Interview With Luca Netz, CEO of Pudgy Penguins

Luca, two years ago you won CoinMarketCap’s award for the most innovative NFT and gaming project of 2022. When everyone was running away from NFTs, what made you rush in and invest $2M into an NFT collection’s IP?

I saw the opportunity from a business perspective, and I thought we could win. Winning is a huge part of what gets me up in the morning every day. I looked at the current landscape, and there was nothing impressive that any NFT project was doing that we couldn't do better. We've proven that thesis true over the last couple of years.

We didn't time the NFT bear market. We actually bought the project, and a week later, NFTs were basically down for the last two and a half years, with Pudgy Penguins being the only exception and outlier. It's been a wild ride. I'm super grateful and thankful to be here. Obviously, there's still a lot left to prove. I think the best years for Pudgy Penguins and the igloo have yet to show themselves.

Community plays a big part in your success. What makes your community so different, and as you transition into Web2 and retail, what was the community's reaction to this? How are they supporting you in these endeavors?

You'd be hard-pressed to find a major crypto company without an executive on the team who isn't part of the Pudgy Penguins community. Some of the best traders and investors and builders are wearing Pudgy Penguins, which gives you alpha and access that very few people have.

A ton of our community members support us and what we're doing for crypto. Many affluent people come into the Pudgy Penguins community from a philanthropic perspective because of what we're doing at retail and for the masses. When you think about what Pudgy Penguins is doing, it's unparalleled in terms of pushing Ethereum adoption forward.

Our community rallies behind anything that pushes the penguin forward and breaks boundaries. Whether it's our arcades across Chuck E. Cheese and other locations around the country, or the toys in Walmart and Target and 10,000 other retailers. Supporting this brand is bigger than just supporting something that might make you some money in the future.

With a successful Web2 marketing background, you obviously had a game plan when you purchased Pudgy Penguins. Looking at Pudgy World now, plus Overpass and all these toys, was that the vision from the start?

Our executive team contributed to the purchase, so we were all in. We had everything to lose, and I think that's what really pushed us to critically think about this 16 hours a day and work our tails off. We didn't get paid for the first year. We had to seed this company with another half a million dollars when we were running out of money.

Everywhere we turned, our back was against the wall, so we had to either duck and pivot or hit back. What you've seen over the last two and a half years is a byproduct of that. I think the best entrepreneurs are uncomfortable, and that's what separates us from the pack.

You used the word "we" a lot. Lots have been said about your role in reviving Pudgy Penguins, but who is the "we" and how have they helped push Pudgy Penguins in one direction?

We have a team of 60-70 people now at the igloo, and they are giving everything they've got to make this a success. They're the ones who make sure that I don't look like a fool when I get on interviews and speak with you, and we make sure that we have the meat and the underbelly to this thing.

I attended your fun Pudgy Penguins Asia party in Singapore, which was in partnership with Animoca Brands. Are you actively trying to expand this to the Asian market or other markets?

Our focus right now is really just expanding into the mass market, and I think Animoca will help play a role in that. Something's going on in Asia around penguins. When you understand Asian culture, there isn't a household in Asia that doesn't have some sort of cute IP somewhere in the home. Naturally, it's just gravitating there.

I also think this bull run and this cycle for crypto is going to come out of the east. So that's serving us really well. We're working really hard to support our builders and our team members over in Asia. Cheryl and Aaron are kind of leading the APAC charge for us at the moment, but it's a huge focus of ours, if not our biggest focus. It's something that we're going to be scaling into really aggressively here over the next couple of months.

You're uniquely marrying the digital and the physical collectibles in Web3. How does it all fit together?

Within the Pudgy Penguin universe, there's Little Pudgies, which is probably a cheaper price point to get into the NFT ecosystem. Then we have our fishing rods, which play into this ecosystem. So within the Pudgy Penguin brand, there are three NFT projects: Pudgy Penguins being the focal point, Little Pudgies, and the fishing rods.

Within the Pudgy Penguin business, we have a couple of verticals:

1. The digital on the Web3 side
2. The physical products, which are the toys and collectibles
3. IP licensing, which scales into physical products like lunch boxes, bed sheets, etc.
4. Content, which includes GIFs, Instagram, TikTok, Facebook—these are getting billions of views
5. Film and TV, which ties into things you haven't seen yet
6. Gaming

Our most advanced verticals today are the content side, the physical products, and the collectibles. We've sold a million and a half toys, which are in Walmart, Target, Smith's, Hot Topic, and all over Australia in Big W and Toys “R” Us.

Explain how NFT holders can monetize their Pudgy collectibles.

The concept is that you should be able to go to Walmart, purchase a toy for $5, follow the instructions, scan the QR code, and basically be crypto-adjacent via this custodial wallet and these NFTs through nothing short of a $5 purchase and three to four minutes of your time.

How do Pudgy World and Overpass support your ecosystem?

On the other side, we have Overpass, which is making the licensing experience scalable, on-chain, and transparent. We also have Abstract, which is a blockchain we're contributing to via a company called Cube Labs. This is probably one of the most exciting things for our ecosystem, which I look at as open ocean—no one's owning the consumer chain, and no one's truly building for consumers.

Pudgy Penguins is very family-friendly. Are you also targeting millennials and their families, bringing them on board and raising the next generation of Pudgy Penguins holders?

This is a brand for everyone, an identity for everyone. This is, I think, the first crypto project where you can actually sit at the dinner table and really get people involved. Some people have asked, "How does that help holders? How does it help the ecosystem?" But at the end of the day, I think people appreciate what this brand does and what it represents for the entirety of the space. If we don't have more Pudgy Penguins in crypto, I ultimately think there's going to be a ceiling on where this industry can go.

You were quite vocal about the SEC's involvement in going after NFT marketplaces like OpenSea. What is your take on this—are NFTs “just JPEGs” as you called them?

Is Sotheby's liable because somebody is buying paintings thinking they'll be worth more later? There are so many cases where this can be applied. If you're going to apply it to digital collectibles, great—apply it to all collectibles and all businesses that are serving collectibles.

Yes, there is some truth that there is a percentage that buys because they love it. People buy Pudgy Penguins because they love the brand and what it represents. But there's another subsection of people, call it 50/50, that are buying it because they want to return value.

It's really just up to the person to make the decision for what they're purchasing and why they're purchasing it. Now, if the company is selling it with a promise, that's a different story. But none of these guys are, and OpenSea especially is not. OpenSea is just the middleman to projects like this.

If you're going after a project that promises you are going to buy this and you are going to make a profit, then I understand that argument. But OpenSea plays no role in selling products like that, outside of just aggregating them. From this perspective, I think it's phony, I think it's a waste of time, and I think we should be spending time tackling things that are more important.

You mentioned a few Web2 brands. Were there any that inspired you and gave you a bit of a roadmap on where you want to take Pudgy Penguins?

In reality, these are first-edition collectibles, and how you bring value to your community around these first-edition collectibles has been done for 100 years. You can look at Pokémon and how Pokémon has done it. You can look at Nike and how Nike has done it. The list is endless on how you bring value to premiere artifacts within your ecosystem.

We're inspired by that. A huge part of our success is that we're not trying to reinvent the wheel. Collectibles are predicated around demand, affinity, and love, and that's what makes them valuable. That's kind of the same approach that we're taking.

NFTs are evolving a lot this year, with some hybrid versions coming out where people can switch between NFTs and tokens. Does that interest you?

What's up for Pudgy Penguins, not only this year but also in the next year, if you can share?