Pudgy Penguin CEO's latest interview: a16z could have bought Pudgy shares at a low price, but they chose to write a sky-high check to Moonbirds | In-depth dialogue

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

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

The following is the original content (the original content has been reorganized for easier reading and understanding):

Host: LucaNetz is like Kobe in the field of Web3 encryption. Everyone is asking, how can you be like LucaNetz? How can you become the best in the world? How can you become a legend?

LucaNetz: Honestly, I just took the credit. I talked to the team a few days ago before we announced PENGU and other projects. I said at the time that I was surrounded by the most powerful people, and this is not my credit.

I am good at communication, being a good community leader and things like that. But all the work you see behind the scenes is the result of Peter, Lorenzo, Vadon, Jennifer, and other team members. There are a total of 60 people on Pudgy. This is all their credit, and I just took some credit.

Host: Luca, I have known you before the team had 60 people. How do you stay on top of everything? This industry can be very stressful and it's really hard. Can you give me some advice on how you stay focused? After all, there must be a reason why you can be the "Kobe" and "LeBron" of this industry to promote public acceptance.

LucaNetz： We are very motivated, just like the metaphor of "Kobe" and "LeBron" you mentioned. This is our biggest advantage, and some people think it is a weakness, and I can understand this view. We have a strong competitive spirit and want to be the biggest and the best. We feel that we deserve such achievements, and our community deserves it too. We have worked hard to prove ourselves in the past few years, and now it's time to stand out.

Years ago, we entered this industry with a mentality of proving ourselves. We invested millions of dollars, gambled our reputation, paid blood, sweat and even tears. Friends betrayed us, and we experienced all kinds of traps and deceptions. We gritted our teeth and survived those storms and went through all possible tests.

We are so eager to succeed, not only for ourselves and the company, but also for the community. I really hope to bring something better to the community, this is what I want most.

You know, if you are not familiar with the story of penguins, they were actually ridiculed and suppressed at the beginning. Many stories about penguins are actually a bit similar to my experience. We have been underestimated, ignored, even laughed at, and become a laughing stock since we were young - at least that's how I feel. Maybe the truth is not that exaggerated, because my life since childhood was not bad, but I always feel that we are a little bit underappreciated and have a sense of pressure on my shoulders.

I feel like the same thing happened with Pudgy, but it’s amplified through these penguin NFTs. So I hope these penguins can feel the same way I feel when I succeed: I made the right decision, I’m the smartest, and I have faith. Even when everyone was questioning and taking sides, the penguins chose the right team. This recognition means more to me than anything else, and I know that this value will be returned.

This mentality comes a lot from our competitive nature. We all loved sports and competition when we were kids. I hate losing and love winning, and our executive team has the same spirit.

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

What are Pudgy Penguins

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

LucaNetz:First, understand the mission of Pudgy Penguins. Our mission is twofold: first, to become synonymous with penguins worldwide. When people think of penguins, I hope they immediately think of Pudgy Penguins; second, to become the mascot and representative of cryptocurrency.

The way we achieve these two goals is to build a positive, positive brand, produce products that people love, and create memories and emotional connections around the characters that impact people's lives. This is a brand that people can feel positive energy. Through this brand value, we can become the global representative of penguins and the representative of the cryptocurrency field.

If we achieve these two points, it will undoubtedly be a great thing for the entire industry. Especially for the IP (intellectual property) industry, it is in desperate need of something fresh and creative, and Pudgy Penguins exists. At the same time, more importantly, the cryptocurrency field needs such a breakthrough. Cryptocurrency still has a taboo color and makes people feel inaccessible. Penguins is the only IP that everyone can accept and identify with, whether you are 5 or 60 years old, regardless of race, gender, profession or background, penguins can be loved by everyone. It is universal enough, not weird or picky - it is the cutest penguin, and everyone loves penguins.

The story of the penguin is also the epitome of the most classic "comeback story" in cryptocurrency. All these factors combined have made it a real cultural phenomenon. People may ask, is this token an ecosystem token? Or...

Host: Wait, let's not talk about tokens yet! The penguin itself is special enough. Let's start with the basics, such as NFTs. How do you connect NFTs to IP? Your ecosystem not only has NFTs, but also games and upcoming tokens. Let's go step by step, what are these layers?

