An interview as part of DappRadar’s educational RugRats series
Luca Netz is the CEO of Pudgy Penguins, an 8,888 NFT collection of cherubic, “pudgy” penguins that embody love, empathy and compassion. Similar to Evolved Apes, a rugged NFT project which was rescued by Web3 leader, Daz3D and recently relaunched as Fight Back Apes, we became interested in Luca’s story as he swooped in to save the Pudgy Penguins project as it appeared to be headed for ‘Rug Territory’.
Luca became CEO of Pudgy Penguins after a much-publicized bidding war in early 2021, in which he bought the underlying Pudgy Penguins IP for a cool $2.5 million. He assumed control of the project from the original founders after the Pudgy community called for a change of ownership, citing the founders’ lack of execution on their promised roadmap. Some have charged the original founders as having executed a “rug,” although that moniker has been debated.
Since purchasing Pudgy Penguins, Luca has rolled out a string of initiatives to add value to the community, including a line of toys and a children’s book incorporating the Pudgy Penguins IP. His extensive business background and life experiences afford him the perspective and drive to make Pudgy Penguins one of the premier NFT projects.
Below is a conversation between Jen Farmer and Mike Cryptobull, community leads for Fight Back Apes and Luca, in which we asked him about his backstory and how it influenced his decision to purchase Pudgy Penguins, his perspective on some of the challenges that plague Web3 founders, and his perspective on how these founders can properly and effectively add value to their community.
Fight Back Apes: Can you talk about your backstory and how it coincided with the Pudgy Penguins purchase? Why did you feel like you were the right person to step in for that particular situation?
Luca Netz: Yeah, so it’s a couple things. Pudgy Penguins was my first PFP NFT that I ever bought. I bought them at a couple hundred bucks, sold them for a decent profit, and then bought other NFTs-a few Bored Apes-with the profits. I looked back a year later and was like, yeah, I made a few million dollars trading NFTs, but it all started with Pudgy. And so, from that perspective, I felt like I had some sort of responsibility in that sense.
I think that’s one answer, and the other is that; I grew up super poor. I made my first couple million dollars when I was 19. I realized that money didn’t make me happy. From there, I had to find my purpose, and I realized that what fulfilled me is making an impact. I felt like I could change the world with these pudgies. I knew as my business developed within the Pudgy Penguin ecosystem that it would push Web3 forward, and I believe Web3 is going to help more people than anything we’ve ever seen before. And so I could play my role in shaping what I think the world will look like by going in a direction that I don’t think anybody’s going, but I think it is completely necessary for NFTs to win long term.
FBA: Why did you decide to step into an already-founded project versus starting something from scratch?
LN: It’s interesting because people were like, well, you could have just made millions by starting something from scratch, but it’s like- the price was so good. Immediately after I bought it, the value increased. On paper, okay, sure, it wasn’t cash in the bank. But whoever let me buy the thing for two and a half million should be ashamed of themselves.
But I guess more importantly-you can’t replicate magic. Everybody in the NFT space tries, but Pudgy Penguins and the IP is magical no matter how many ways you put it. You don’t trade $200 million in NFT volume with no utility, no leadership, and no real roadmap. No, you trade that much because people are impacted by the IP. And so I thought, two and a half million was a cheap price to pay for something so magical. And also, the really, really hard part was already done-which is the initial formation of that community. A lot of people can’t figure out how to get that first group of tight-knit individuals. All I needed to do was add fuel to the fire and grow it.
FBA: Was there an appeal to the narrative of being able to come in and salvage this magic that you describe?
LN: Yeah, that innocence, that joy that pudgies bring people was 100% worth saving.
There was just something about these penguins that when you look at them, they make you smile, they make you happy. It sounds corny and strange, but I think the common consensus is that the look and feel of them makes your day just a little bit brighter, even if it’s a fraction of a percent. And that’s the IP, right, that has nothing to do with the NFT, that has nothing to do with Web3. And so if I publicize these things and get them out there in different places in the world, people are hopefully going to experience the same thing that I do, and in some way, shape, or form, are going to feel just a little bit better themselves.
FBA: Can you take me through the acquisition process? What was that experience like?
LN: It was a hard and long process because a deal like that had never been done at the time. And there was no legal case study to reference. And so it was really long and tedious, I think is probably what I remember most. It was long and it was tedious and it almost didn’t happen.
FBA: Can you describe your experience as a Web3 founder vs. your experiences in traditional tech spaces?
LN: The key difference to me is that Web3 requires a whole different level of communication. Because you have people that are buying because they believe- they’re not buying to consume like they are in Web2, where you have to make sure that the consumption of your product is efficient, and that the product is done well. In Web3, they’re buying to believe in something bigger, so leadership is absolutely vital.
FBA: In your own words, what does it mean for a Web3 founder to add value to their community?
