Latest exclusive interview with Pudgy Penguin CEO: a16z could have bought Pudgy shares cheaply, but they chose to write a sky-high check to Moonbirds

Original author:Mika, youtube
Original compilation: zhouzhou, BlockBeats

Editor 's note: This conversation focuses on how LucaNetz and his team experienced difficult challenges in the early days of Pudgy Penguins, including financial difficulties, investor rejection and community distrust. It discusses Pudgy Penguins' ecosystem, tokens and its future development. It also touched on the reasons why Pudgy Penguins chose Solana instead of other chains, and stated that it would change the Solana ecology by promoting cultural phenomena.

The following is the original content (the original content has been edited for ease of reading and understanding):

Moderator: LucaNetz is like the Kobe Bryant of Web3 encryption. Everyone is asking, how can I be like LucaNetz? How to become the best in the world? How to become a legend?

LucaNetz: To be honest, I just take the credit. I talked to the team the other day before we announced PENGU and other projects. I said at that time that I have a group of the most powerful people around me, and this is not due to me.

What I'm good at is communication, being a good community leader and that kind of thing. But all the behind-the-scenes work you see is the result of Peter, Lorenzo, Vadon, Jennifer, and other team members. There are a total of 60 people in Pudgy's team. These are all their contributions, and I just get some honors.

Moderator: Luca, I 've known you since before there were 60 people on the team. How do you stay on top of everything? This industry can feel very stressful and really difficult. Can you give me some advice on how you stay focused? After all, it is certainly not without reason that you can become the "Kobe" and "LeBron" that promote public acceptance in this industry.

LucaNetz: We are very motivated, just like the analogy you said between "Kobe" and "LeBron". This is our greatest strength and some consider it our weakness, and I understand that. We are very competitive and want to be the biggest and the best. We feel we deserve this and our community deserves it. We’ve worked hard to prove ourselves over the past few years and now it’s time to stand out.

Years ago, we entered this industry with the mentality of proving ourselves. We've invested millions of dollars, staked our reputations, poured blood, sweat and even tears. Friends have betrayed us, and we have experienced all kinds of traps and deceptions. We gritted our teeth and weathered those storms and every possible test.

We are so driven to succeed, not just for ourselves and the company, but for the community. I really want to bring something better to the community, that's what I want most.

You know, if you're not familiar with the story of penguins, they were initially ridiculed and suppressed. Many stories about penguins are actually somewhat similar to my experience. We have been underestimated, ignored, even ridiculed and become the butt of jokes since we were young - at least that's how I feel. Maybe the truth is not that exaggerated, because my life since I was a kid was pretty good, but I always felt in my heart that we were a little underappreciated, and there was a feeling of pressure on our shoulders.

I think Pudgy’s story is the same, just amplified through these penguin NFTs. So I want these penguins to feel the same way I feel when I succeed: I made the right decision, I was the smartest, I had faith. Even though everyone was questioning and taking sides, the Penguins chose the right team. This recognition means more to me than anything else and I know this value will be reciprocated.

This mentality stems largely from our competitive nature. When we were kids, we all loved sports and competition. I hate losing and love winning, and our executive team shares the same spirit.

Our time is now, we have all the ingredients for success, now is the time to go out and prove it to the world. This is the cultural phenomenon of this cycle. We respect and are grateful to those who paved the way, but this is not their time, it is ours.

What are Pudgy Penguins

Host: This is the Luca I know! You do mention a team effort, but that 's why we call you the "LeBron" or "Kobe" of the encrypted Web3 industry. I hope people will send this to their grandma, their friends, their cousins. Everyone is asking questions about meme coins, and they see them on TikTok, Instagram, and social media. So, if you had to explain Pudgy Penguins and the entire ecosystem to your grandma, what would you say?

LucaNetz: First of all, you have to understand the mission of Pudgy Penguins. Our mission is twofold: first, to become synonymous with penguins around the world. When people think of penguins, I want them to immediately think of Pudgy Penguins; second, to become the mascot and representative of cryptocurrency.

We achieve both of these goals by building a brand that is positive and empowering, making products that people love, and creating memories and emotional connections around characters that impact people's lives. This is a brand that makes people feel positive energy. Through such brand value, we will become synonymous with Penguin around the world and a representative in the field of cryptocurrency.

