E42: Lucas Netz - Pudgy Penguins Will Be The N°1 NFT Project In The World

0:00Started my first business when I was 18, became a millionaire at 19. Our guest today is Luca Nets, a serial entrepreneur who sold for more than$500 million in consumer package goods. The CEO and owner of Pudgy Penguins, Web3's leading IP company. What do you think of Miami? I like Miami. I think it has an interesting crypto culture, an interesting NFT culture, an interesting hub for young entrepreneurs. I talk about it a lot, so I won't bore the audience with a sob story. What was the first business? Selling jewelry online. What kind of jewelry? fake gold chains and cubic zirconia diamonds why did you choose that it has this dark side i couldn't afford school so going into debt to get a degree didn't seem like something a good businessman would do this industry in general web 3 nfts whatever it may be i think is marketing and branding and i think i do that the best in the space and so who else do you think in crypto is doing a decent job at that uh grew up homeless and then you start your business and very quickly you become a millionaire like how do you react when you make this money that quickly i've gone through so much pain and suffering in my life.

1:03I knew the value of a dollar and I didn't mess it up. I didn't go and party and go spend tons of things on cars and stuff. You talk about being a people pleaser. Yeah. But you're able to make a difference between business and real life now. Yeah. How do you do that? Enlighten me.

1:23Seventh one. Lucky number seven. Give you the best one. Let's do it. Yeah, man. Seven podcasts, but like it's just through by like crazy. And I was really looking forward to this one. Thank you. Because you're a special, special dude. I'm trying to be. How are you doing? I'm doing good. How are you? Very good. On fire, actually. I was thinking, man, I would be exhausted after seven podcasts in a day, but I'm actually more on fire than ever before. You know at the moment when you build the momentum and you just, I mean, you know it, you're in the flow, basically. I'm in my fifth Asian city in the last 14 days.

1:55So unfortunately, I'm not, I don't have the same energy that you do. But I'm going to give you my best. I'll give you some of mine. Please. Feel it in the atmosphere. I'm feeling it. You're hyping me. Where did you go before? I mean, Korea, but where before? Yeah, I was in Japan. So I was in Osaka, Tokyo. Then I was in Seoul, one other city, I forget. And now Singapore. Okay. On 12 days. What did you do? Tokyo, huge meetings with a bunch of, you know, Tokyo is the hub of IP. And so we'll get into this in a sec. But, you know, for Pudgy Penguins, I want to be one of the world's next great characters.

2:28and five of the 10 biggest characters in the world have come out of Tokyo. So Tokyo is really the home of this stuff. I went there to meet with some big companies that are based out of their distribution and other IP collaborators. And then I also just wanted to understand the culture. I've never been to Asia before. So I was just trying to squeeze it all in. Seoul, Korea Blockchain Week, a couple of the other cities. I went to Site C. That was a mistake. And now Singapore for Token 2049. What was your favorite place? I love Asia. I thought America was the most advanced. And I totally, being here, I'm like, these people are eons ahead of what we are in America and Europe.

3:11And you haven't been to China. Because China is like next level. It's a very different culture. So people might like or not like it. But in terms of technological advancement and everything, here is like 2 ,000 years before China is much more advanced. I can't believe it. I thought America was eons ahead of everybody and it's not the case. So it's been fascinating to watch. I love the people. I love the food. I love the culture. I love how quiet it is in busy areas. I love it. It's a culture built on respect and I appreciate it. I appreciate the system and processes. I mean, it's just an unbelievable world.

3:47If you've never gone, I highly recommend anyone listening to come to Asia at least once. It's mind blowing. And so I love the people. I love it. I love every city that I've been to. But for me specifically, I'm like a culture bug. We'll get into this. I'm very much, I think, in the culture business. And Tokyo is just special. So Tokyo has my heart, but I love everywhere else, you know, just as much, just maybe Tokyo, 1 % more. Where are you based? I'm in Miami and LA. So our team is based in Miami, but I have a home in LA. So I bounce back and forth, but mainly Miami. What do you think of Miami?

4:21I like Miami. I think it has an interesting crypto culture, an interesting NFT culture. I think it's an interesting hub for young entrepreneurs. It has this dark side, I think, like most cities. I love Los Angeles as well, but I'm happy to have my main home in Miami. What do I need to know about your early context to understand better the Luca who is standing today in front of me in this studio? I talk about it a lot, so I won't bore the audience with the sob story, but just me and my mom and my brother, so a single mom. Grew up homeless for 10 years, not homeless sleeping in a shelter, but bouncing around home to home, couch to couch for about 10 years, staying in one place between 6 to 12 months at a time.

