Luca Netz on building Pudgy Penguins into the internet's Mickey Mouse — $40M revenue, toys in 10,000 retailers

and how numerals fitting in. Uh Luca, welcome to the stream. We are of course joking. How you doing? What's going on? Welcome. Hey guys, happy to be here. Thanks so much for hopping on.

Um, uh, I'd love to start with kind of the a little bit of the history of Pudge Penguins because I know that there's been like a series of eras for the company and you're obviously taking it in somewhat of a new direction or expansion now, but what's the story that you tell about the genesis of the project, your involvement over time, and like where things are going?

So the the 60-cond version is I was a huge collector of Pudgy Penguins when they launched about three and a half years ago. They were kind of one of the three golden projects of the NFT bull run. It was really board apes, punks, and penguins. Unfortunately, Penguins kind of got mismanaged.

They were founded by a bunch of 18-year-olds in their college dorm basement with no operational experience. So at no fault to them, you know, board apes ended up being a $4 billion business. Punks became a legacy collection with a multi-billion dollar market cap.

Uh, and Penguins kind of withered withered to the wayside. But at that time, while I was collecting the NFTts, I was a CMO and co-founder of a company called Gel Blaster, which was North America's fastest growing toy business. Uh, I was really involved in just IP. Get those for the studio.

Yeah, I I I see those ads all the time. I didn't realize you were behind those. Ben, order some gel blasters right now. Yeah. I I'll get you guys sent I'll send some to the office. But that that I was I was really immersed there.

And so when I just closed my eyes and I thought Pudgy Penguins, I just thought this is a multi-billion dollar business. And so rather than being like a disgruntled holder who was complaining all day, I decided to step step up to the plate.

Uh and I bought the project for about two and a half million bucks three years ago, April 4th. So we're about three years and three and a half months into this. I think what we want to be today is I think twofold. I think on one side of the spectrum, we want to be the face of crypto.

Uh when you think uh crypto today, I think crypto is intimidating. It's taboo. But I think there's no better way to invade the hearts and minds of everyday consumers and with cute pudgy penguins.

And I think there's no better representative from a mascot perspective for the industry than the pudgy penguin uh you know, the story all-encompassing. And on the other side of the spectrum, we want to be the face of penguins around the world. When you think penguins, I want you to think pudgy penguins.

And I just believe that the penguin animal uh is severely underdeveloped. Do you do you guys give uh do you guys like do any charity things for the actual penguins? You know, kind of like a royalty little give back for the those the we've done a couple activations.

I think uh children's uh children's health and penguins I think are the two places that we donate and we're charitable. Awesome. You mentioned that uh the the early Pudgy Penguins community was unhappy with the development of the project.

Uh it sounds like that's in contrast to the other uh NFT projects where people were satisfied. But from my perspective like a lot of these they the 10k NFTts go out they mint and then I don't really engage with these projects deeply enough to know like what is the community clamoring for?

So what was the community in Pudgy Penguins clamoring for that they weren't receiving? And then what are you building that actually will satisfy the community or what like like what are they asking for and what what are you trying to give them?

Yeah, I think I think what every community member in crypto wants is productivity and and pushing the boundaries and forward progress within you know both the the internal IP and maybe just for the category in and of itself.

But just to be clear like we bought Pungry Penguins under the guise that the NFT race and the NFT buildout was severely underdeveloped.

uh and there was a bar still yet to be set and we bought this business to win in this category and ultimately to win in the broader crypto category and so I think from our perspective it's not just winning for our community members within our small niche and within our you know within within the Pudgy Penguin universe it was really winning for the entirety of NFTTS because prior to us NFTTS stayed in this digital universe in this you know vision that Ready Player 1 was going to come 20 years earlier than it actually was going to come.

And I thought, you know, if this was the next generation brand and all of these companies were raising billions of dollars under this guise, then as a brand builder for the last eight years, I felt like they just weren't doing all of the obvious things that all these brands have to do to win. Are we going digital?

Is everything going to be digital 20 years from now? Sure. But today, people need physical interactions. Uh, and I think that's a huge reason why we've won and we've been so successful the last couple of years is we really blended the two worlds, right? we have, you know, toys in 10,000 retailers.

Every toy is tied in with an NFT and crypto experience. Uh, and and the whole thing really segus. You would build this thing the same way you, you know, Hasbro or or Mattel or Disney would build it, but it's cryptonative. It's internet native. And I think that's the difference.