LucaNetz:Okay, let's look at this from the perspective of the funnel, which I started thinking about from the beginning. The top of the funnel is demand, right? So what creates this demand? Is it the millions of followers on Instagram? Is it the millions of followers on TikTok? Is it the billions of views on Giffy every month? Is it the toys and the coverage of millions of households? In summary, the creation of demand and emotional connection starts at the top of the funnel.

Then as you work your way down, initially, the middle of our funnel was "Pudgy World" - from toy buyers or Instagram fans to toy buyers, you transition to this blockchain-based experience, which is kind of like blockchain technology support on the back end, coupled with some form of gamification on the front end.

Moderator: You mentioned this blockchain-based experience, can you elaborate on that a little bit more?

LucaNetz: You'll see the final version soon, and basically every toy we sell will come with a QR code. When you scan the QR code, you get three to five digital wearable NFTs. You enter your email and password, enter the "Pudgy World", and the system will give you a custodial wallet. Then, you can redeem these NFTs by paying a certain fee. Ultimately, for example, you only need to spend $5 on a toy at Walmart, follow the instructions, and in about 3 to 4 minutes, you can start collecting these digital assets on the blockchain.

Pudgy's CTO How to Change the Rules of the Game

Host: Why is this important? Why is it interesting to have these assets on the blockchain? Why put it on the blockchain, especially with what is called a "crawling mechanism" in the traditional toy industry?

LucaNetz: Because you can access global liquidity, and that's only possible on the blockchain. So the importance of this is that if Pudgy World is successful, I'm really looking forward to the progress in the next few months. Because we can finally see whether this mechanism can actually work, even though it has been delayed for a year. And I think now is the best time because I think the popularity of penguins has never been higher.

But the key is that I can buy a toy for $5 and unlock three to five digital features worth $2. Then I can sell these digital features and keep my physical toy. In other words, I bought the toy for $5 and unlocked digital features worth $10. I sold them, made $5 back, and still kept the physical toy. This model in principle will disrupt the entire consumer goods industry, especially fast-moving consumer goods (CPG) and loyalty reward systems.

If we can create a successful case here, it will change the entire industry landscape and change everyone's business model. This is the biggest catalyst that I think will drive big brands in. Retailers, especially Walmart, focus on "value for money." For example, Walmart's goal is to provide value to customers. If I can go to Walmart with data (millions of dollars of data to support this theory), I can undoubtedly become the most cost-effective product on their shelves.

Because I can basically show Walmart that every customer who buys this product has a considerable chance of recovering their costs or making a profit. So they will hardly lose money by buying this toy. If this idea really gains recognition among consumers, the product will definitely sell out quickly, and it may be sold out within an hour.

Of course, there are a lot of variables here, like the economic situation, whether the demand is right. These factors have a higher probability of success in a bull market, and we are in a bull market now. So I think it has a higher probability of success, which is cool. Obviously, there are a different set of variables in a bear market, and I don't want to think too much about those situations.

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

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

For example, Pudgy Penguins' NFTs and Michael Jordan's basketball cards are essentially the same, they are both collectibles. One is digital and the other is physical. But digital collectibles have many characteristics that physical collectibles do not have, such as it is digital.

For example, I collect art, but now there is no place to hang more paintings, so the art I can buy is limited. But I can buy unlimited NFTs because my wallet can hold unlimited art. And my gallery can also be unlimited because it is digital.

This is the difference between physical collectibles and digital collectibles. NFTs are born with the attributes of physical collectibles, but they are digital. So when we first entered this industry, everyone was actually quite confused and asked what we were doing. My response at the time was: I just did what physical collectibles do. I just wanted to do it the same way as they do, because there is really not much difference. Everyone is trying to redefine what digital collectibles should be.

Now what we need to do is to make these digital collectibles match the physical collectibles in terms of brand awareness, brand affinity, emotional connection, etc. This is actually what we have been doing for the past three years: How do we make our popularity explode? How do we become an online idol? How do we create love and resonance around this brand? And then work backwards.

Host: I remember seeing the Pudgy Penguins NFT collections, and they were only $60 at the time. Now these NFTs are worth $100,000, which is amazing! But I don't think we're there yet, and there's still a long way to go. I have a bigger vision. But it's still exciting to look back on these achievements. This is not only the work of your team, but also you and your vision. After all, it takes a lot of entrepreneurial spirit and business acumen to achieve these achievements. It would be very helpful if you could give everyone a brief overview of how you saved Pudgy Penguins and raised it from a $60 asset to $100,000 today.