5:11So I've stayed everywhere to the hood in New York City, to the hood in L.A., to the Hamptons in L.A., to Beverly Hills in L.A., just bouncing around. and whoever my mom's friend, whatever friend would let us stay on the couch and my mom would try to take care of the home. We did that for about 10 years. My mom was finally able to get a job and find some stability, but we still grew up really poor. I dropped out of high school when I was 16. I got my first job at a tech startup called Ring. I was throwing underground raves and rap shows while working at Ring. Why did you drop out of high school?

5:45I couldn't afford, I wanted to be a businessman and I couldn't afford school. So going into debt to get a scholar, going into debt to get a degree didn't seem like something a good businessman would do. So... What did your mother say? You know, most people who grew up with a single mom as a young man, I think your mom can't really control you as a young man. But did she say something? She... Because despite, I mean, parents, like they have this idea of like, oh, the safe classic path. Yeah. Did she think the same? For you? No, because our situation, so she Airbnb'd our house. We had basically just a one-bedroom apartment that she would Airbnb.

6:26And so her and I were just basically living together in the living room pretty much. And, you know, what are you going to tell? What are you going to say to your kid? Your kid's saying he wants to go make money. He wants to go, you know, produce. And you're over here, like, making two grand a month in Los Angeles. Like, what are you going to say to that? So she knew. But I tested out of school. I say I dropped out, but it's kind of the same thing. But I took a test called the Chesapeake. So in California, that's a test. So I was able to go to college afterwards. It's not the same thing as dropping out.

6:55It's a little bit harder. So I tested out, got a job at Ring, did the underground rap and rave shows, and started my first business when I was 18, became a millionaire at 19. What was the first business? Selling jewelry online. What kind of jewelry? Fake gold chains and cubic zirconia diamonds. Why did you choose that? Because hip hop was the fastest growing trend in America. And I thought, how can kids look like their favorite rappers? And well, gold chains and jewelry is really expensive. But for$100, I can make you look like your favorite rapper. So you have this idea on one side, but then you need to execute on all the distribution side.

7:35Yeah. How did you manage that? Drop shipping. Drop shipping? Yeah. Through what platforms? Amazon and Alibaba. But really early on, I only did that for the first six months. So I think dropshipping is a good mechanism if you've got absolutely no money. But I realized really early on the shipping times and the pain points. So the first hundred grand I made, I bought a bunch of inventory and started shipping it out of the States. What about the marketing channels you were using? I was one of the first people to really do influencer marketing. On Instagram? Yeah, I kind of pioneered it. So to give you some context, I wanted rappers to promote my fake chains.

8:12but I couldn't afford them. So what I would do is I would go to rapper fan pages. So let's say, you know, rapper is Kendrick Lamar or something. I couldn't afford a million dollars to get Kendrick Lamar to promote, but Kendrick Lamar dot fan page on Instagram had a hundred thousand followers and all of Kendrick Lamar's diehard fans. So I'd go to Kendrick Lamar dot fan page on Instagram. And I say, I'll pay you a hundred dollars for a story or an Instagram post. And I'd pay him a hundred dollars and make me a thousand dollars back. And I would do that all day for months. And then eventually I scaled it really big and I started paying the rappers themselves.

8:44When is that exactly? 2016 is when it started. So just turned 18. First couple of months, I kind of the first couple of months it was wasn't working. And then I figured out that whole influencer strategy within three months of me figuring that out. I went from, you know,$20 ,000 a month to half a million a month to multimillion dollar months when I was 18, 19 years old. And that's when you realize actually it's all about marketing. Marketing, all about marketing. Absolutely. You can have the best processes, the best product ever. If no one knows what you're doing. And today with social media, it's absolutely amazing.

9:20A lot of people see this social media stuff as, oh, it's not good. People are glued. But if you're a producer of content or if you use the content in the right fashion, it's a goldmine. It's amazing. And that's why I love being in this space right now because I believe in crypto. I believe in the blockchain. chain. But I think one of the Achilles heel of the space is I think the two Achilles heel in crypto and just this industry in general, Web3, NFTs, whatever it may be, I think is marketing and branding. And I think I do that the best in the space. And so I'm happy to bring my talents to a new world.

