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There have been many remarkable comeback stories throughout history.
Steve Jobs was kicked out of Apple 🍎 in 1985 but made a triumphant return in 1997 when Apple acquired his company, NeXT.
After briefly retiring from basketball 🏀, Michael Jordan returned to the NBA in 1995 and led the Chicago Bulls 🐂 to three more championships.
Before achieving enormous success with the "Harry Potter" series, J.K. Rowling faced financial difficulties and rejections from multiple publishers. 📚
The great comeback story of web3 and maybe even this decade has got to be Pudgy Penguins. 🐧
This is a story of a $8M rug pull that no one talks about anymore.
This is a story of a community voting out its leader.
This is the story of a new leader who has become one of the most respected leaders in web3.
This is a story of building a billion dollar global IP brand. 💰
This is a story told onchain. ⛓️
This is, above all, the epic story of Pudgy Penguins. 🐧💫
But before we dive into the story, we need your help! 🙏
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Everyone who replies will be rewarded with a juicy discount to our upcoming Investing Course. 💸 Now back to Pudgys! 👇
Let’s start this journey with 5 onchain numbers:
June 22, 2021 – Floor price of 0.03 ETH
Pudgy mint sells out, led by a team of 4 founders. ✅
Aug 29, 2021 – Floor price of 3.8 ETH
Floor price on Aug 29, 2021. Pudgy floor hits an ATH the day before the “Pudgy Presents” airdrop. 🚀
Jan 6, 2022 – Floor price of 0.5 ETH
Pudgy floor plummets to 0.5 ETH after it is revealed that founders have emptied over $8M from the treasury and the community votes to kick them out. 😨
Jan 4, 2023 – Floor price of 6.5 ETH
6 months after being taken over by Luca Netz, Pudgy sets a new ATH. 📈
Aug 3, 2023 – Floor price of 4.3 ETH
In a bear market when most NFT projects have gone to 0 and every bluechip is down at least 80%, Pudgy is only down 30%.
But what happened? How did this project go from dead after getting rugged to being a rather successful project through the bear market? 🤷
Today we’re going to break down the Pudgy story in 4 chapters:
Chapter 1: Four Founders, Three Collections and $145M in Secondary Sales
Chapter 2: The Most Diabolical $8M Rug Pull
Chapter 3: The $2.5M Saviour
Chapter 4: How to Build a Billion Dollar IP Brand
Buckle up my PRO frens and let’s go. 👇
First let's just make sure everyone is on the same page. If you’re a Pudgy fan you already know this.
There are 3 collections within the Pudgy ecosystem.
Pudgy Penguins launched in July 2021 amid a period of mania in the NFT space. The collection consists of 8,888 avatars of cartoon penguins living on the Ethereum blockchain.
The NFTs were available to mint for 0.03 ETH and quickly sold out. Not much happened in the first month. The floor price fluctuated but never really took off.
Until August 5, 2021, you could’ve bought a Pudgy for 0.08ETH. 8 days later on, Aug 13 the floor hit 3.5 ETH.
That’s a 43x! The days of NFT summer were crazy! 🤯
The collection soared in popularity as key players in the NFT space endorsed the project on social media. Whales started to buy in.
High-profile celebrities such as rapper Tory Lanez and NBA star Steph Curry joined as well.
By August 2021, The New York Times had run a feature on the collection.
On August 30th, 2021 Pudgy Rods, AKA “rogs”, (previously “Pudgy Presents”) were released as a free-to-claim NFT, one for each Pudgy Penguin.
They were released as eggs wrapped in red ribbons, and their contents were kept as a surprise. 🎁
During the time between the release and the reveal on Christmas, people were speculating about the possible outcomes of the eggs.
After months of anticipation, on Christmas Eve, the presents were revealed. People generally didn't know what to expect, but were extremely underwhelmed with the unveiling of the fishing rods.
The aesthetics were pretty bland, and to add salt to injury, they were misspelled as "Rogs."
