As the NFT sector continues to waddle through a period of frosty consumer interest, some collections are diving deep, exploring new waters and expanding their horizons to the physical realm in hopes of reaching more people and growing their brand.

Pudgy Penguins, an (admittedly adorable) NFT collection that also doubles as a web3 IP company, is releasing a line of toys dubbed Pudgy Toys, Luca Netz, CEO of the company, told TechCrunch+ in an exclusive interview.

The penguin plushies are being made in collaboration with PMI, which also produces toys for Fortnite and Among Us, Netz said.

The company sees physical toys as a “Trojan horse” for the web3 ecosystem and NFTs. “Unfortunately, NFT revenue is not sustainable and it’s not really growable,” Netz acknowledged, adding that the toys are meant to make the company more sustainable. “Secondly, we wanted to create an IP that transcends this ecosystem, and the way I know how to do that is through physical products.”

Launched in 2021 and acquired by Netz in April 2022, the 8,888-NFT collection has grown to include real-world products and experiences ranging from live events to physical goods (like these toys).

The company has chosen and licensed 16 SKUs inspired by Pudgy Penguin NFTs from the original collection. The 16 NFTs were picked based on aesthetics, various characteristics and how engaged the owner of the NFT is with the community, Netz noted.

“Every toy is an NFT that lives on the blockchain and that NFT is licensed directly from the holder,” Netz noted. “So every time one of those toys sells, they make a royalty in perpetuity.”

The initial launch will include about 100,000 toys, priced from $5 to $35, that will be sold online and through retailers internationally. Each toy comes with a birth certificate and QR code that unlocks a series of NFTs, or a trait box, on its online platform, Pudgy World, Netz said.

“Pudgy World is where you build your character, play mini-games and interact with other users,” he added.

The company’s endeavors seem to be paying off: It recently raised a $9 million seed round. Of course, this is not the first NFT-focused company to raise capital, but the funding indicates that off-blockchain efforts are a good way for popular digital collections to build on their brand and attract external capital.