9:53Who else do you think in crypto is doing a decent job at that? Is there anyone? Because actually, just the user experience is really bad. I think they do parts of it good. I think crypto puts an emphasis on technology and really great technical minds. And that's great. We need that. Obviously, there's so much friction and so much buried entries of that. And so I'm not knocking that. I have so much respect for people with technical brains. I'm not that. But I think there's such a side to this. On one side of the spectrum, you have technical savvy and the importance of the technicalities. And on the other side, you have branding and consumer products.

10:35It's like crypto is very much in the space right now where it's, you know, IBM and Microsoft with computers, but nobody knows how to package it like Apple and Macintosh and brand it in that way. And so I think I'm kind of coming in and creating our version and doing to the space what Apple and Macintosh did to computers. I think we're going to do for crypto and the blockchain. I think the tech is there. It's clunky, and they're going to figure it out. But how do you package it in a non-intimidating way? The problem with crypto is everyone tries to sell it like the front end. Everyone thinks that's the hook.

11:10That's the drying power. But it's not. It's what powers the experience. It's the back end. And I think that is the misconception in crypto today. So you grew up homeless and then you say you start your business and very quickly you become a millionaire. Like how do you react when you make this money that quickly, especially with that background? Yeah, it was tough. And I didn't go down a crazy rabbit hole. Like I've gone through so much pain and suffering in my life that I knew the value of a dollar and I didn't mess it up. I didn't go and party and go spend, you know, tons of things on cars and stuff.

11:46But did you have an imposter syndrome or something, especially if you come from like a, I mean, for example, for me, I'm not from a poor background, like from normal one. I felt like an imposter in 20, 2021. Like really, I was feeling terrible. I was, I took the moment for granted, I think is what I did. I kicked. So in the early days of e-commerce, and there's earlier days than when I started, but I was still in the early days when I became rich off of e-commerce and direct consumer. I was making so much money doing so little work because I had a formula, right? Product, shipping, fulfillment, influencer post, machine.

12:25It was a very simple system. And I was, you know, making$100 ,000,$200 ,000 a day. And I could have made so much more. I could have been Fashion Nova before Fashion Nova. I didn't really, what I didn't focus on in my younger years was enterprise value. I wasn't worried about building equity. I was worried about cash flow and how much money I could put in my bank at the end of every month. And that was the mistake because everything was so easy. I mean, you'd literally click a couple buttons on Facebook ads and a couple influencer campaigns and you'd make generational wealth. But the problem is it wasn't really generational wealth unless you built enterprise value.

13:03And so now my only focus is enterprise value. I don't even care, you know, cash flow is cash flow, but that's the business that I'm in. But in that moment in time, I was sitting behind, sitting at a pool in the biggest house in Miami at the time, which was Bay Harbor, in the nicest neighborhood in Miami with the biggest house. And I was just chilling when in reality, I should have been trying to kick it up a notch in a bigger notch. I didn't have a vision when I was younger. And I think that was the problem. do you think this is not normal i think it's probably normal especially when wealth happens fast yeah that you have a moment where you are i don't want to say almost losing drive but you're like i mean you're essentially you're losing a bit of drive which is a problem as an entrepreneur you become kind of you can't be really happy without the drive and when things are too easy you still think especially when you're young and maybe it's the first time it happens you think why would i struggle that much to think more when all this shit is so easy it's funny you bring it up because it's uh it's being comfortable and and being comfortable is the is leads to complacency and complacency leads to failure right and so it's funny to that it's funny you bring this up because i think that's my problem with the nft space right one of the reasons why i came in is because so many guys and groups and gals made tens if not hundreds of millions of dollars for doing nothing.

14:19So they got rewarded for this terrible behavior, which led them to be comfortable. I mean, nobody earned their cash. Nobody in the NFT space earned the money that they made. Nobody. I think anybody who would say otherwise is a fool. Like nobody earned the money that they got. In the sense that there is no actual profitable business or company behind anything they've done. There's just no movement. There was no, you know, if anything, Anyone who only person who kind of came close to them in Yuga Labs, you know, definitely there were some like people who underestimate the influencer marketing masterclass they put on and some of the business developments that they did in a good BD team.

14:57So, you know, there's probably an exception there somewhere. But I mean, everybody else made a pretty picture, you know, minted it on the blockchain, made tens of millions of dollars, you know, thought everything was great. Price went up. And then when price started going down, didn't know what to do. And that's where I came in. I said, I'm going to show you guys what to do and how to do it. So just before jumping into that, you talk about this easy, how easy it was because of like early inference for marketing. How long did this easy period last? Three years. It doesn't last forever. Three years.