LucaNetz: In short, we acquired this project for $2.5 million about three years ago, with an initial investment of $500,000. The day we acquired it happened to be the beginning of the bear market, so we faced a continuous decline from the beginning. There were a lot of hard times along the way, and we almost went bankrupt several times.

We didn’t take a penny from the community, except for programmable royalties, which were cut by 90% a month after we acquired it. We just did our best to do the right thing and create a project that everyone can like. What we tried to do was to create value for our holders and the community. Although the process was difficult, we kept going.

Even in the last three months, there are still many people who think "Penguin is dead and has passed its prime", and they think I don’t know what I’m doing. In fact, there are many stories in the middle that I can share with you. We are now in 10,000 retailers, the most famous of which are Walmart and Target. We also did big joint collaborations, such as the collaboration with Vandy, and recently with Pokémon, which are all very cool.

Our video views on social platforms have exceeded 50 billion, and there are 40 billion views on Giffy alone. It's huge, so obviously with the meme spread, I don't think there's any crypto-native IP other than Doge that has spread as widely to the general world as we have. We have a lot of the necessary conditions, like a large number of users and the opportunity for change.

I don't know if you've seen Pudgy Kindness or Kind Pango on TikTok, where we changed the usernames of these users, and although the content is simple, we are really changing people's lives on that channel. Like 10 videos brought in 500 million views, which is really a beautiful story. I want to do my best to represent this industry well, do as much good as possible, improve people's lives, and set an example to follow. Of course, we are not perfect and make mistakes, but we will do our best to lead this industry.

Misunderstandings about Cryptocurrency

Host: So what do you think is the most common mistake people make when talking about cryptocurrency and the Web3 ecosystem?

LucaNetz:They just think it's their own show, and they feel arrogant and stand tall. To be honest, I can only speak to this issue 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 return you. Look, we are still here, we are still doing our thing. We know that if we take care of them, they will also return the value. I'm not sure what kind of return it will be, maybe now I know something, 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, I'm in charge."

Host: But if we step out and look at how people from the outside view the cryptocurrency industry, what are they wrong about?

LucaNetz:I think they actually have PTSD because every bull run and adoption cycle of cryptocurrencies is just about price increases. But the problem is that retail investors are always the last to take over. So in every adoption cycle, let's say there are a million new users coming in, maybe only 50,000 people can make money, see the opportunity and stay, and the other 95% will feel the pain of cryptocurrencies until they forget about it, until the trauma dissipates. But the reality is that 95% of people, from a general public and retail perspective, will eventually be burned by cryptocurrencies. So that's the problem. You know what I mean? They feel that cryptocurrencies are not real enough, or too illusory.

So a lot of Pudgy's work is about how to connect with consumers and retail, and not focusing on price. Maybe they’ll stumble upon PENGU or Pudgy’s NFTs, but we prefer to build a first impression by exposing them to actual merchandise, like a toy they sleep with, or a charm on their backpack, or a social media post their significant other sends them, because it’s fun, uplifting, or makes them happy. We want these to be their first point of contact. Then, over time, if they’re willing to join and believe in Pudgy Penguin’s vision and movement, they can do other things, but first, the alignment is in place.

Moderator: So what do you think of outsiders’ views on cryptocurrencies, especially those who haven’t yet entered the Web3 ecosystem? What misunderstandings do they have about the industry as a whole?

LucaNetz : I think they actually have PTSD. The problem is that the bull market and the adoption cycle of cryptocurrencies is always centered around price increases, but retail investors are always the last to buy in. So every adoption cycle, for every million new users that come in, maybe only 50,000 people make money, see the opportunity and stay, and the other 950,000 people complain about cryptocurrencies until they forget about it, until the trauma is over. Like, 95% of people, especially the general public and retail investors, have been hurt in the crypto market. So this is the crux of the problem. Do you know what I mean? They don't believe that cryptocurrencies are real, they don't think it's real enough, or its value is not tangible enough.

So one of Pudgy's jobs is how to cater to the consumer and retail market, not centered around price. Maybe they'll find an NFT of PENGU or Pudgy, yes, but we want to attract them through some actual products, like a toy they hold when they go to bed at night, a charm on their backpack, or a social media post their significant other sends them, because these things make them happy, excited, or interesting. We hope that these will be their first contact point with Pudgy. Then over time, if they are willing to join and believe in the vision and movement of Pudgy Penguin, they will make more choices. But the key is to align first.