If we achieve these two things, it will undoubtedly be a great thing for the entire industry. Especially for the IP (intellectual property) industry, it is in urgent need of something fresh and creative, and Pudgy Penguins is just that. At the same time, what is more important is that the cryptocurrency field needs such breakthroughs. Cryptocurrency still has a taboo feel and makes people feel inaccessible, but Penguins is the only IP that everyone can accept and identify with, whether you are 5 years old or 60 years old, regardless of race, gender, occupation or background, Penguins can Be loved by everyone. It's universal enough without being weird or fussy - it's just the cutest penguin, and everyone loves penguins.

The story of Penguin is also the epitome of the most classic "counterattack story" of cryptocurrency. All these factors combine to make it a true cultural phenomenon. People may ask, is this token an ecosystem token? still......

Moderator: Don’t worry, let’s not talk about tokens yet! Penguins are special enough on their own. Let’s start with the basics, like NFTs. How do you connect NFTs to IP? There are not only NFTs in your ecosystem, but also games and upcoming tokens. Let 's go step by step, what are these levels?

LucaNetz: Okay, let's look at this from a funnel perspective, and I've been thinking about this line of thinking since the beginning. The top of the funnel is demand, right? So what creates this demand? Millions of followers on Instagram? Millions of followers on TikTok? Billions of views every month on Giffy? Are toys and millions of homes covered? In summary, the creation of need and emotional connection starts at the top of the funnel.

And then as you go down, initially, the middle part of our funnel is "Pudgy World" - from toy buyer or Instagram follower to toy buyer, you transition to this blockchain-based experience, which Kind of like blockchain technology support on the back end, plus some form of gamification on the front end.

Moderator: You mentioned this blockchain-based experience, can you explain it in more detail?

LucaNetz: You will be able to see the final version soon. Basically every toy we sell will come with a QR code. After you scan the QR code, you will get three to five digital wearable NFTs. You enter your email and password, enter "Pudgy World", and the system will give you a managed wallet. You can then redeem these NFTs by paying a fee. Ultimately, for example, you just need to buy a toy at Walmart for $5, follow the instructions, and in about 3 to 4 minutes, you can start collecting these digital assets on the blockchain.

How Pudgy’s CTO is changing the game

Host: Why is this important? Why is it interesting to own assets on these blockchains? Why put it on the blockchain, especially what is called a “grab mechanism” in the traditional toy industry?

LucaNetz: Because you can access global liquidity, which can only be achieved on the blockchain. So the importance of this is that if Pudgy World does succeed, I'm really excited to see what happens in the next few months. Because we finally get to see if this mechanism actually works, albeit after a year's delay. And I feel like now is the perfect time because I think the popularity of Penguins has never been higher.

But the point is, I can buy a toy for $5 and unlock three to five digital features worth $2. I could then sell the digital features and keep my physical toys. In other words, I paid $5 for the toy and unlocked digital features worth $10. I sold them, made $5 back, and kept the physical items. This model would in principle disrupt the entire consumer packaged goods industry, particularly consumer packaged goods (CPG) and loyalty reward systems.

If we can create a successful case here, it will change the landscape of the entire industry and change everyone's business model. This is I think the biggest catalyst for big brands to come in. Retailers, especially Walmart, focus on “value for money.” For example, Walmart’s goal is to provide value to customers. If I could go to Walmart with data (millions of dollars of data to support this theory), I could be the best value product on their shelves, hands down.

Because I can basically explain to Wal-Mart that every customer who buys this product has a certain probability of recovering the cost or making a profit. So if they buy this toy, they will hardly lose money. If this idea really gains traction among consumers, the product will definitely sell out quickly, possibly within an hour.

Of course, there are many variables here, such as economic conditions and whether the demand is appropriate. These factors have a higher probability of success in a bull market, and we are indeed in a bull market now. So I think it has a higher chance of success, which is cool. Obviously, there's a different set of variables in a bear market as well, and I don't want to think too much about those scenarios.