15:29And then it got hard. Okay. It got really hard. What did you, what, what was the first thing that made you realize, oh man, this is not the same game anymore? I just, it just, for two years, we would just make more money every month. And then we started making less. And then I took it seriously. And I was like, okay, well, I want to make more again. And I couldn't. And then the power of brand. So a lot of my peers who were making lesser money, who started at the same time as me, started to kind of go like this. And I started to kind of go down. And I was trying to figure out why. And it's because they had done the dirty work and the hard work to build a brand and to build lifetime value and customer retention.

16:08These are the things I wasn't focused on. I was focusing on how many new customers could I get to buy my product. Processes over brand. Yes, processes over brand, the system. And in reality, you want to optimize for lifetime value. You want to optimize for brand integrity. And these are the things, again, I got rewarded for bad behavior, right? I got rewarded for selling high margin product as fast, getting it to the customer as fast as possible, and then not caring if they purchased again. But it's all about how many times they purchase over our life cycle. I mean, that's what's acquirable. That's enterprise value, right?

16:39Right. So. So what do you do at that moment when you realize all money is harder? Yeah, it was crazy because then by I started doing a lot of venture investing. So I've deployed five million dollars in my own capital across maybe 30 different businesses, a lot of which, you know, some of which have failed, but a lot of which have done really well. I started doing a lot of that because I was a cash flow king. I was kind of known for this, the king of cash flow. Like nobody was really I was kind of known as the golden boy for many years, at least in Los Angeles, that was kind of like the aura around me because nobody was really making cash like I was.

17:10I was buying homes out the wazoo, cars. No one was really, really doing it. I felt like the way that I was doing it. And so I started venture investing because I thought that was the highest impact use of my cash. Better than buying cars. Better than buying cars. That was a waste. That was such a foolish thing. But I started putting that money into venture investing. I thought that was the way that I was going to create an impact. And as the cash flow started to decrease, an opportunity came around to kind of bring back a company called Von Dutch, which you're probably familiar with being, you know, Swiss and French.

17:40And so that showed me my capability because what I had done is I had built such an insane network with all of these influencers. Nobody was paying influencers the way that I was for many years. I was, you know, then Fashion Nova came along and a lot of these brands started doing what I was doing. But in the early days, influencers weren't making any money. So I was the guy paying them$1 ,000 for a post,$5 ,000 for a post,$10 ,000 for a post, and I was really the man. And then I did the same thing with Von Dutch, and I realized what my formula and what my playbook was capable of, but with a brand that was like really hot, high quality, high integrity product.

18:15And that made me realize like the true power that I possess and what I had learned over the last couple of years, right? Because Von Dutch went from a nothing, a dead brand to$100 million company in 12 months when I came around. What did you do for them? I just, I applied what I call the playbook. So I have this thing that I've developed. Well, Von Dutch made me realize that I had a playbook. So I developed what I call a playbook, which is this formula that I apply to businesses. I either, you know, join or that I start. That is like a formula that if I rinse and repeat it now three times and it's worked every time, where I kind of just plug this playbook into the, this playbook in this system into this business and it just works.

18:57And so I can't give you the details of what the playbook looks like because every competitor watching probably would like to know. But that's very much my formula and what makes me, I think, so special. What was your role there? Basically marketing. I was like leading the whole marketing chart. So I'm a marketer at heart. That's my specialty. So you did that for 12 months? 12 months. And then? Well, so I worked. Oh, sorry. I worked out a gross revenue deal with them. So they were making no money. And so I basically I don't I don't work for retainers or for salaries or anything like that. I basically said if I make I knew I was going to make them rich.

19:29So I said, I want a percentage of gross revenue. So let's say you did a million dollars a month. I wanted to call it 10 % of that. And so by the time I left, they were making millions of dollars a month. And I took a basically a top a top gross line percentage of that number. And so when it came to resign our agreement, we have a 12 month agreement. I thought because I had made them so much money, they would do what anybody does, which is, hey, you did what you said you were going to do. You made us rich. We're going to give you what I would call the supermax, right? If LeBron James comes to Los Angeles and says, I'm going to win you a championship this year.