The entrepreneurial history of Pudgy through hell

Host: You mentioned that you have a team of 60 people. For entrepreneurs like me who want to enter this industry, can you share how to make this project a success? What was your first step? What happened next after you bought the project?

LucaNetz : We had a very difficult first 12 months after we bought Pudgy Penguins. Initially we had no way of making money from royalties. I knew we had to build a sustainable business model very quickly, but I didn't expect that we would go bankrupt so quickly. The first month after we bought the project, we made $500,000 in royalties, and the second month it was only $20,000. I thought that was crazy! It wasn't because the market volume dropped by a lot, maybe 20% or 30% of the transaction volume dropped, but the royalties went straight to zero and we suffered. You can't imagine how difficult it was. We had a few people who should still be here who were part of our initial team, but they ended up killing us and really stabbed us in the back.

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

LucaNetz : Oh, I really cried. It was terrible, that kind of betrayal, it was the worst. I also had to deal with some big holders calling me stupid behind my back. We had a few guys like that early on, leaking the contracts they signed NDAs, spreading FUD. Don't you understand? I was working my ass off to make this work, we had no money, the whole team was only paid $1,000 a month. Jennifer, our CLO, she was a lawyer at Stanford, she could have made $40,000 a month, but she chose to stay and believed in our vision, believed that we could do it, and believed that we would find a way to get through this.

Then I had to go on a conference call with 300 VCs to discuss fundraising, and the answer I got was "no." I just felt very strange. I had built a company worth hundreds of millions of dollars before. How could you say that it was not possible? You invested money in projects that I didn't understand. I felt insulted.

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

LucaNetz: I think they didn't see the big picture. They focused too much on the micro and thought it was just an e-commerce or consumer goods company. They didn't realize that we are a real team, a team with a dream, and I am also a founder with a dream. Most venture capital firms 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. Investing is investing in people. The core importance of the team is more critical than creativity and products. All the investments I made well were because the team was strong. The projects I invested in were successful because the team was super good. That's it. This is the only place worth betting on.

So we were really struggling. We were down to about $200,000 at the end, and these VCs were still saying "no". At the same time, I saw them writing huge checks to other companies, like Moonbirds was initially funded for $50 million. Do you know how I felt? I was like, "Are you crazy?" I was really mad that I didn't trust us. That's when I decided to put these people's names on my list and let them know that they missed an opportunity. I had a list of names, and I knew where they invested their money, and it was really hard because I was going to give him 50, but he wouldn't even give me a quote for Mia.

Moderator: I always hear people say, “I wish we had a Luca on our team.” Right? I’ve said that I wish I could be like Luca in certain companies, especially in the children’s IP space, which is hard.

LucaNetz : Even so, there were a lot of problems. That wasn’t the hardest part, the hardest part was when you look at these other NFT projects, there were projects that were two Ethereum at one point, and the next thing you know, 20, 50, 100. And I’d go to present, and they’d be like, “No, it’s OK, it’s good work, it’s cute.” That was the hardest part, even the attitude.

That really was the hardest part, because I was doing the Spaces tour, working harder than anybody. You couldn’t work harder than us, every physical effort, every meeting, every flight, every meeting, they put me in the back row of every meeting, and up until three to six months ago, they put me in the back row. That's the hard part, and now I won't accept anything less than that.

That's really the hardest part, not just the investors, but almost everyone is downplaying it, except for the community, and I'm really grateful to them. Really, I have the utmost respect for them. One guy stepped up, we have Spencer here.

Spencer's NFT fund is probably the best performing in history, right? His biggest investment is Pudgy Penguins. I love that because you know how many big NFT funds there are? They're all buying art stuff, and they're not pushing the industry at all. Right? Now, if Pudgy can do what we want to do in the next few weeks, we've brought back the NFT market, not the artists.

I respect that, I love that, and I'm not disparaging it. But the question is, brother, how can you spend $10 million on that and not own a penguin?

I'm telling you this to inspire the people who will eventually replace me. I'm at the top now, and I'm going to keep it up for a long time, but I want you to know that the people who take my place, you know what? They're going to put you in oblivion, just like we did. You have to dig deep and stay strong and never let it get to you. Because man, I had some days where I was close to breaking down, and it was 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 is fun and exciting, but I'm telling you, every bad thing that an entrepreneur can go through in their company and business, we've been through it, and more than once. So, as a source of motivation for all the entrepreneurs and builders out there, I hope you can make it through this, man. This is not a victory lap, we have a lot to prove. So, I'm not saying I'm the GOAT, you know? But at least we're somewhere.

