Lab Summaries - Building NFT Businesses and Brands with Luca Netz (CEO of Pudgy Penguins)

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I have been a huge fan of NFTs - because of its intersection between art, technology, culture and business.

While there are many projects today focusing on the art and technology aspects of NFTs, I am particularly interested in the role NFTs can play in culture and business.

As such, I really enjoyed this conversation Luca Netz (CEO of Pudgy Penguins) had on Twitter Spaces with Mario Nawfal.

They discussed engaging topics at length, including NFT brand vs utility, business building in Web3 vs Web2, NFT's real world utility and more.

If you are a fan of business building, culture or just NFTs in general, here’s a summary you don't want to miss.

What is more important for NFTs - Brand or Utility?

People purchase NFTs for many different reasons. Some simply like the art and vibe, while others buy it become of the utilities it promises to bring.

Brand and intellectual property (IP) are key for NFTs. They can offer uncapped upside, as there is practically limitless potential for an NFT project when it develops a strong brand.

In Web3, there is also greater and aligned incentives for NFT buyers to be brand ambassadors of the NFT projects. When we purchase NFTs, we have the common goal of seeing them become successful.

On the other hand, an NFT's utility provided can also be useful in rewarding holders of NFTs. However, it has a capped upside, as the value of the NFT will then be tagged to the value of its utility.

Brand building in NFTs, therefore, is key to maximizing an NFT project's potential.

NFTs projects and their parallels to business building

At its core today, NFTs' key use case is still to serve as a digital identity for buyers. But for NFTs to reach its maximum potential, NFTs projects need to build a strong brand and business.

They have the potential to evolve from being just PFPs, to the becoming the next great brands and companies.

How are NFT projects and business building similar?

Building a successful Web3 business shares foundational elements with traditional businesses. For example, both types of businesses have a core group of members that come together to build something for a greater good.

What’s unique to Web3 is that it can grow passion for a purpose/business much faster than Web2 companies, due to its stronger network effects.

This community-first narrative can change how businesses are done in the future. At the moment, businesses typically focus more on customer acquisition rather than lifetime value (LTV), but it is proven that having a stronger LTV brings about better ROI for businesses.

Unique insights about NFT builders and businesses

The NFT space's paradigm shifted from simply being digital identities and collectibles to business building once Yuga Labs became a huge success.

However, many of the early NFT builders were not prepared to evolve to become business builders. This is made even more challenging by the fact that the NFT industry is extremely complex with its unique characteristics:

For one, mistakes can be fatal and directly felt by more stakeholders. When a mistake is made, everyone (including holders, communities, team members) will feel the pain and impact.

It is akin to building a publicly traded startup, as everything is out in the open while the project is still new and has many experimental aspects to it.

As a builder in the NFT space, Luca has to be the leader to not only his own team, but also the entire Pudgy Penguins community.

An observation by Luca is that most NFT projects are chasing the same users within the space, rather than going out and getting new NFT adopters. He aims to take the Pudgy Penguins IP to the real world so that it invades the minds of non-NFT natives.

This can be done with licensing of collectibles and IP monetisation, with licensing agreements with the community to create a ‘real-world utility stack’ that reaches a much larger audience.

This also allows them to build alternative revenue streams, as Luca believes that one cannot build an NFT business based on mints and royalties

Additional insights

• Investing in NFTs: Investing in NFTs is 100% about investing in the team.

• NFT value accrual: Value accrual should all go back to the core collection and holders. Luca sees Pudgy Penguins as similar to a first edition Pokemon card. All the efforts with brand awareness, product lines and collectibles aim to drive value back to the core collection.

• What makes a blue chip NFT projects: Luca's definition of a blue-chip NFT project is one that can lose attention and gain it back. This can be done through gamification to fill the void and keep the community engaged. Ultimately, the success of a project is dependent on its churn rate vs newcomers.

Enjoyed this summary? You can listen to the full (3 hour) Twitter Spaces here.

Do also check out the Pudgy Penguins NFT project!

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