How do you balance developing the IP in the way that you believe will create the most value long term and and kind of the the desires or or wishes from the the community of initial holders, right? Because as a business, you constantly need to be evolving, reinventing yourself.

Um, and I imagine there's a bunch of good parts about having this super loyal, dedicated fan base that's, you know, heavily invested in the projects, but then there's also some hard decisions to make at different times.

Yeah, I think the community's bought in under this guise that we are creating the internet's Mickey Mouse and that everything that we do is to support that thesis and they're aligned in that vision.

I think the problem or not the problem but I think the hard part about this business and it's and it's relevant for a lot of crypto founders but I coined this like three years ago which is we're basically building a publicly traded startup where I have all of the cons of being publicly traded with none of the pros and I'm a startup right if I [ __ ] the bed right my pri and price and crypto is the best marketing because it's such a hyper financialized asset class um and and and you know I do something great price goes up you know holders are in the money the more in the money they are, the more they champion, the more they recycle those profits back into the product.

Uh, and the different the different product lines that we have within the business.

Uh, but then obviously if you [ __ ] the bed, you know, it it the the the financialization to me is is a hyper form of alignment and it can be your greatest superpower, which I think we've been able to harness and galvanize over the last couple of years, or it can be your greatest kryptonite.

And you've seen situations like this with basically 98% of founders in crypto is that ends up biting them in the ass. They make one wrong step. They don't have that relationship. They don't have their rapport with the community and then the whole thing just kind of backfires. Yeah.

Do you think uh if you look back at at the NFT category holistically is o are projects uh is part of that kryptonite just being over capitalized?

has that uh how much of a strength have you you know I don't know how how resource constrained you guys have been exactly but I imagine it's quite a bit more constrained than than many other many other projects in the space especially as you know certain projects got marked you know really really high a bunch of capital flooded in and uh I don't really have a good lens on on how that's worked out yeah I think that's just entrepreneurship 101 I mean crypto in general makes people more money than they're supposed to make.

Uh, you know, it's kind of like there's an arbitrage that I talk about a lot where, you know, there's a real opportunity for builders in web 2 to come here because the premium on users and success here is probably 10 to 15 to 20x what it be in the what it would be in the real world.

Meaning like the ibida of Pudgy Penguins, you know, might be, you know, we might be a 300 $350 million business today. You know, we've created, you know, five plus billion dollars in value over the last couple of years. And, you know, our total ecosystem is north of2 billion dollars.

Um, so I think from our perspective, it's really just a a matter of um, you know, being being resource constraint has been the one of the biggest things for us and probably the thing the lens that I'm most proud about.

I mean, our our next 10 competitors that we've outperformed over the last couple of years have, you know, nine figures in funding, whether it's from venture or community. Uh, but that's naturally every entrepreneur gets gets into that problem at some point.

uh unless you really, you know, fight tooth and nail uh over the course of a long period of time to earn that capital. But in crypto, you can make a lot of capital and raise a lot of capital really quickly. And the NFT cohort of 2020, 2021 is exactly that.

I mean, guys made, you know, 50, 100, a billion dollars, you know, within 12 months of being in business. Uh you're not going to be a superstar organization, you know, off of that type of growth. um unless you're just a one ina- million entrepreneur and group. Uh but that that that wasn't the case here.

And so I think I think us being scrappy has been huge for us. We raised you know 9 million our seed round and and we haven't raised anything else for Pudgy since then. Uh and you know this year we'll do $40 million in revenue. So you know so far so good. That's awesome.

Can you talk about uh the the decision to surface crypto functionality to the user to the customer? Uh the Instagram has 1. 8 million followers, never really mentions mentions crypto. There's a world where you're communicating to a non-cryptonnative audience.

You have a different group of customers that's very cryptonative. How do you balance those things out? Is it all just one on-ramp one direction or the other direction? How do you think about that that dichotomy? Yeah. So, yeah.

So I'm a consumer product guy and and in consumer products conversion is an action in in crypto I and I think with building IP and character and love and affinity I think conversion is a process right and so I think the idea that you know you immediately sell people on something that is still taboo and still intimidating I think is a mistake and so my my my objective is how do I create love and affinity around this character you know positive impact around this character positive association around this character over the course of time and as they become super fans and participate in the fandom they then go and figure out that this is crypto and go down that rabbit hole and I think that's a really beautiful story.