LN: I think there are several different types of “utility.” There’s transactional utility, which is making people money. You know, price goes up. That can happen through an airdrop of a coin or NFT, you know, it’s something that Yuga has done really well. Then you have companies like Disney, which is a master at emotional utility-how do you impact people in a way that drives them to be emotionally attached to your product? So that’s through content, that’s through messaging, that’s through branding, and that’s through community. Emotional utility is going to Walmart, seeing a Pudgy Penguin toy on a shelf, and giving that to a friend, family, niece, or nephew. Or making a piece of content that makes somebody cry, or makes them smile, right. Right now, a lot of NFT products have been focusing on the transactional side of things, which is an effective playbook, but it only works in a bull market-it doesn’t work in a bear market. It’s the emotional utility side where I think Pudgy Penguins are really going to excel.
FBA: Having said that, your floor price has risen a lot over the past few months. How does that make you feel? I’m sure you’ve had a ton of positive feedback from the community because of that.
LN: It definitely made me feel good but the issue with the floor price is that the first four months I was a slave to it. I cared for the sake of the holders, but I realized that for me personally, I can’t let it get to me, either when it’s down or when it’s up. Don’t get me wrong-it’s a goal. A higher floor price is a goal. It’s an aspiration. It’s something I’m chasing, but I’m not going to celebrate every floor milestone. Because this thing- this Web3 game is a mental toughness game. This is the most mentally taxing business I’ve ever been a part of. And so I have to be really tough with how I maneuver in my head. And so in this respect, I’ve now learned over the last couple months that at the end of the day, I want to get to a 100 ETH price-and maybe then I’ll jump for joy. But I can’t jump with joy at 10, 15, 20 ETH. Having said that, sure, I understand that the floor price going up made the community believe in me more. You know, the pudgy community beginning to believe has been one of the coolest parts about it all.
FBA: What is your motivation for adding “value” to your holders?
LN: One of the most fulfilling things I’ve done in life has been mentoring kids as I’ve came along in my career. I’m only 24, but I get a lot of 18, 19, 20 year olds coming up to me and asking for mentorship. And I love it – I love the network effect of helping people make money, and how that translates not only for reputation, but for the opportunities that come your way as that reputation grows-it’s priceless. A majority of the money I’ve made has been built off of relationships. There’s no better way to build a relationship than to bring value to people. And so like one, it fulfills me, because I just know that some Pudgy holders aren’t all affluent crypto whales. Like, think about it-I’m at the driver’s seat of 4,600 people’s lives-that’s not to say they fully depend on me, of course, but if I do what I can do, I can change their lives even just a little bit. Isn’t that cool? I’m thinking long-term here-there’s people who spent life-savings on their Pudgy Penguins. I didn’t tell them to do that but they did, and now I can’t let them down, you know?
FBA: When you see people in the crypto and NFT space acting in bad faith and messing up your plans, how do you deal with that?
LN: Our model is not dependent on what other people are doing. I came into this saying that I can’t build a business that is dependent on macro conditions. All these bad actors fall into those macro conditions I can’t control, you know. Don’t get me wrong, it sucks and definitely hurts sometimes. But FTX doesn’t affect whether our toys might sell in Target or Walmart. The pudgy brand is bigger than force-majeure events in the Ethereum world and crypto space as a whole. And so it’s really a balance.
FBA: This being your first experience as a Web3 founder, do you think communities are too tough on their project teams/founders?
LN: Across the board, yes. It’s a really tough business. Like, a really tough business. I come from a traditional tech background, so for me when I’m building a brand, it’s like- let’s just go into my playbook of how I’ve built brands up until this point. A lot of people in this space don’t have that kind of experience. They haven’t built 9-figure brands before, and they’re just like inventing things as they go. But I mean, that’s why I bought pudgies, because I thought I had a real competitive edge-I know how to build a brand. It’s second nature to me. I ask, okay, how do I grow? How do I find an angle or messaging that resonates? And then I just lean into it. I’m going into all of my tools that I’ve developed over the last six years. I think that’s a core differentiator between me and these guys and gals who have never built brands before.
So it’s interesting to say the least, but I do have empathy for founders. More so than I did before.
FBA: What would you recommend to young founders looking to build and foster a satisfied community?
LN: I think setting expectations is key. Communities get mad at founders who set very clear expectations they don’t hit. If the guy said he’s not going to work on it, and you still bought it and now you want him to work on it, the fuck are you thinking? But if the guy said I’m gonna build the next great IP company the world has ever seen, and then he’s in for 12 months and bounces, yeah, that’s fucked. You can’t do that. If I’m an artist, if I’m Drifter Shoots, per say, and I’m doing a PFP collection, like, there’s no promise of utility. I’m an artist-that’s my expectation. And that’s that standard. Right? But if I’m saying I’m building the next great metaverse gaming company, well then I better make sure I give it the next five years, you know, and I build that company, and if I disappear anytime between now until then, I’ve broken the standard. Just tell people exactly what you’re going for. If there’s an exchange of value from people’s bank account to yours, then there’s an expectation that must be set.
FBA: What motivates you going forward?
LN: I want to build one of the biggest IP companies the world has ever seen, and do it in Web3. And I truly believe I can do that because there’s no better way to invade the hearts and minds of everyday consumers than with these cute Pudgy Penguins. When you look at all the IP in the space, who has a better shot of reaching every demographic and personality. And I made this assessment before I bought it. I said, well, the value prop is so big and the opportunities are still so open. And so, in that respect, I think we can really, really crush it.
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