The Pudgy Penguins might seem like a random assortment of slightly overweight cartoon penguins but they’re actually one of the most notable profile picture (PFP) collections in the tumultuous world of NFTs. In late-August a single Pudgy Penguin sold for a record-breaking 400 ETH — a value of roughly US$600,000 at the time.
Who are the Pudgy Penguins?
While this might seem like an insane amount to pay for a picture of a penguin, the ‘Pudgys’ are actually a collective of thousands of people, many of whom are successful entrepreneurs helping each other out. For example, a user who goes by ‘Ledger’ on Twitter runs one of the largest and most successful crypto-focused podcasts called Up Only while another prominent Pudgy, Wade Preston from Alabama, runs a Web3 project called 0xCoffee that’s in the early days of upending the outdated and exploitative international coffee trade.
However, things haven’t always been peachy for the members of the Pudgy Penguins community. Late last year the ‘Pudgys’ were staring down the barrel of a potential disaster when rumours began circulating that one of the project’s founders ColeThereum had been engaging in some nefarious and scam-like behaviour. The community was outraged and began to fear that they may soon experience the worst thing that can happen to a project in the NFT space: a rug pull.
A rug pull occurs when a project’s founding team decides to bail with funding that supporters contributed toward an NFT project’s development. Even the slightest whiff of sketchy behaviour from founders can be enough for the community to bail on the project and send its value to zero.
A Twitter thread from prominent Pudgy owner ‘9x9x9’ details exactly how pissed off many members of the Pudgy community were at the time.
The drama reached its apex when it was revealed that the project’s founders had all but emptied the account that was dedicated to funding the Pudgy Penguins project. The resulting fallout from the news saw the project’s floor price drop to a new low of 0.5 ETH, an eye-watering 80% drop from its former all time high of 2.49 ETH.
Luca Netz Saves the Pudgy Penguins
While embroiled in the scandal of an impending rug pull, the community were desperately searching for new leadership. In April of 2021 the community was saved when a new buyer purchased the NFT project for 750 ETH, a price tag of roughly US$2.5 million at the time. This buyer was Luca Netz, a young but experienced serial entrepreneur who saw an opportunity to dive headfirst into turning the project around.
While two and a half million dollars might seem like an enormous sum to drop on a collection of 8,888 slightly overweight little penguins, Luca said it was such a good deal he kind of felt like a thief.
“I actually thought it was a steal. The Pudgy Penguins business had netted US$6 million in the five months that preceded it. So buying it for two and a half million from a simple maths perspective was super obvious,” Luca said.
“I was literally doing a money dance when the transaction went through.”Luca Netz
Luca’s acquisition of the Penguins has been widely regarded as “the greatest comeback story” ever to grace the NFT industry. In the seven months following Luca’s purchase of the NFT collection, the floor price of Pudgy’s quadrupled, despite facing down a widely accepted ‘bear market’ that had been wreaking havoc on the price of popular NFT collections across the board.
Luca’s team wasted no time in building up Pudgy’s as a real brand, unleashing new avenues for creators to capitalise on the project’s Intellectual Property (IP) through Pudgy Media as well as launching a physical product line called ‘Pudgy Toys’. They’ve also doubled down on their social media strategy, creating a strong sense of brand identity for Pudgy’s that continually establishes a variety of methods to onboard ambitious newcomers into the community.
One of the biggest problems that plagues existing NFT projects today is that creators too often rely on the hope of continued royalty payments (a percentage that gets charged every time an NFT is bought and sold) as the sole source of income for the project. The problem here is that this essentially creates a “flywheel” where no real value is being created and the project only grows based on a continuous stream of new users buying up NFTs.
“I’m not a believer of not running on royalties. I really think that you have to build real revenue, you know, in traditional ways, and then bring that value back and kind of do the best of both worlds,” Luca explained.
“I don’t believe that you can just ‘be an NFT project’ and then build from that.”Luca Netz
So who is Luca Netz?