Moderator: Let’s go back to those features. You mentioned these NFTs as features. Can you give everyone a more intuitive understanding? Like Fortnite skins, or like other similar trading and monetization models?

LucaNetz: I think it's more like a digital collectible, like you would buy a Michael Jordan basketball card. I think it's more appropriate to compare it to baseball cards or basketball cards. That's a better analogy because, you know, the difference between a basketball card and a Pudgy Penguins NFT is obviously brand recognition and emotional connection and so on. But at their core, digital collectibles have advantages over physical collectibles. Why? Because digital collectibles have no insurance problems, no counterfeiting problems, no friction in transactions, and no transportation and storage problems, because the characteristics of NFT itself determine that it has these advantages.

For example, Pudgy Penguins NFTs and Michael Jordan basketball cards are essentially the same. They are both collectibles. One is digital and one is physical. But digital collections have many features that physical collections don’t have, for example, they are digital.

For example, I collect art, but now I have no room to hang more paintings, so I am limited in the art I can buy. But I can buy unlimited NFTs because my wallet can hold unlimited amounts of art. And my gallery can also be unlimited because it's digital.

This is the difference between physical collectibles and digital collectibles. NFTs inherently possess the properties of physical collectibles, except that they are digital. So when we first entered this industry, people were actually quite confused and asked us what we were doing. My answer at the time was: I was just doing what physical collections are meant to do. I just wanted to make it the same as them because there really isn't that much of a difference. Everyone is trying to redefine what digital collectibles should be.

Now what we need to do is to make these digital collections consistent with physical collections in terms of brand recognition, brand affinity, emotional connection, etc. This is actually what we have been doing for the past three years: how to make our popularity explode? How to become an Internet idol? How to create love and resonance around this brand? Then work backwards.

Host: I remember seeing Pudgy Penguins’ NFT collection, which was only $60 at the time. These NFTs are now worth $100,000, which is really awesome! But I think we haven’t reached that point yet, and there is still a long way to go. I have a bigger vision. But looking back at these achievements is still exciting. It’s not just your team’s effort, but also you and your vision. After all, it takes a lot of entrepreneurial spirit and business acumen to make these achievements. It would be very helpful if you could give everyone a brief overview of how you rescued Pudgy Penguins from a $60 asset to $100,000 today.

LucaNetz: To put it simply, we acquired this project for $2.5 million about three years ago and initially invested $500,000. The day we acquired also happened to be the beginning of the bear market, so we faced a sustained decline from the start. I went through many difficult moments along the way and even almost went bankrupt many times.

We didn't take a penny from the community, except for programmable royalties, which were cut by 90% the month after we acquired them. We just try our best to do the right thing and create a project that everyone can enjoy. What we try our best to do is create value for our holders and the community. Although the process was difficult, we persisted.

Even in the past three months, many people still think that "penguins are dead and have passed their prime time." They think that I don't know what I am doing. In fact, there are many stories in it that I can share with you. We are now in 10,000 retailers, most notably Walmart and Target. We've also done big collaborations, such as with Vandy, and recently with Pokémon, which are very cool.

Our video views on social platforms have exceeded 50 billion, and we have 40 billion views on Giffy alone. This is huge, so obviously it spreads through MEME, and I don't think any crypto-native IP other than Doge has spread as widely as we have to the general world. We have many necessary conditions, such as a large number of users and the opportunity for change.

I don't know if you've seen what Pudgy Kindness or Kind Pango does on TikTok, where we change the usernames of these people, and even though it's simple content, we're really changing people's lives on that channel. Like 500 million views in 10 videos, it's really a beautiful story. I want to do my best to represent the industry, do the best possible things, improve people's lives and set an example worth following. Of course, we are not perfect and make mistakes, but we will do our best to lead the industry.

Misconceptions about cryptocurrencies

Moderator: So what do you think are the most common mistakes people make when talking about cryptocurrency and the Web3 ecosystem?

LucaNetz: They just feel like it’s their own show and it feels very arrogant and they stand tall. To be honest, I can only talk about this based on our success. You may agree or disagree, but I think you should put the community first, take care of your community, and the community will reward you. You see, we're still here, we're still doing our thing. We know that if we take good care of them, they will repay the value. I'm not sure what the reward is going to be, maybe now that I know a little bit about it, but we just want to do our best to take care of them and make them successful. And some people just take things too arrogantly and think, "This is my business and I make the decisions."

