AJ Nelson Speaks of clusterFlunk and Other Fun Things to Say

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“I guess it all started with some self-realization.  We didn’t pay attention in class. So there must be a tool out there that can help us we thought,” explained AJ Nelson, Co-Founder and CEO of clusterFlunk. “We quickly found there wasn’t a social network built around the classroom and connecting people by that thread, and that is where clusterFlunk came from,” he said, explaining, that like many start-ups, this social networking and virtual study group platform was born not of an idea, but in response to a need.

Nelson, the August guest of Executive Director Mike Colwell at the Business Innovation Zone’s Start-up Stories, covered a variety of subjects as he shared the experiences he and his partner Joe Dallago have accrued since launching a beta version of the site at the University of Iowa in January 2013 and growing University of Iowa student participation to the 75% level while also expanding to 14 more universities this year.

Described as “the way our generation does education,” clusterFlunk is an on-line social networking site built around university classes and intended to remove the social barrier that naturally exists in the lecture hall environment, encouraging students to share notes and work together in a virtual study group. In response to questions from both Colwell and a room of attendees which included a number of local tech entrepreneurs, investors, and entrepreneurial community supporters, Nelson touched on some common themes.

Funding

“It seems like fundraising in this area is getting much more straightforward,” observed Colwell, noting the success of Igor, TelePharm and Men’s Style Lab who have all recently closed rounds. Nelson concurred commenting on several rounds of funding successfully achieved by this bootstrapped start-up and culminating in the July announcement of $1 million in funding from Lightbank, a venture capital firm founded by the principals of Groupon.

Revealing the secret to the clusterFlunk approach Nelson shared, “We figured out that it is not about business plans, presentations or introductions and connections; it’s about making the correct product and the right people will come to you.” Nelson advocates the creation of relationships well before the need for fundraising, noting that the best time to meet people is when you don’t need money from them. “You shouldn’t be looking for money, money isn’t going to help you, it’s the people and the product that can take you to the next level that is going to help you,” shares this entrepreneur who argues the money will find you when the product is ready.

Scaling

Sharing advice given by Dwolla Founder and early clusterFlunk investor Ben Milne, Nelson discouraged scaling for the purpose of scaling. “There is no reason to scale when you haven’t gained traction or hit a tipping point in your first market,” commented Nelson, explaining that they have developed a recipe for scaling that requires 10% plus of each new university to register in the first semester. 

Marketing

Being a social media entity within the unique confines of a college community, clusterFlunk has been successful at growth by eschewing virtually all traditional marketing and utilizing what are becoming the new traditional social media venues. Twitter, Facebook, e-mail and choosing a product name that piques mainstream media interest have all helped clusterFlunk grow virally. Nelson offered his own formula for growth, G=c+op-mm, or growth equals content plus other people minus marketing messages, arguing that your users voices are much stronger than any marketing message.

“These are the things companies don’t talk about,” said Nelson with a smile as he shared a number of activities that have helped create buzz and garner attention both in the press and the on-line community. “We have always acted a lot bigger than we are,” he chuckled, citing the time he tweeted an Iowa City CEO that they could not meet until their engineering team returned from Palo Alto, not mentioning that Joe was the whole of the engineering team. The tweet spread, and clusterFlunk’s cred grew.

What no one tells you

As they grow and expand, opening offices in Chicago, clusterFlunk is hiring and experiencing the less glamorous side of start-up success. “It’s the stuff that no one tells you about that is the hardest, like hiring and management.You think that the money is the hard part and once you have that everything will fall into place, but that’s not true at all,” he relates. He and Colwell both underscored that while it is vogue in start-ups to disdain structure, when you start to grow, you realize its importance.

Revenue models

With angel and venture capital at their back from a variety of sources, the discussion eventually turns to potential revenue models and Nelson unabashedly admits he has no idea how the revenue will flow when the time comes. While the answer on the surface may seem flippant the thought process behind it is not. Quoting the philosophy of The Social+Capital Partnership, a tech funding partnership in Palo Alto, clusterFlunk is focused on “Doing social good first and the revenue will follow,” building a solid value proposition for its users and growing its user base is pre-requisite to chasing revenue.

Nelson does observe however that while he has no idea what the final model will entail, they have given it much thought to the possibilities and are not unprepared for the day when that becomes an issue; but that day is still in the distance as they capture and cultivate the most highly prized consumer demographic.

While it may be true that Nelson and his partner didn’t pay attention class at the University, it’s equally clear that they’ve gotten quite an education while there!