The Rods reveal was not well received by the community or by Crypto Twitter in general.
It was widely considered a flop, and it strengthened people's already existing FUD cases against Pudgy Penguins and its founding members.
That Christmas eve signified a turning point in the Pudgy Penguins history. 👀
By the end of December 2021, the Pudgy founders had made over $8m from the primary mint and secondary royalties. 🤑
The Pudgy community ended 2021 faced with a potential crisis when rumors started circulating about ColeThereum, one of the project's founders, allegedly being involved in questionable and fraudulent activities.
This revelation left the community in a state of shock, apprehensive about the looming possibility of the most detrimental outcome for an NFT project: a rug pull. 😱
The culmination of the unfolding drama occurred when it came to light that the project's original creators had nearly depleted the over $8M+ in the Pudgy Penguins treasury.
The promises of a game and a metaverse were nothing more than words. 😬
The aftermath of this revelation triggered a significant downturn in the project's valuation, plummeting its floor price to an unprecedented low of 0.5 ETH. 😓
Subsequently, in early January 2022, the Pudgy Penguins community collectively decided to oust Cole from his leadership role.
In a Discord community vote, Pudgy Penguins holders overwhelmingly supported the motion to remove Cole from his position at the helm. ❌
Can you believe this?
Cole was the one who proposed this vote. So rather than it looking like he rugged the community he got the community to vote him out. 😅
Walking away with clean hands like this is a chef’s kiss diabolical move. 😈
You can’t make this shit up! 🤷
By April 2022, a ray of hope dawned upon the community as a new leader stepped in and acquired Pudgy Penguins for a substantial 750 ETH, translating to approximately US$2.5 million in value back then. 💰
This buyer was none other than Luca Netz, a youthful yet adept serial entrepreneur, who detected a promising prospect to take the reins and steer the project toward success. 🚀
Although investing such a sizable amount—two and a half million dollars—into a gathering of 8,888 pleasantly plump little penguins might appear exorbitant, Luca remarked that the deal was so favorable it almost made him feel 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 math perspective was super obvious,” Luca said.
This revenue Luca refers to in early 2022 was the result of royalties on secondary sales which have since gone away due to the rug.
This reliance on royalties is one of the biggest problems that plagues many NFT projects today.
Thankfully, Luca wasn’t going to rely on the hope of continued royalty payments as the sole source of income for the business.
“I’m not a believer of 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.
The royalty playbook was the one that the original founders of Pudgy followed along with many other NFT leaders.
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 and selling NFTs.
So how did Luca know better?
Despite being just 24-years-old, Luca had extensive background in entrepreneurship under his belt, including an $8M exit from a video-doorbell tech startup known as ‘Ring’. The company was acquired for a total of $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 as one of the world’s most successful young entrepreneurs.
However, the journey hasn't always been filled with glamor. Luca Netz's upbringing was marked by adversity — spanning nine years, he experienced homelessness and found himself living in over 30 different locations.
During this time, he slept on various sofa beds, generously offered by both acquaintances and strangers, who opened their doors to accommodate him and his mother.
Growing up in a chaotic environment, Luca learned to be resourceful. Despite early challenges, he believes this skill now gives him an edge over his competitors in the wild world of tech entrepreneurship
Luca’s acquisition of the Pudgy Penguins has been widely regarded as the greatest comeback story ever to grace the NFT industry.
In the 1+ year following Luca’s purchase of the NFT collection, the floor price of Pudgys has been very strong, despite the bear market that has taken every other bluechip down at least 80%.
In August 2022 a single Pudgy Penguin sold for a record-breaking 400 ETH — a value of roughly US$600,000 at the time.
But how did this happen?
Here’s the TLDR of the Luca playbook:
Strong & invested leadership team: There’s no secret to success. You just need a group of people willing to work their asses off for it.
Have a clear vision and purpose: Pudgy aims to build a global IP brand.