Moderator: But if we step out and look at it, what do outsiders think of the cryptocurrency industry, and where do they go wrong?

LucaNetz: I think they actually have PTSD, because every bull market and popularity cycle of cryptocurrencies has just revolved around rising prices. The problem is, retail investors are always the last to take over. So in each adoption cycle, assuming a million new users come in, maybe only 50,000 people will make money, see the opportunity and stay, while the other 95% will feel the pain of cryptocurrency until they forget about it , until the trauma dissipates. But the reality is that 95% of people, both from a general public and retail perspective, will eventually get burned by cryptocurrencies. So here's the problem. You know what I mean? They feel that cryptocurrencies are not real enough or too unreal.

Therefore, a lot of Pudgy's work is how to connect with consumers and retail, and it does not focus on price. Maybe they will find PENGU or Pudgy's NFT by chance, but we prefer to establish a first impression by letting them come into contact with actual products, such as toys they hold while sleeping, or pendants on their backpacks, or their of social media posts that your significant other sends to them because it’s interesting, uplifting, or makes them happy. We want these to be their first points of contact. And then, over time, if they want to join and believe in Pudgy Penguin's vision and movement, they can do other things, but the first thing is to align.

Moderator: So what do you think of external people’s views on cryptocurrency, especially those who have not yet entered the Web3 ecosystem? What misconceptions do they have about the industry as a whole?

LucaNetz: I think they actually have PTSD (post-traumatic stress disorder). The problem is that cryptocurrency bull markets and adoption cycles always revolve around rising prices, but retail investors are always the last to catch on. So every adoption cycle, for every million new users that come in, maybe only 50,000 people make money, see the opportunity and stay, while the other 950,000 people complain about cryptocurrency until they forget about it, until the trauma passes. Like, 95% of people, especially the general public and retail investors, have been harmed in the cryptocurrency market. So this is the crux of the matter. Do you get me? They don’t believe cryptocurrency is real, feel it’s not real enough, or that its value isn’t tangible enough.

So one of Pudgy's jobs is how to cater to consumers and the retail market, not price as the core. Maybe they will find PENGU or Pudgy NFT, yes, but we hope to attract them through some actual products, such as toys they hold when sleeping at night, pendants on their backpacks, or their significant other sends them social media posts that make them happy, uplifted, or amused. We want these to be their first points of contact with Pudgy. And then over time, if they are willing to join in and believe in Pudgy Penguin's vision and movement, they will make more choices. But the key is to dock and align first.

Pudgy's entrepreneurial history through hell

Moderator: You mentioned that you have a team of 60 people. For entrepreneurs like me who want to enter this industry, can you share how you made this project successful? What 's your first step? After you bought the project, what happened next?

LucaNetz: We had a very difficult first 12 months after we bought Pudgy Penguins. Initially we couldn't rely on royalties to make money at all. I knew we had to build a sustainable business model quickly, but I didn't expect to go out of business so quickly. The first month we bought the project, the royalty income was $500,000, but the second month we only had $20,000 left. I think this is crazy! This is not because the market volume has dropped by much, maybe 20% or 30% of the transaction volume, but because the royalty income has directly returned to zero, and we have suffered like this. You can't imagine how difficult that time was. We had a couple of people, who should still be here, who were part of our early team, but ended up screwing us over and really stabbing us in the back.

Host: What do you do when someone betrays you like this?

LucaNetz: Oh, I really cried. It was terrible at that time, and that kind of betrayal was the most painful thing. I also had to deal with some big holders calling me stupid behind my back. We had a few of these guys in the early days leaking contracts they signed NDAs and spreading FUD. Don't you understand? I was working my ass off to get this thing done, and we had absolutely no money. The entire team only got paid $1,000 a month. Jennifer, our CLO, was obviously a lawyer at Stanford and could have earned $40,000 per month, but she chose to stay and believed in our vision, believed that we could do it, and believed that we would always find a way to get through the difficulties.

