve the right to mediate and try to resolve any negative instances. We will surely develop a clear and understandable mechanism of problems resolution based on the feedback from our community members.
11. “The leasing thing needs to be explained more. There is brief explanation in the Whitepaper. Is it like Waves leasing? If I lease my tokens still I have the voting right?”
The token can be very simply rented. You send your token to another user. There is a restriction, however — it can not be spent or transferred to a third party. These are peer-to-peer transactions; therefore, parties must agree on costs and payments between themselves. The holder of the token is protected by his own Blockchain — the protocol works in such a way that the token cannot be transferred on but remains in the wallet of the rentee: in effect, the token is on a «temporary loan».
The minimal duration that a token can be rented is 3 months, and there is no maximum period. A rental agreement may be terminated ahead of time by mutual decision of the parties or unilaterally. Formally, the WAVES platform does not allow the inclusion of specific leasing rules (i.e. the price, time, conditions, etc.) into the Blockchain, as there can be too many scenarios of interaction between users. However, within the leasing agreement between the parties, there are guarantees on the fulfillment of contractual obligations of all involved.
We do not want to make the rule of leasing tougher because there are too many interaction scenarios. You give access to a third party but you do not lose the token. Blockchain protects you from the fact that the token can be misused or spent and so on. It is very convenient. This allows you to radically change the relationship. This technology allows you to speed up the processes, which are already so obvious and understandable.
12. “Is there a roadmap?”
Roadmap is very simple and is available on the webpage. We are seeking to launch five Primalbase locations in total. In September we will open a workspace in Berlin, in December — in London. By the time the location in Berlin is opened, we are going to launch a mobile application to allow booking workspaces in an easy and convenient way.
By the opening of the location in London, we will create a digital platform, which is going to simplify interaction between tenants and facilitate solving various practicalities. Locations in New York and Singapore will be opened in 2018.
New locations might be opened in the future depending on the demand. Our community members are going to be the ones voting and making the decision on the geographical location for new workspaces. There are already a few suggestions to open workspaces i Hong Kong, Prague, San Francisco, Toronto, Barcelona, Tokyo and maybe somewhere in Switzerland, which is already a popular place for setting up a blockchain-related business.
There is a number of locations where presence of Primalbase workspaces is more than justified, but we are going to move forward steadily, opening one location after another.
13. “Is there a business plan?”
Please, read our Whitepaper. It gives you a clear understanding of how we are going to proceed and where we are going to direct funds collected during ICO. Some part will be directed to cover operational costs and another one to develop digital products combining real estate and digital infrastructure for our offline infrastructure. We know that we are all decentralized but we know also that we are together. This is our plan, it is clear and I think it doesn’t require any additional explanations.
14. “Why don’t you make the pricing more transparent? Why can’t I find out how much your office in Amsterdam costs?”
One should keep in mind that the location in amsterdam was established as a proof of concept. It already works, but will be significantly improved in the future. At the moment there is a number of tenants who are testing how Primalbase will be working. It was created to show how it would look like, to make it possible to come to a physical location, talk to our community members, our team.
We are planning to establish a global network of workspaces. We are not aiming to sell office spaces for a few thousands of euro. The system is transparent, our goals are transparent. We are focusing on building infrastructure, not selling office spaces.
15. “Have you thought about offering just a post office box and a company address (Virtual Company Spaces)?”
We will be offering products, which fit perfectly into shared workspaces model, including various services for project teams. These are not only services directly related to building infrastructure, but also services aimed at streamlining business processes in companies, their operations.
We can decrease operational expenditures of project teams on a large scale. WeWork provides this kind of service, we, on the contrary, are not developing products from scratch.
16. “I like the office photos — but can you maybe insert a virtual tour? This is currently the cutting edge in the real estate market.”
Everyone is welcome to come visit our office — it is way much better than having a virtual tour. Follow us on social media — you can find a lot of photos and videos of workspace, virtual tours, various updates. But really, come visit us for a better idea of how it works.
17. “Will be a couple others probably like why did you choose Waves? Will Vitalik Buterin publicly acknowledge being advisor?”
When choosing a platform for our tokens, we proceeded from business tasks. The Waves platform implies the ease of creating tokens, transfer rate, low transaction fees. In addition, Waves has now created an infrastructure that allows you to place it on the exchange in your wallet. In doing so, we also have a gate into Ethereum Blockchain because Ethereum has a large community.
Primalbase is about the development of the Blockchain community, and Ethereum community is certainly a significant part of it. Plus Waves allows you to use a feature for leasing tokens. It is convenient and fits into the business tasks. Plus of course there are opportunities to refine the token for business tasks.
As for Vitalik Buterin, initially our idea was to open Primalbase in Hong Kong. Vitalik also offered to open Primalbase in Singapore, Toronto and Tokyo. Singapore is a very promising place. Naturally, we will listen to our colleagues and together choose the priority locations and try to move faster.
I think the official announcement from Vitalik will not keep you waiting. This is an interesting idea for developers, for community. We are glad that Vitalik got to the heart of the matter very quickly, figured out that in addition to real estate there is a lot in it for the community. His comments were useful to us, and we are always in touch.
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