Build a sustainable business first: In an interview recently Luca said that Pudgy would make over $6M in 2023 with very little being from royalties.
Establish a powerful marketing engine to attract new consumers: Pudgy is the largest web3 brand on Instagram and has over 5B views on their GIFs.
Always reward your original community: Pudgy is building an onchain IP licensing platform called Overpass that will license the IP of an NFT from the holder and use it to sell a product, movie, or other content. Proceeds will then be shared with the owner of the NFT.
Luca brought a team with him from his past ventures and he asked them to invest their time and money.
These leaders each purchased part of the $2.5M sale of Pudgy and they all agreed that this was the most important thing in their lives and they were prepared to work very hard and put in the hours.
Pudgy then raised a $9M seed round in 2023 further bolstering their team with strong advisors and capital to scale.
This is from the team…
“Pudgy Penguins is accelerating Web3 innovation through IP utilization and community empowerment. Embodying love, empathy, & compassion, the Pudgy Penguins are a beacon of good vibes & positivity for everyone. Each holder receives exclusive access to experiences, events, IP licensing opportunities and more. Let’s break through the boundaries of Web3 together.”
Their long term vision is focused on 5 key initiatives:
Consumer product goods (Toys)
Gaming
Film and tv
Partnerships and licenses
Expanding in the web3 ecosystem
In order to create a sustainable business that gains value from outside the ecosystem, rather than extracting value from the holders (by creating new mints) or relying on royalties,the team launched Pudgy Toys & Pudgy World in May 2023.
The launch was incredibly successful and Pudgy Toys were #1 on Amazon and sold over $500k in their first week.
They were featured on NBC News, Toy Insider, and more. Additionally, they won ‘Toy Insider’s Summer Toy Of The Year.’
These toys are aimed at the massive kids toy market and they are priced accordingly, at $20.
Every toy comes with a digital experience linked to Pudgy World.
This will be a new way that NFTs and blockchain technology are introduced to the everyday consumer, in a seamless, non-intimidating way.
Pudgy World is an experience that gives the non-NFT public their very first blockchain wallet, Soulbound NFT, and Tradeable NFTs, all in one simple sign up with an email address.
Not only did the toys launch on Amazon, they will also be available in retail. With the support of Retail Monster and PMI Toys, the Pudgy Toys will hit the shelves of some of the most prominent retail and specialty stores in the world.
But why have just 1 consumer product category when you can have 2?
Separate from the mass-produced line of Pudgy Toys, the team launched a line of high-end, very limited-edition collectibles.
The first one in the line was the "Shark Suit" collectible, which is based on the 1/1 Pudgy Penguin #7365.
The collectible includes a scannable NFC chip to verify authenticity onchain. Pudgy Penguins “Shark Suit” Collectible sold out in 10 seconds.
The second line was the Banana Suit, which sold out in 7 seconds, at $249 each.
Launching both $20 toys on Amazon and in retail stores along with high-end collectible toys allows Pudgy Penguin (the company) to:
Bring in a sustainable revenue stream
Spread the brand of Pudgys across the world
And whoever buys these toys joins the Pudgy ecosystem, which results in their 8,888 core NFT collection growing awareness.
Win for the Pudgy team, win for the Pudgy holders & win for the consumers.
The team went all in on their social media strategy, creating a strong sense of brand identity for Pudgys that continually establishes a variety of methods to onboard ambitious newcomers into the community. 🌊
In June 2023, Pudgy became the most followed web3 brand on Instagram, passing Bored Ape Yacht Club, which has 600k followers. Currently, Pudgy’s IG has over 733k followers.
With thousands of GIFs and Stickers uploaded onto Giphy, they’ve accumulated over 5.7 billion views across two accounts.
Meanwhile, their Twitter is 111k and their Discord is 39k.
Stop and take that in for a second. 😌
This is a web3 brand that has an Instagram (an anti-web3 platform) 6.6x the size of their Twitter (a pro-web3 platform). Remember they have a clear vision to build a global IP brand based on their penguins.