Then I had to sit on a conference call with 300 VCs to discuss raising money, and the answer was "no." I find it very strange. I have built a company worth hundreds of millions of dollars before, so why do you say it can’t be done? I feel insulted that you are investing money in projects that I don't understand.

Host: What do you think is the reason for this? Why don 't they like you? Is it because they think this is a "children's industry"? They don't understand?

LucaNetz: I think they don’t see the big picture. They focus too much on the micro. They think this is just an e-commerce or consumer goods company. What they didn’t realize was that we were a real team, we were a team with a dream, and I was a founder with a dream. Most venture capital funds don’t do well. I can tell you an investor’s perspective: when you make an investment, you don’t look at the project itself, but at the team. Investment is investment in people, and the core importance of the team is more critical than ideas and products. All the investments I’ve done well were because of a strong team. The projects I invest in succeed because the teams are great, and that's the only thing worth betting on.

So it was really tough for us at the time. In the end, only about $200,000 was left, and the VCs still said "no." And at the same time, I see them writing huge checks to other companies, like Moonbirds was able to get funding for $50 million initially. Do you know how I felt? I was like, "Are you crazy?" I was so mad that I didn't trust us. That's when I decided to put these people's names on my list and I wanted to let them know that they were missing out on an opportunity. I had a list and I knew where they were putting their money and it was so hard because I was going to give him 50 but he wouldn't even give me an offer for Mia.

Host: I always hear people say, "I wish we had Luca on our team." Right? I said I wish I could be like Luca in some companies, especially in the children's IP space, which is hard.

LucaNetz: Even so, there are many problems. That's not the hardest part, the hardest part is when you look at these other NFT projects, there were projects that were two Ethereums at one time, and then someone was 20, 50, 100. When I go to show it, they're like, "No, it's okay, it's good, it's cute." That's the hardest part, even people's attitudes.

That was really the hardest part, because I was doing the Spaces tour and fighting harder than anyone. You can't work harder than we did, every physical effort, every meeting, every flight, every meeting, they put me in the back row of every meeting, until three to six months ago, they And put me in the last row. That's the hard part, now I won't accept anything less than that.

That's really the hardest part, not just the investors, but pretty much everyone downplaying it, except the community, really appreciate them. Really, I have a lot of respect for them. One guy stepped up, we have Spencer here.

Spencer's NFT fund is probably the best performer in history, right? His largest investment was Pudgy Penguins. I love this because you know how many big NFT funds there are? They are all buying art things, and none of them are promoting this industry at all. Right? Now, if Pudgy can do what we want to do in the next few weeks, we are bringing back the NFT market, not the artists.

I respect this, I love this, I'm not dissing it. But the thing is, man, how can you spend $10 million on that and not even own a penguin?

I tell you this to inspire those who will eventually replace me. I'm at the top now and keep going.

I'm going to hold on to this position for a long time, but I want you to know that the person who takes my place, you know? They'll knock you into oblivion, like we did back then. You have to dig deep inside, stay strong, and never let this get to you. Because man I had days where I was really at a breaking point, and that was really hard.

I'm telling you this story and this background on this podcast to inspire you, to encourage you. I know what you're seeing right now is fun and exciting, but let me tell you, every bad thing an entrepreneur can go through in their company and business, we've been through it, more than once. So, as a source of motivation to all entrepreneurs and builders out there, I hope you all get through this, bro. This is not a victory show-off, we still have a lot to prove. So, I'm not saying I'm a GOAT, you know? But at least we're somewhere.

Why will PENGU fill the final vacancy in the Solana ecosystem?

Moderator: There is a lot of content in this industry. We said NFT, now games, then tokens. So can we talk about gaming? Let’s talk about tokens. How does it connect to all of this? Give us some key intel, directly to us. It 's not a meme coin, nor is it just a cryptocurrency, let's put it bluntly.

LucaNetz: I want everyone to define what they think it is, is it a community coin? Cultural currency? meme coin? Or consume brand tokens? It's all of those things and, to me, it's the face of crypto and you identify with what I think is the most beautiful story in crypto over the last four or five years. It is a "dark horse" story. I feel that if it succeeds, it will change the entire industry for the better.