Now on one side that's epic but I think a lot of people always misinterpreted our strategy which is like oh how do you get the non-crypto user to then go buy our assets whether it's our token or our NFTts and it's actually a misappropriated uh way of how I think people look at the strategy.

Uh, it's more impactful if you're a crypto native.

Let's say you're a crypto whale and your mom or your cousin or your niece or your nephew or your son or your daughter is then participating in a Pudgy Penguin, buys a Pudgy Penguin product at Walmart or shares you with an Instagram piece of Instagram content or a game or something like that.

That aha moment for that crypto whale is then like, "Oh, I've been in crypto for how long? " You know, nothing has has transcended into my family the way that this has. this is clearly doing something for the industry that that nobody else is doing.

And that's kind of like our edge is like we believe crypto is for everyone and but right now it's not positioned for that, right? It's positioned for the finance bro, for the cool guy, but you know, if we really want crypto to succeed, it's got to be for the woman. It's got to be for the child.

As silly as it sounds, those kids are becoming crypto native. And an anecdotal story that I think your audience will love is, you know, I started to meet some of the top Salana traders over the last couple of months. These kids are 16, 17, 18, 19, 20. Guy, guys who made 20, $30 million in cash, right?

Or 16, 17 years old, couldn't couldn't cook a steak medium rare if they wanted. Those are the crypto native, right? And and and that next generation will actually be native, unlike, you know, you or I who maybe saw the world before crypto. You know, we're crypto adjacent and we're cryptofamiliar, but we're not native.

This next cohort that's coming in the next 5 to 10 years will be crypto native. And that's the audience that I really want to speak to. That's pretty awesome. Uh talk to me about the decision to uh tradeoffs between the Ethereum blockchain and Salana.

Uh obviously the project originally launched on Ethereum, but the Pudgy token is on Salana now. What are the trade-offs? How do you think about those? Is there one power law winner that's running away with the game or is there a world for both?

Yeah, I think they they they're functionally trying to achieve two different things in my opinion. I think Ethereum's goal and objective and mission is to be a decentralized network state, which I think is really important for the sake of humanity, right?

Like if you if you weigh a a bunch of different variables, AI and and just everything that might come into the future, like having a decentralized network state is really really important. U and and I think it plays its role really well doing that.

I think Salana is the first blockchain that I've really interfaced with uh from from an outside org in that I think is really trying to be an organization that's built to win, right?

And they and they and they want to capture as much, you know, value in winning and building the biggest and best blockchain in the world and then all the things that come with that, right?

like low latency, really fast, amazing BD, getting all the top advisers in to come and help, you know, bootstrap and and and help, you know, ecosystem apps. It's really run like a like a Silicon Valley organization. And its function, I think, is to win, right? Uh but there's two different functions.

I think I think building a decentralized network state and building a blockchain to win, right, and to dominate, you know, tech and and to, you know, because blockchains fundamentally are, what are they really, right? A lot of people tell themselves a lot of different stories. To me, they're borderless payments, right?

And they're global and they're global. So, global liquidity and global composability, right? Like those are its two functions. And if you actually understand that as like an entrepreneur building in the web, those solve two really big problems, right? Like like humans problems, right?

Like like Stripe used to, you know, Stripe and PayPal would take your money and shut you down and do the whole nine, you know, like blockchain will remove that edge. And so I think they're functionally two different organizations.

I think from our perspective, we wanted to launch our token because we wanted everyone to have a piece of our main character, this internet's Mickey Mouse. We wanted our followers on Instagram and on YouTube and on Tik Tok to be able to participate uh, you know, in purchasing that token.

And today, it's hard to argue that Salana doesn't have the best experience for that person coming from Instagram to then go in and and purchase something quickly, right?

like Ethereum today, even with cheap gas fees, like no one wants to spend a couple bucks, you know, on on some gas fees, even even when that's relatively low for the ecosystem, you know, they they'll want to spend a couple bucks buying the token and that's about it. Uh so it seemed like a good fit. That's awesome.

Well, thank you so much for stopping by. This is fantastic conversation. Yeah, I really appreciated your perspective. Would love to have you back on again for for a longer interview. This is great and I'm excited for our GE gel blaster Nerf battle basically. Yeah, we need to send me an address.

It's going to be pretty obnoxious the packages I'm going to send. So stay tuned. Okay, great. We'll talk to you soon. Amazing. Thanks for coming on. Cheers. Um, really quickly before our next guest, public investing for those who take it seriously.