They know that Instagram has a larger global reach and is the better platform for a cute chubby penguin IP brand to grow.
By IP, I mean videos, GIFs, memes and images that go viral because they’re cute, funny & relatable.
What’s most impressive about their Instagram is that there is no mention of NFTs. They understand (like Web3 Academy PRO members) that there are less than 20M active wallets right now.
And if you want to build a global brand you do it by relating to a global market of hundreds of millions that care more about cute animals than they do about future tech.
The man behind all this insane social media and brand growth is none other than the Chief Meme Officer.
Yes, Pudgy has a Chief Meme Officer!
This may sound like a ridiculous title to most companies but this is why Pudgy is winning. They understand that culture builds community and a community creates a flywheel of growth.
Here’s their head of memes showing off his Pudgy in Times Square a few days ago.
Pudgy Toys mark a special moment in history. They are the first mass-market product licensed DIRECTLY from the community.
Right now, the toys are subject to a licensing royalty, where the NFT owners receive payment annually and in perpetuity. At the end of each year, the Pudgy team calculates the revenue and makes the payouts.
So far, only a small portion of less than 40 NFTs have been licensed.
In the future, they plan to switch to "non-exclusive upfront payments," meaning they will pay the NFT owners an amount they believe the licensing deal is worth and send the money directly to their wallets.
At the moment, the team is focused on building a Web3 Licensing tool called Overpass. NFT owners can sign legal documents, receive license payouts, and handle the entire process directly onchain.
This platform will be open to other projects in the future as well, because Pudgy wants to democratize the IPs. Pretty cool.
In order to get license deals for all 8,888 NFTs the team plans to not only license the NFTs for toys. In order to achieve the scale of licensing thousands of pieces of IP, the team plans to license the IP for usage in content like GIFs.
Currently, the Pudgy team is not licensing the IP that it is using in GIFs or social media content.
But we’ll see when Overpass launches later this year if they take steps in that direction.
Pudgy isn’t just the comeback story of the year.
It’s redefining the future of how a business can build alongside its community.
It’s creating a playbook for an IP Licensing Model we’ve never seen before.
It takes huge guts and a lot of hard work to push the boundaries of tech, community and business in such an innovative way.
But that’s why we’re all here. That’s why we’re in web3. Because we want to be part of a future that hasn’t been written yet. And we are the DOers that are going to leave our mark.
No one says it better than Luca…
“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 behaviors, and web3 essentially gets rid of those gatekeepers.” - Luca Netz
As you’re reading this, you are part of a migration from online to onchain. A migration at a scale we’ve never seen before.
The unlocks and benefits of web3 are immense and the opportunity for you, as an early investor and builder are even greater.
With that said, this isn’t a report meant to persuade you into buying a Pudgy. Hell, we at Web3 Academy don’t even own one.
But it’s meant to show you the way of how to build a sustainable business, using web3 features.
And for investors, it’s meant to show you how a business that you potentially want to invest in, should look & behave like.
Remember: Build a valuable product that people actually want to use first. Then, the sky's the limit.
If you’re not doing that, you’re setting yourself up for failure. And if the company you want to invest in doesn’t do that, they’re setting themselves up for failure.
As a PRO member, you are positioned perfectly to learn and evolve as web3 grows. There’ll be an abundance of projects looking to both rug you and make you rich.
We’ll show you the difference between them so you can always build and invest successfully in this space.
That’s it for today… I hope that you can join us in Discord next week for an upcoming event.
What: Eyes On Chain – we’re going over the most important charts and trends in web3 right now.
When: Tuesday, 12PM
Where: Web3 Academy Discord
See you there. ✌️
Thanks for reading. And remember, you're strong, you’re powerful, you’re alpha! ❤️
See you soon. ✌️
Disclaimer: This article is for informational purposes only and not financial advice. Conduct your own research and consult a financial advisor before making investment decisions or taking any action based on the content.
Jay Hamilton
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