Ralph Manheim jokes that he is a “boring person” now that he has given up coffee. He might miss the rollercoaster of energy it gave him, but one thing is for sure – the world in which he operates is anything but dull.
The towering Dutch chief executive of co-working company Primalbase is standing in the firm’s Amsterdam HQ surrounded by hammocks hanging from chains, flashing LED lights and playground swings. But the aesthetics are not the most interesting thing about the offices. The real difference is that the space is powered by cryptocurrency.
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It makes sense. Primalbase was conceived as a hub for cryptocurrency and blockchain communities. And how do you attract a community that is embedded into the forefront of digital currency? You start one yourself. The company issued 1,000 digital tokens last June in its initial coin offering, selling them all in just over 24 hours for a total of 3,100 bitcoin – roughly $7.6m then (£5.4m), or more than $32m at the time of writing. Anyone with one Primalbase token (PBT) can book a hot desk in any of the Primalbase offices around the world.
Manheim is now ironing out the final arrangements to open – by June this year – the operator’s first London office on the 32nd floor of CityPoint, EC2. It will be the third of five planned Primalbase offices around the world, after Amsterdam and Berlin.
Right of usage
“In a normal co-working space, you lose money every month because you pay for your desk and you throw your money away,” says Manheim. “In this instance, you have the right of usage, and that’s an indefinite right. If you can hold on to a token for 20 years and then sell it for the same price, then basically you’ve worked for free for 20 years.”
Because Primalbase capped the number of tokens in the market at 1,000 and sold them all in its ICO, it cannot make any more money out of the tokens themselves. Instead, it covers its operational costs with tenants who rent private offices within the space in a traditional way, paying local market rates. These are small, medium or large companies working with blockchain.
And these occupiers do not just cover the costs of running the business. Manheim says: “We also have these companies to help the token holders who are sitting here to have a really nice ecosystem and to learn from each other.”
“If you can hold on to a PBT for 20 years and then sell it for the same price, then basically you’ve worked for free for 20 years.”
He describes a scene from a few weeks ago where two people met in the office, talked for a couple of hours and then threw open their laptops to compare code. “It was inspirational to see. I don’t know what they were talking about, but it was really cool that they had met here and tried to work together on new projects.”
More importantly, he hopes the model will facilitate international expansion for small companies. “If you are a start-up or a scale-up and you want to enter a different market, it’s very difficult because it’s not so easy to find the space and rent the space when you have no track record or credit history.”
As a Dutch start-up, the talent you want might be located in London, but setting up an office – one you might grow out of in a year or two – might be out of your reach or your budget. Primalbase would allow a token holder to book a space in the London office exactly as they would in Amsterdam at no extra cost.
A business within a business
For Primalbase, the major benefit of using tokens was in raising capital. Funds from the ICO enabled it to pursue its plan to open five offices in strong blockchain markets – in Amsterdam, Berlin, London, New York and Singapore. For the token holders, however, it doubles as an ongoing investment.
As with any cryptocurrency, speculators are able to trade tokens – divisible up to 0.0001 PBT – on crypto exchanges, but Manheim says these token holders are in the minority. He estimates that about three-quarters of token holders are in it for the long run to take advantage of current or future office space, and it would not make sense for them to trade fractions of the coin for a quick profit – particularly because you need a whole token to use the office. There could be some, however, who buy fractions of the token to build up to a full one over time.
The more compelling business, Manheim says, is the option of leasing your token. Primalbase is developing an online marketplace where token holders can rent out their token for three to 12 months. That way, someone who has not invested in PBT can gain access to the space on a temporary basis.
It would be an independent market where the price is dictated entirely by what people are willing to pay, and its success depends on enough token holders offering their tokens to keep it competitive.
Risk of vacancy
One concern is whether token holders actually use the space. On the morning I visited the Amsterdam office, the silence was library-like. A handful of people were working in separate corners, the hammocks untouched, occasionally wandering past the pool table into the kitchen for complimentary drinks and snacks.
Because there is no maximum on the number of tokens anyone can buy, someone with no intention of using the office could hoard tens, if not hundreds, waiting for the price to rise. After all, Manheim says, the price should go up every time Primalbase opens a new office, due to new demand. Other investors might be in regions where Primalbase has yet to open an office, thinning the pool of potential users in existing markets.
While it would not directly affect the company’s ability to keep the spaces going, since costs are covered by permanent tenants, it would take away its unique selling point – connecting up-and-comers with the established market.
But Manheim has an eager faith in the community and the product. “I don’t think that will happen,” he says. “If you look at our audience, which are ‘digital nomads’, we tell them, ‘Instead of working in a hotel or in a Starbucks, please come here and have a space with like-minded people.’ I’m not so afraid of it.”
He adds that the offices will be more “buzzing” once the leasing system is up and running and more people get access to the space.
The primal future
When Primalbase published its white paper – its plan for how the tokens and funds from the ICO will be used – last May, it set out a roadmap for its five international offices. Although there have been delays – the London office was initially scheduled to open in January before negotiations over the first office option fell through – Primalbase is on its way to deliver on those promises.
Manheim says he is already seeking out space in Brooklyn and gearing up to find the right office in Singapore while finalising plans for London. Once all five offices are open, the company will start to look at what to do next.
It will talk to token holders about where they want the next Primalbase offices, but for now the goal is to give the community the five locations it had promised. What comes next is still a mystery.
He says: “We don’t know how far we can stretch it, but I don’t worry too much about it, because if the product is good and we keep delivering, the value will go up. And that will give us more and more opportunities.”
PBT prices
At the time of writing, the price of PBT is hovering between $4,500 and $5,000 (£2,850 and £3,560).
In theory, the price of PBT should reflect demand for the offices and should gradually creep up as new locations open and a wider pool of people find value in having a token. It should be more stable than the wider, more volatile crypto market because there is a concrete, practical reason for holding rather than day-trading.
In reality, though, PBT got caught in the crypto mania that gripped the world in the second half of 2017, peaking in mid-December before plummeting. The price fell by 74% from $9,676 per token to $2,372 between 16 December and 6 February. Bitcoin fell by 64% in that same time.
But PBT did jump by 37% on October 12, when the Amsterdam office opened, as expected. However, the price barely flinched on 15 December when the Berlin office opened. This could, however, have been because the price had recently shot up along with most of the crypto market and there was not much room for improvement.
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