Iowa City-based clusterFlunk opens up about raising seed round

Iowa investors also serving as mentors for young founders

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The first time AJ Nelson and Joe Dallago spoke with a West Coast investor about their idea, they were teenagers.

Dallago met the angel investor while living and interning in Palo Alto, Calif., and Nelson flew out to make their pitch. They asked for $5 million to build clusterFlunk, their idea for a social network for college classes, and take it to 25 universities.

Suffice it to say, they didn’t walk away with the money.

While the co-founders were initially devastated, the rejection motivated them to put all of their energy into turning their idea into a real product.

“If you want this to happen, you just have to make it happen. We just dropped everything,” Nelson said. “It’s not a pretty process.”

After years of near-constant work on clusterFlunk and dozens of pitches to investors, the co-founders eventually did find $100,000 in angel investments in July of this year. They discussed the experience in-depth Tuesday night at an event produced by Vault Startup School.

clusterFlunk’s funding came from four Iowa investors, including Josh Cramer, founder of Iowa City’s Cramer Development, and Ben Milne, founder of Des Moines-based Dwolla. The co-founders called this “smart money,” because the four investors also are entrepreneurs who can mentor the young company.

“You’re only as smart as the people around you,” Nelson said.

Dallago and Nelson reported that 25 percent of the student body at the University of Iowa has registered for their social studying site, with 18 percent logging in bi-weekly and 8 percent using the service every week.

“The founders are worth following just to see what happens,” Milne has written about his investment. “They have that built-in Midwest hustle and clarity of purpose you just don’t find very often.”

Nelson said the duo were a bit naive about the amount of work involved in building a company and raising funds when they began – and that wasn’t a bad thing.

“We were so passionate, we just worked all day and night,” he said. “We were – well, we still are – just two young punks, disrupting every way we can.”

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