Despite being just 24-years-old, Luca’s extensive background in entrepreneurship under his belt, including an US$8M exit from a video-doorbell tech startup known as ‘Ring’. The company was acquired for a total of US $1B by Amazon, giving Luca his first taste of entrepreneurial success.
Now, Luca Netz runs a multi-million dollar venture capital firm and has rapidly cemented himself one of the world’s most successful young entrepreneurs. But things haven’t always been so glamorous. Luca Netz grew up homeless — for nine years he lived in more than 30 different guest bedrooms and living rooms, sleeping on an assortment of different sofa beds of friends and strangers that were willing to take him and his mother in.
From his fast and loose upbringing, Luca built up the crucial skill of “being resourceful” and claims while it was difficult at the time, it’s what’s given him a leg up on his competition as he delves ever-deeper into the wild world of tech entrepreneurship.
“My mum and I were essentially homeless for 8 or 9 years. We bounced around between different people’s living rooms all over the world, from London, to France, to South Africa to New York.”
While Luca said that they were never “pushing a cart down the street”, he pointed out that they lived an extremely unlavish lifestyle. “We never had anything, we were genuinely super poor”.
Luca and his mother eventually settled down in LA, where he enrolled in Fairfax High School, only to drop out a few years later at the age of 16 to help pay the bills. From that point on Luca rapidly began understanding his aptitude for all things entrepreneurial and by the age of 23 he’d accrued millions of dollars from growing, selling and investing in multiple startups.
With that being said, Luca tells me that he didn’t feel fulfilled when his first major chunk of cash hit his bank account. He went on to say that this dissatisfaction then drove his desire to get involved in venture capital, realising that the potential for good investment to change the world was something he should start taking more seriously.
“I grew up always thinking that money would make me happy. That sort of changed when I realised that we all have a responsibility to impact this world in a positive way and make it a better place than when we first came into it,” Luca said.
From that point onwards Luca launched his venture capital firm Netz Capital, which has been directly involved in the growth of numerous e-commerce companies, seeing a number of multi-million dollar exits. The examples of Luca’s success can be seen in the growth and sale of companies like affiliate marketing app Social SnowBall, customer support service Chirpish, and e-commerce solutions provider Steam Commerce.
Why are Pudgy Penguins a worthwhile investment?
Unsurprisingly, Luca’s decision to go quite literally all in on the Pudgy’s should make it fairly clear that he’s a firm believer in the future of Web3. While Luca says that many “older people” looking in from the outside may not understand what’s going on with NFTs, Luca shared some thoughts that might help newcomers understand what the hell is going on in the tumultuous and strange world of NFTs.
“I think people put too much emphasis on the picture. I think they need to realise this is the beginning of the decentralised internet, and the decentralised internet, just like the internet starts with community,” Luca added.
“So these pictures are kind of bunching communities up together. And that’s kind of how I think it’s kind of working out. But this is really, like 1998 to 2000, right? The world completely changed in the next 20 years. So the next 20 years here will completely change again. You’ll be able to bank and send money and interact with people in ways that we never even thought feasibly possible.”
From CMO of popular toys to CEO of popular penguins
Luca wastes no time in telling me that his decision to step down from his role as CMO at Gel Blaster was made entirely because he believes that Web3 is fully capable of upending the way nearly everything is done on Web2.
“I think that Web3 is capable of changing nearly all of the existing Web2 models of doing stuff. It’s gonna break up web monopolies like search engines, social media platforms and rapidly change the distribution of speech and opinion. The internet right now is gate kept. Certain powerful people curate messaging and online behaviours, and Web3 essentially gets rid of those gatekeepers.”Luca Netz
If his previous success is anything to judge him on, members of the Pudgy community have good reason to trust in Luca’s leadership moving forward.
“I know the future when I see it and this is the future. This is what Web3 is creating.”