20:03And he does, what do you do? You know, give him a rookie contract. No, you give him the supermax and you back up the Brinks truck and you say, thank you, keep doing this. They didn't do that. They basically took my contract from a supermax to a rookie contract. And I said, screw you guys. And then I went a couple months later, I invest in this company called Gel Blaster, which ends up being North America's fastest growing toy company. What did you learn from this Von Dutcher experience? Really my power of what I could do if I was behind a brand, like a real brand. Von Dutcher is a real brand. What's your crypto aha moment?

20:39My brother is a really tech savvy. He didn't even call himself a nerd, but he's like a nerd. and and I just you know consider yourself a nerd no no no but there's a part of me that is there's definitely a part of I mean I I I do things that a lot of nerds do for example the just command and conquer video games uh stare at like I'm not technically savvy the numbers start breaking at a certain point for me my brain is not programmed that way I'm very much an EQ, high EQ individual, not a high IQ individual. And so that's kind of the discrepancy for me. But in 2017 or 2016, Bitcoin started doing its thing.

21:24I started making some money. My brother was really into it. And then I invested. I maybe had like 40 1080 TIs, AMD 1080 TIs running in my mom's apartment at the time. so but it was like in so incredibly hot but we just believed we were mining the wrong thing we were mining digibite which just didn't end up going anywhere yeah uh on bitmax moving all the funds at bitmax but we i spent i was basically taking all of my money and buying amd because there's something i learned really early on i had read it or i'd heard it from somewhere but you know when you have businesses that you know lean into what we call basic human rights they always are the businesses with the most upside i.e the cell phone and the ability to communicate with one another.

22:06Communication is a basic human right. So if you empower communication, that's going to be a really great business ended up being one of the great businesses of all time social media, same thing. It's a basic human right to be able to socialize with others that are distanced away from you as long as technology permits it highest upside businesses of all time, the ability to transact freely without a middleman is a basic human right, there shouldn't be a person in the middle of that. So that made sense to me. And so I was always looking for many years, I was a little more advanced than maybe my peers.

22:33But when I was 15, 16, I was always looking for the next basic human right. I'd learned this really early on. And, you know, the second I started learning about entrepreneurship, I had read this in some, digested it somewhere that made me like keen to this. Applying patterns, basically. Exactly. The human right pattern. Where is that next? And so it was crypto. And so I knew crypto was going to be the one. 2017 happened. I was a Litecoin lit in there. Is it because you were like, oh, the technology or the potential is amazing or because amazing or is it because you look at the talents even if there is nothing like concrete out there you look at the talents for me was that i was like man all the dudes have been following you know balaji chamas all these dudes they're in 2000 navale 2012 13 like and some of them they went all into crypto like there must be a freaking reason and that was five six years ago so like i'm gonna follow and a lot of people hate on crypto which is a good sign so i'm gonna follow these dudes that was that's the right thesis and that's and that's my thesis today right that that's why I go.

23:31So one thing I didn't do, and this was really good advice, but one thing I didn't do was I didn't really put my money, all my chips on high conviction plays. I would always like dip and dabble. And I think a lot of investors do this. Now, when I have a high conviction play, I put it all in, right? Or like a lot in. So what I, that is very much my thesis today. So now like crypto is a high conviction play for me. I'm pretty much all in, right? Before then I was risk adverse. Remember, I just made it. So I didn't want to go lose all my money and things like that. And I was based off the pattern.

24:05I wasn't I hadn't reached that curve of like, oh, who is Chamath? Who is Naval? I didn't know any of those people at the time. I knew I knew Steve Shortsman. I knew Bill Gates. I knew Steve Jobs. Those are the people I wasn't remember. I'm like 17, 18. I don't have that depth of knowledge that probably you did at the time. But I bag held 2017. I ran it all the way to the top. We bag held it all the way to the bottom. Classic. Yeah, watch CoinMarketCap every day until 2020, but I was just buying, you know, just every little check that I could, but again, not high conviction. Now, this time around, I'm just putting all the chips to the table because I believe it's going to happen again.

24:40Same, absolutely. Absolutely. And people, for some reason, are depressed again. Yeah. It's not going to happen. Why would it go up? It's because of money printing and COVID 2020. Dude, no. Probably, but like, no. It's coming back. Obviously, it's coming back. Just about the time. And now's when you should be figuring out ways to make money to buy some. Not when it's up like this. I learned that the hard way. I was the king of buying things when it's up like this. I love buying things when it's up like this. I don't like buying things when it's like that. But money is made when you're buying things like that.