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John James Starts Engine, Raises $4M for E-Commerce Software FirmLock Icon

5 min read

Fayetteville entrepreneur John James is back with another enterprise.

James, a co-founder of Acumen Brands in 2009, has raised nearly $4 million for his latest startup, Engine, which sells business management software to e-commerce retailers and hopes to compete with Canadian e-commerce leader Shopify, which James once recommended to entrepreneurs.

Founded in 2016, Engine’s software handles everything from content management to processing orders and payments for e-commerce companies. Among the company’s initial investors is Claiborne Deming, chairman of Murphy Oil Corp. of El Dorado.

The U.S. e-commerce market is growing, making this a good time for James’ enterprise.

“Total spend on enterprise-level digital commerce platforms represents $6.6 billion in 2018 growing to $11.4 billion in 2022,” according to a Sept. 13 report on Shopify by Wedbush, a Los Angeles financial services and investment firm. “E-commerce spend totals represent the growing market that will continue to draw merchants to create online stores.”

Adding to the potential for growth, James said, is the fact that many e-commerce companies, whose platforms date to 2006 or 2007, need makeovers. “That’s before the iPhone, that’s before Facebook,” he said. “We believe there’s a real opportunity in building a mobile-first, social network-enabled platform for the next decade.”

Website efficiency is of crucial importance to a retailer, Jill Dvorak, the senior director of digital retail for the National Retail Federation, said in an email to Arkansas Business. “The inventory, pricing, details, extended images and other information is expected to be there in real time,” she said. “Even if the transaction happens offline, much research and info gathering is done online.”

Engine is projected to have more than $1 million in revenue this year, but James wouldn’t disclose the exact amount. “We’ve had a good run,” James said. “We’ve got our first handful of clients up and running.”

James said the money raised through selling shares of the company will be used to hire more employees, especially engineers. The company has grown from three employees earlier this year to 21. James hopes to eventually have close to 40 employees.

Raising money in Arkansas is a challenge, James said. “I’ve had better luck than most,” he said. “I’m well over $100 million in capital taken in, but it’s still hard even for me with a good track record for making investors money.”

Little Rock attorney Jamie Fugitt, who represents entrepreneurs, investors and technology startups, said he doesn’t think funding for startups has dried up in Arkansas, although it’s sometimes difficult to get. “I think that good startup investment opportunities get funded or get funding,” said Fugitt, a Harvard-trained lawyer at PPGMR Law. Fugitt assisted Engine with the offering.

James and Terry Turpin co-founded Acumen Brands in 2009 and the company launched a number of e-commerce companies, such as Country Outfitter, which sold Western-style clothes and boots, and Scrub Shopper, which sold medical wear.

In 2013, General Atlantic, a private equity firm in New York, invested $83 million in Acumen and received a 60 percent ownership stake in the company. James left Acumen in 2014, but remained on its board until 2016.

Earlier this year, General Atlantic told investors that their shares were worthless. In January, James and Turpin declined to comment to Arkansas Business about the decline in value of Acumen shares.

After Acumen, James started Hayseed Ventures, which assisted and invested in startup companies.

While working at Hayseed, James met with about 250-300 entrepreneurs for e-commerce companies.

A recurrent theme, he said, was that the companies wanted to build their own software, but they couldn’t afford to do so, nor did they have the technical skill. James said he directed those entrepreneurs to Shopify, a growing company that is now Engine’s competitor.

Wedbush said in its company report that Shopify is “well positioned to capture share of the total commerce market.” Wedbush said that Shopify “essentially created a new market by allowing smaller merchants to build their own ecommerce stores through its simple, cost effective plug and play software.”

Shopify had revenue of $459.3 million for the six-month period that ended June 30, up 65 percent from the same period in 2017.

Still, James said he wanted to create a software platform that has all the data an e-commerce company would need in one location.

“So that was really the genesis of” Engine, he said.

Deming serves on Engine’s board of directors with James and another founder, Jim Kane of Fayetteville. Kane was the chief technology officer and first employee at Acumen Brands. James has known and worked with him for three decades, James said.

The e-commerce market is one of the fastest-growing retail segments in the country. The market has grown steadily from $225 billion in 2012 to more than $450 billion in 2017, according to Wedbush’s report.

“But despite this robust growth over several years, e-commerce still only contributes to less than 10 percent of all retail purchases and represents a huge secular opportunity for all of the merchants (large and small) that are involved in the offline to online shift in shopping,” Wedbush said.

James said Engine will target clients that have around $1 million or more in annual revenue. Engine “is designed for businesses that have outgrown Shopify and … want to build a big, nice $50 million or $100 million business,” James said.

(Shopify, however, does have companies that have more than $100 million in annual sales, according to Wedbush. Some of Shopify’s clients include Nestle and Kylie Cosmetics by Kylie Jenner.)

Deming Sees a Revolution
Engine will “revolutionize the e-commerce space” and help companies grow, Deming said in a January news release. “Engine, with its headquarters in northwest Arkansas, can capitalize on its proximity to leaders in retail to collaborate, network and learn… I am glad to be on the ground floor of a project that will change e-commerce for the better.”

James said the $4 million sale of Engine shares, which represents a minority stake, will make the company profitable. He would like to grow Engine large enough so it could go public.

However, “that’s not what drives us here,” James said. “It’s building a sustainable, profitable business.”

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