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!

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Eliason Speaks of Teams, Innovation, Des Moines and I/OWA

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“All of us are part of a larger start-up, it is called the State of Iowa,” remarked James Eliason, CEO of Goodsmiths and 2nd generation serial entrepreneur, during his remarks before the September Business Innovation Zone Luncheon and Networking Session. “In general the State of Iowa is learning alongside the local start-up community and I believe you will continue to see more and more good things.” Speculating that the next five to ten years will see strong growth in the Central Iowa tech start-up community emanating from downtown Des Moines and spreading to West Des Moines and Ames, Eliason cited the “realist Midwest mentality” as fundamental to that continued success and projected growth.

“He’s a young man but I call him one of the old guys because he has been around so long,” said Mike Colwell, Executive Director of the BIZ when introducing Eliason with the moniker of Giant-Slayer for his tendency to take on large companies the likes of Twitter and Etsy.

Eliason’s presentation before the monthly event, billed as “Innovation, Success and Failure on the Road to Goodsmiths” shared many of the lessons learned in not only his own path to success, but his collaboration and association with many entrepreneurial adventures including the fifteen originated by his father.

Enrolled at the University of Iowa in Economics and Business Administration Eliason became disenchanted early. “I became frustrated like a lot of entrepreneurs who decide college is not the right fit for them, and then I discovered the John Pappajohn Entrepreneurial Center,” he recalls. This started him on  the path that would, after graduation, bring him home to join his father’s endeavors before breaking off on a series of start-ups, some successful, some not, and eventually lead to the formation of Goodsmiths, a niche E-bay like company facilitating transactions between hand-made and vintage product stores and their clients. 

Download a summary of the conversation (pdf file)

Download James’ presentation (pdf file)

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