Pudgy Penguins Bucked the NFT Crash—Now It’s Raised $9 Million

Pudgy Penguins, an Ethereum NFT project that surged amid the 2021 bull run and then toppled into chaos, was purchased by a serial entrepreneur about a year ago and given a second life—right as the market collapsed. But the cartoon birds have persevered, and now the team has raised funding as its ambitions grow.

Today, Pudgy Penguins announced that it has raised $9 million in seed funding in a round led by early-stage investment firm 1kx, with participation from Big Brain Holdings, Kronos Research, Old Fashion Research, CRIT Ventures, and the founders of LayerZero Labs, per a release.

The project launched in July 2021, just as the NFT market started putting up billions of dollars’ worth of trading volume each month, and Pudgy Penguins’ rise was propelled in part by a viral story in The New York Times.

But the initial buzz didn’t last, and by early 2022, the community was in disarray amid controversy over a co-founder’s past Web3 actions and plans by some NFT holders to break away by “wrapping” their Penguins as another token. Pudgy prices fell sharply amid the drama.

Luca Netz, a serial entrepreneur, purchased the project IP outright from the founders in April 2022 for $2.5 million, and told Decrypt that Pudgy Penguins didn’t have the millions of dollars’ worth of funds that some NFTs projects and startups had banked during the bull run.

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“When we bought it, we had no money in the bank,” he said. “And we knew that.”

Netz said that Pudgy Penguins “needed a real operator” to steer the ship. Soon after, however, overall NFT sales volume plummeted amid a crypto market crash, generating fewer creator royalties from secondary market sales and diminishing broader enthusiasm in the space. His team had to be “really scrappy” to grow the project amid those conditions.

Many NFT projects have lost considerable value over the last year. The Bored Ape Yacht Club, for example, fell from a peak starting price of about $429,000 (152 ETH) in late April 2022 to a current price of $82,600 (45 ETH). But Pudgy Penguins has bucked that trend, rising from $4,365 (1.55 ETH) to  $8,170 (4.44 ETH) in the same span.

Amid that market-defying growth, Pudgy Penguins has launched physical toy projects and other merch and built an advisory board with leaders from Meta and Hasbro. The project recently said that it signed with major Hollywood talent agency WME to pursue media projects and beyond, and it has generated some $250 million worth of total trading volume to date.

And while those moves have set Pudgy Penguins up to explore mainstream plans, the project has also grown its cachet amongst NFT die-hards, no doubt helped in part by being one of the rare profile picture (PFP) projects that has actually gained value amid a broader freefall.

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From his vantage point, Netz said that he understands what users want from the project. The first NFT he ever bought was a Pudgy Penguin, and he told Decrypt that he then went on to trade millions of dollars’ worth of NFTs after that.

Netz later purchased the Pudgy IP thinking that it had all the pieces to drive both a Web3 community and mainstream extensions ranging from products to entertainment media. It’s family-friendly and inclusive, he said, with a fervent community of NFT holders behind it.

Many NFT projects talk about creating major IP—for Netz, achieving that goal would mean ensuring that Pudgy Penguins has broad “influence.” Pudgy Penguins has notched over 3 billion views on its official GIFs and tens of millions of Instagram views, and now the seed funding and apparent WME deal may help it reach an even wider audience.

“I look at the Pudgy Penguin like an influencer,” Netz said. “This character is transcendent in its ability to get where we want it to be.”