Drew McLellan: Reluctant Entrepreneur…Twice

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“There are lots of ways to be an entrepreneur,” reflected Drew McLellan, owner of McLellan Marketing Group (MMG) and nationally recognized guru of all things brand. “Twenty years ago I did it the traditional way by starting from nothing and just grinding it out, this time I bought an existing business,” he said of his acquisition four years ago of what would become Agency Management Institute, a wholly owned subsidiary of MMG. McLellan made his comments as the featured guest of the July rendition of the Business Innovation Zone (BIZ) luncheon.

The marketer of record for the BIZ from its inception and a much heralded annual speaker, typically on the latest trends in marketing, McLellan spoke this year of his own highly successful experiences as a start-up, a topic which has come to take center stage in the BIZ sessions with the burgeoning Des Moines start-up community. Under initial questioning from Mike Colwell, Executive Director of the BIZ, and subsequently from the capacity audience gathered at Start-Up City Des Moines, McLellan reflected upon the challenges and solutions of his personal entrepreneurial experience, and found some time to comment on the state of marketing trends as well.

“I’m a reluctant entrepreneur actually,” explained McLellan. “I always thought I would run an agency some day, it just never occurred to me it would be my own,” he confided, adding that in retrospect, like many entrepreneurs he is fairly opinionated. “In all fairness I was probably not a great employee and today I would be the worst employee known to man, in fact I would fire myself,” he said invoking humor while giving expression to a subtle but quintessential element of the entrepreneurial spirit, the conviction that you can do it better if given the freedom to try.

Like many talented individuals who set off to find their fortune under their own banner, McLellan admits to his close encounter with the e-myth syndrome where the reality of the entrepreneur’s lack of business acumen threatens to de-rail them early. “I didn’t know anything about running a business,” he recalls, “and learned the hard way for a couple of years.”

Noting that many people go into agency work because they find the business side of business repugnant, McLellan shared what for him was a resource of the highest order. Colwell and McLellan both extolled the virtues of peer forums and networking organizations that bring together leaders in a particular field or position whose companies are not in direct competition and encourage frank and open conversations and sharing. Whether CEO’s from different fields or from the same field and different markets, the shared wisdom and the honest feedback can ameliorate the inherent risks of entrepreneurship.

McLellan was fortunate to find such an organization led by a former agency owner and joined a recurring roundtable of his peers from across the country. With a well-established and successful agency and with McLellan becoming a brand in and of himself on the national speaking circuit it would have seemed that MMG had successfully transitioned into a stable post-start up position when opportunity arose. The owner of the association opted to retire and offered the business to McLellan. Soul searching, consultation with fellow members of the association and the advice of a business acquisition expert led to his purchasing and rebranding the business as Agency Management Institute in 2011, bringing it under the umbrella of MMG.

“It’s exciting, it’s fun and rewarding and it enhances my existing business,” he says in retrospect, and with an eye to the future the institute, which is not itself a full time job, beckons as a transition into a distant retirement.

Inevitably when an audience questions McLellan the topic turns to brand and marketing trends, and such was the case with the balance of the hour long session. Among the highlights:

Branding: The most successful brand will authentically represent who you truly are while at the same time resonating with your “sweet spot” customer.

Agencies and Start-ups: Recognizing that budget and time constraints as well as other factors are a challenge for most start-ups McLellan urges a phased approach. He suggests an initial consultation with an agency might be wise to help sketch out a plan as well as to introduce an outside perspective. While many start-ups can implement their own marketing, the perspective an agency can bring is often worth the investment of a quarterly or annual review and consultation.

The current blend of traditional and digital marketing: “Today, most of the agencies that did not choose to engage in the digital space no longer exist,” he said of a scene that is trending to 75% digital and 25% traditional marketing. While a few years ago the trend was to exclusive digital marketing, an equilibrium has emerged that maintains a traditional component and those agencies who sprung up only to service the digital realm have had to make adjustments to meet the needs of the market.

The changing face of agency staffing: Along with the trend toward digital and hastened by the impact of the recession on the agency business, contract and remote employees have become fairly commonplace. “I have one employee, whom I know very well, but we have never met face to face,” shared McLellan, observing that in response to the recession many agencies have utilized contract workers as a means of moving their largest fixed cost, labor, to a variable scheme.

The view of Des Moines: In what has become a common theme of these luncheons, perhaps owing to the perspective of the BIZ, the question of Des Moines’ place in the start-up world arose. McLellan, whose business found him on 125 planes last year is something of an ambassador for the community and can reflect on its changing image across the country. “There has been a concerted effort to put Des Moines on the map nationally,” he said of the work of the Greater Des Moines Partnership and others. “And I do think the world is changing its view of Des Moines, for the most part thinking of it as a hip and happening community.” As well it should.

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