I think it's hard to argue with that, and of course, I'm biased. So you can evaluate it yourself. But you can't say that Pudgy's success isn't a huge victory and a huge force pushing the entire industry forward. To me, Pudgy's success is a huge force in moving the field forward. I think it's easy to understand, a lot of people might think it's a meme coin bonus, right?

From a technical and structural perspective, it is very much like a meme coin. 4 billion views on Giffy, all meme-y. So you know, it's very fungible and memetic. I think from this perspective, many people will agree with this narrative. And, you know, the prophecies and legends of Penku Man, they existed before me.

From this perspective, I think many people will agree that it is a meme coin. But you know, I'm going to put that blue penguin in Walmart and Target, number one in the App Store, put it in the hands of millions of people, all over social media. I'm also going to bring it to the big screen, and someday I'll do it all.

So, meme coins usually don’t get much action, right? But I firmly believe that I think this will be the first example of the evolution of meme coins. I think if Doge had a team like ours behind it, the value of Doge would increase exponentially because Doge could be used in so many movies and TV shows. You can't tell me that the popularity of the IP won't create demand, but demand will. Make things more valuable. It's a very simple concept, as is anything that has a fixed supply.

This is actually the supply and demand model. So you're telling me that millions of fans and hundreds of millions of views per day won't impact and support this ecosystem and this theory? I think this view is simply untenable.

Moderator: So what can the PENGU token do?

LucaNetz: I can’t say specifically, anything that means something to you, means something to you. Buy stuff, do whatever you think you can do. Everything is. You know, it's all based on your understanding. We're a smart team, right? But in the end, it all depends on everyone’s participation.

But don't expect more from it than your local Doge or Pepe. It is the same vehicle, and any other thoughts are unexpected surprises and joys.

Moderator: Why choose Solana instead of Abstract or other chains?

LucaNetz: Because the original intention was to do it on Abstract, but it wasn't ready yet. Cryptocurrency is really all about timing, right? There came a point where I knew intuitively that it was time to do it. You can't rush into something so important just to pursue a point in time that has nothing to do with it, right?

It will only make the community bigger, create more hype and momentum, and it will only make things more fundamental. So many people who build on Abstract actually mainly focus on two things: they believe that Abstract can bring Web2 Distribution capabilities, and they also believe that Pudgy is the best community for exposure to cryptocurrency. The first reason still stands, the second reason now makes more sense because I will soon have thousands of coin holders, soon hundreds of thousands, probably soon There are millions of coin holders. Now the "Penguin Army" is no longer 10,000 people, but 500,000 people, and may even reach 1 million people. It will move towards multi-chain, and it will be a multi-chain project, right?

I believe in a multi-chain future, and I think Solana is where we most want to go. I feel like what we can bring to Solana is really important to that ecosystem, and I feel like we can do something from a unified perspective, and I feel like we can bring everything together. You know, Solana has its PvP and we're on top of its L1, but from our perspective, Pudgy is not the face of Ethereum, it's the face of cryptocurrency, right? For us, I believe in Solana's ecosystem, I believe in its community, and I believe in its culture.

If we were not present at Solana in this space, then I feel like we would be making a huge mistake in helping to open up this new space and lead the way. It's a big loss for us, for our ecosystem, and even for Solana, and I think it's right for us.

I think what we brought to the table was, in my opinion, the beginning of a cultural phenomenon. I think this is the last missing piece of the puzzle for Solana. You put a cultural phenomenon on Solana, like Bored Apes and Punks did, and I think it makes the entire ecosystem better. Based on my interactions with the Solana community, I wanted to be able to do something for them, and this was a great opportunity for me. Of course, eventually it will become an SPL token. Eventually, you know it will be a token standard based on Solana, and such a token is the SPL token.

Moderator: SPL token, please explain to the audience what it is.

LucaNetz: SPL is one of Solana’s local token standards. There are different types of token standards on Solana, and SPL is the most common. So actually nothing is too complicated, you can understand it.

Moderator: When will this token be launched?

LucaNetz: Very quickly. Very quickly. We don’t plan to wait until the end of the year, nor do we plan to go online immediately. Therefore, according to plan, this may already be online when it is released.