Zima Red ep 136: Luca Netz - Pudgy Penguins: The IP Company
Primer: Why did Luca Netz acquire Pudgy Penguins for $2.5 million? What is his motivation? Where is he taking Pudgy Penguins to? Find out from the man himself in this episode of Zima Red.
Background
Serial entrepreneur for the last 6 years
11 months ago, they bought Pudgy Penguins as he was a huge fan of the project but the team was not executing well
Before Pudgy Penguins, he was part of Gel Blaster, America’s fastest-growing toy company
Gel Blaster exposed him to the world of IP and toys
Decision To Buy Pudgy Penguins
Bored Ape’s $4.5 billion dollar raise showed that the major players were taking the space seriously
Other projects had similarly high valuations but had not delivered much
Saw the huge potential of IPs in Web3
“I'm just looking at the landscape. I'm understanding the business potential as an entrepreneur. And I'm thinking to myself, let's build this thing because the bar is incredibly low, the valuations are incredibly high.”
- Luca Netz
Pudgy Penguin was able to beat other projects without raising any capital
Physical VS Digital Goods
Pros of digital goods:
No inauthenticity issues
No friction in buying and selling
Pros of physical goods:
Has an emotional touch point
For Pudgy Penguins, they want to keep their digital ecosystem as scarce as possible until there is overflowing inbound
Pudgy Penguins
Defining Pudgy Penguins
It’s an IP company
The Pudgy Penguin characters are the IP
Building Their Brand
Their team does a lot of A/B testing
When they started, they tried out all social media platforms
They doubled down on Instagram
After they perfect the process and make it autonomous, they will move on to the next platform
Their main goal is to create a brand and a character that people can be emotionally attached to
His Tweet On “Attention Is The New Oil”
It’s all about touchpoints:
His job as CEO & Founder to be a beacon and a champion
People scrolling through Instagram and coming across Pudgy Penguins
Texting friends and someone sending you a Pudgy Penguin gif
A TikTok strategy with a mascot
A Web3 community wearing the same PFPs
Physical products
Eventually, Pudgy Penguins will become inevitable
His Management Style
Is a leader — knows how to galvanize and speak well
In the beginning, he was micromanaging and ripping everything apart
Have learned to trust his team
Has hired an executive coach
As he is the voice and champion for the brand, it means he has less time on product, tech, etc.
Storytelling
Has hired a couple of amazing storytellers
The community already has existing lore, ideas, and NFTs
Has spent a few months making everything cohesive
Their brand bible and art bible are multi-100 page documents
Once their brand is big enough, animators will approach them, wanting to build on it
This approach is taken by Bored Apes. They want to take the exact same approach
Dealing With Negativity In The Bear Market
“I called NFT projects publicly traded startups.”
- Luca Netz
Their community is intelligent and familiar with what’s going on
Their brand equity is worth a ton. They put where their mouth is and has invested more than any other holder
Loves constructive criticism
Has experienced antagonizers. Dealing with them saps up a lot of their time
Recommends antagonizers to communicate appropriately as they may end up doing more harm than good
Is Floor Price A Gauge On Sentiment?
No NFT founders will say that they do not care about the floor price
The floor price sets the bar for how people value your project
There are variables that they cannot control:
A whale needing capital and selling some of his penguins
The impact of FTX on Pudgy Penguin prices
Looks at the floor price on a monthly basis
Pays a lot of attention to Twitter's sentiment
Revenue Sources
Creating toys and collectibles. It is just weeks away from the launch
Got paid by Instagram
Last month, they have made more money on royalties than they ever had
Their Physical Products
Their toys have a digital integration
Attempting to create a low-fidelity interactive experience
Their Roadmap
Prioritizing what has been working for them (e.g. Instagram)
Their goal in the next 12 months is to focus on their core competencies
Their core competency is in growing their social media better and shipping stuff better than everyone else
Their 10-year vision is to make a meaningful game, toys, and a short series
The Pudgy Penguin world is very similar to the SpongeBob world
What Makes NFTs So Powerful?
NFTs are powerful because they align the incentives of consumer and brand in a way that was never possible before
Building a business in Web3 is more powerful as there is an instant feedback loop and champions/affiliates of your brand that would otherwise take years to cultivate in a Web2 brand
Biggest Issues Around NFTs
The really toxic culture
Know of many great founders that are checking out because they are getting bullied
Bullish And Bearish On
Bullish
NFTs and Web3
The wave of consciousness that is coming around people — people waking up to the bullshit
Bearish
Inflation
What Do People Misunderstand About Him?
People think that he is arrogant
His Biggest Failure
In 2019, he started a company focusing on influencer monetization
Learned that if he wants top-tier talent, he needs to pay them top-tier salaries
Defining Success
Happiness — How content and happy you are with your life
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