Why PENGU will fill the last gap in the Solana ecosystem?

Moderator: There are a lot of things under this industry. We talked about NFTs, now games, and then tokens. So can we talk about games? Talk about tokens. How does it connect to all of this? Give us some key intelligence, give it directly. It's not a meme coin, it's not just a cryptocurrency, just say it directly.

LucaNetz: I want everyone to define what they think it is, is it a community coin? A cultural coin? A meme coin? Or a consumer brand token? It's all of these things, and to me, it's the face of cryptocurrency, and you agree with what I think is the most beautiful story in the crypto industry in the past four or five years. It's a "dark horse" story. I think if it succeeds, it will change the entire industry for the better.

I think it's hard to refute this, of course, I'm biased. So everyone can evaluate it for themselves. But you can't say that Pudgy's success isn't a huge win and a huge force in the industry moving forward. To me, Pudgy's success is a huge force in the space moving forward. I think it's pretty easy to understand, and a lot of people might think it's a meme coin plus, right?

From a technical and structural perspective, it's very much a meme coin. 4 billion views on Giffy, all of the content is memetic. So you know, it's very fungible and memetic. I think from that perspective, a lot of people would buy into that narrative. And, you know, the prophecy and the legend of Penku Man, it was around before me.

From that perspective, I think a lot of people would buy into it being a meme coin. But you know, I'm going to put that blue penguin in Walmart and Target, in the number one position on the App Store, in the hands of millions of people, all over social media. I'm going to bring it to the big screen, and I'm going to do all of that one day.

So, meme coins don't usually do much, right? But I firmly believe that I think this will be the first example of the evolution of meme coins. I think if Doge has a team like ours behind it, the value of Doge will increase exponentially because Doge can be used in many movies and TV shows, and you can't tell me that the popularity of an IP doesn't create demand, and demand makes things more valuable. It's a very simple concept, and it's true for anything that has a fixed supply.

This is really a supply and demand model. So you're telling me that millions of fans and hundreds of millions of views a day won't affect and support this ecosystem and this theory? I don't think that's true at all.

Moderator: So what can PENGU tokens do?

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

But don't expect it to be bigger than your local Doge or Pepe. It's the same carrier, any other ideas, are unexpected surprises and joy.

Moderator: Why 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 about timing, right? There was a point in time, and I knew intuitively that it was time to do it. You can't rush something so important to pursue a time point that has nothing to do with it, right?

It just makes the community bigger, creates more hype and momentum, and it just makes things more fundamental, so a lot of people who build on Abstract are really looking at two things: they believe that Abstract can bring the distribution capabilities of Web2, and they also believe that Pudgy is the best community to get in touch with crypto. The first reason still holds, and the second reason now makes more sense because I will soon have thousands of holders, and soon hundreds of thousands, and soon maybe millions of holders. Now the "Penguin Army" is no longer 10,000 people, but 500,000, and it may even reach 1 million people, and it will go multi-chain, it will be a multi-chain project, right?

I believe in a multi-chain future, and I feel that Solana is where we want to go the most. I feel that what we can bring to Solana is very important to that ecosystem, and I feel that we can do something from a unified perspective, and I feel that we can combine everything. 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 crypto, right? For us, I believe in the Solana ecosystem, I believe in its community, trust its culture.

If we weren't present in this space with Solana, I feel like we would have made a huge mistake in helping to pioneer this new space and lead the way. It would be a big loss for us, for our ecosystem, and even for Solana, and I feel like it's the right fit for us.

I think what we bring, in my opinion, is the beginning of a cultural phenomenon. I think that's 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 whole ecosystem better. Based on my interaction with the Solana community, I want to be able to do something for them, and this is a great opportunity for me. Of course, it will eventually become an SPL token. Ultimately, you know it will be a token standard based on Solana, and such a token is the SPL token.

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

LucaNetz : SPL is one of the native token standards of Solana, there are different types of token standards on Solana, and SPL is the most common. So there's nothing too complicated, you can learn about it.

Host: When is this token scheduled to be launched?

LucaNetz: Very soon, very soon. We don't plan to wait until the end of the year, nor do we plan to launch it immediately. So, according to the plan, it may have been launched when it is released.

「Original link」