John James is an ex-physician who gave up his practice for the adventure of innovation. He is the founder of Engine Ecommerce, Hayseed Ventures, Acumen Holdings, Legal Sense Publishing, Egora Group and Champions Quiz Preparation. In this episode, John talks about his career path and developing an e-commerce platform.
Episode Transcript
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00:08 Matt Waller: Hi I'm Matt Waller, Dean of the Sam M. Walton College of Business. Welcome to Be Epic, the podcast where we explore excellence, professionalism, innovation and collegiality and what those values mean in business, education, and your life today.
00:27 Matt Waller: With John James, the CEO of Engine and John has a lot of experience in E-commerce, which is the topic tonight. John first got involved in E-commerce in 1995 before I knew what e-commerce meant or had ever even heard of it. But he's been involved in it for a long time, which is unusual, so it makes him a particularly strong expert on this topic. So we're fortunate to have you, John. Thank you for joining me.
01:00 John James: Thanks for having me, this will be fun.
01:02 Matt Waller: So John, I would like to start off with just a quick overview of how you got involved in E-commerce and then I want to skip ahead and talk about Hayseed Ventures and how that spanned Engine.
01:23 John James: To start in E-commerce, so it's '93, I come to the University of Arkansas and I'm living in Pomfret Hall. And at that time, in order to get an email address to get access to the internet, you had to take up Computer Science class. So I'm a Pre-Med Major, Microbiology undergrad and so I sign up for Computer Systems Engineering 101, or whatever it was, 1913 I believe is what it was. And I spent my entire freshman year trying to figure out the internet. It was fantastic. It was mostly text-based. The browser didn't even exist yet. Netscape wasn't out yet. And boy, I just fell in love with him.
02:00 John James: So here's '95, you start to see a little bit of the advent of E-commerce, Amazon exists, a few others start to pop up. And I'd started a little quiz bowl business. We were the State Quiz bowl champions, met in high school in '93 and I wrote a bunch of practice questions and study aids to help high school kids prepare for this academic competition called "Quiz Bowl". And I needed a place to sell it, so I went to the Mullins library and checked out every book I could find on direct mail and I love it 'cause it was really very succinct math-oriented. So there was this thing called conversion rate and return on investment and all this. And then I saw the internet and it was that on steroids. So direct mail would take you a month or two months to three months in order to get results that you could reliably plot out and know what your revenue was gonna be. With the internet, it was in minutes. You could tell and it was was pretty awesome. So that's how I paid for medical school by selling Quiz bowl questions online on a fairly, well today, a very poorly built E-commerce site that I built myself in '95 in my dorm room.
03:04 Matt Waller: That is a remarkable story. And I know, later then you started another E-commerce business.
03:13 John James: 2001, it was right after 9/11, my brother was the president of Sun B micro products. They had just gone through this ridiculous change with Chainsaw Al Dunlap. It was Enron before Enron came around. It was super bad. I guess my brother was the highest ranking clean person in the company and he was elevated to president. He lives up in Joplin and we were in the mall right after 9/11 he says, "We should sell grills online." And I laughed at him. I'm like, And I am in my intern year of my residency, I'm working a hundred hour weeks as a family practice resident, I've got this Quiz bowl business that's going on, I'm gonna have my first kid and there's no way, "I can't do this."
03:49 John James: Well I was on call a night or two after that and it was the only slow night of call I had was in old Washington Regional year and I built grillstuff.com that night when I was on call. And we thought, "Hey, if we can have a $30,000 a year in 2002, we've knocked it out of the park." Well, we had a $30,000 day at the end of 2002. So we missed it by 365 X and we were off to the races. And that was about the point that I knew I wasn't gonna practice medicine. It was a combination of the love of what I did with the Quiz bowl business, this internet thing that was by then, exploding. Everyone knew what it was in 2001. Everyone had started to shop online. I mean, that's when Jeff Bezos famously put out the 1000% growth annually. Never seen anything like it. So it was a pretty neat time. Google had just launched their cost per click ad system and we were in the right place, right time with that.
04:42 Matt Waller: Now eventually, I know you've been involved in lots of businesses. You eventually started Hayseed Ventures. Would you tell us just a little bit about that?
04:52 John James: So in 2009, I started Acumen brands and had a really good run with that. We ended up raising over $100 million of venture capital and I basically had found of PTSD after I sold the majority of that business and it made a lot of my early investors a lot of money. And the founders did okay in that transaction and I knew I wanted to do something. I wanted to give back to the community. There was no way I was ready to run another venture at that point. I needed a break. My kids were at an age where I wanted to see them a lot and they both started, my two girls had started playing volleyball and my son started getting into things and so, I needed something to find my next venture. And so Hayseed was really a combination of three things. Number one, was to give back to the community a little bit but I had 300 coffees in the span of 18 months with entrepreneurs trying to grow their venture. I had no ulterior motor. I was just meeting with these kids, trying to help them move forward and then we wrote 12 checks. So we made 12 investments out of Hayseed and that was the second reason to do it. There is no capital at least at the time, there was no capital to fund these fledgling young businesses, back at the napkin level fledgling, so really early seed stage investing. We invested in 12 companies and the third thing was for me to find my next venture in the 12th business we started out of Hayseed was one that I decided to run Engine, which is an E-commerce platform.
06:21 Matt Waller: And it's an e-commerce platform kind of like Shopify, right?
06:24 John James: A lot like Shopify.
06:25 Matt Waller: And so a lot of the, if I remember correctly, a lot of the companies that you were shepherding along in Hayseed were E-commerce, right?
06:35 John James: All of them, for the most part, for the most part yeah.
06:36 Matt Waller: All of them? And I remember one of them, you harvested quite well.
06:41 John James: Yeah. We've had... Yeah, there's another couple that are coming, but the first one we did was Menguin. Menguin was a group out of Atlanta, three, four or five guys, and they rented tuxedos online. And they saw this huge market moving forward, but they couldn't raise any capital in Atlanta. So I got a call from Silicon Valley Bank, the bank we used after we'd raised all the $100 million of capital, and they introduced us, and couldn't find out, they had a great product. They had terrible technology and they had terrible customer acquisitions. So those are the only two things in the world that I understood about tuxedos, is how you might acquire customers and how you might build an e-commerce system to run. So they had tried everything. They had tried Jobify, they had tried three or four other things. It hadn't had much success building it out. So offered them a $140,000 investment. I don't know why that number, but it just sticks out in my head. They moved their entire team to Fayetteville with a $140,000 investment, which doesn't even seem possible. Eighteen months later, 20 months later, they sold the business for $25 million.
07:51 Matt Waller: It was a pretty good deal.
07:52 John James: Not too bad, right?
07:53 Matt Waller: That was a good investment.
07:54 John James: That was a great one, that was a great one. Apptegy was our second investment, a little group out of Little Rock. They've had a probably bigger success, believe it or not, than Menguin. I think they have 80, 90 employees there in Little Rock, and we were off to the races. But seeing the problem that Menguin had, and one or two of the other companies that we had with Shopify, we said, "Gosh! We solved this problem. We solved every one of the problems they had at our last business. Let's just build our own software platform." And we initially said it as a joke 'cause this is a herculean undertaking. There's no way you would just really nearly say, "Let's build an e-commerce platform." And so that's what we decided to do after about a year of soul-searching, a year of talking with the smartest people I knew. Getting a partnership with my old Chief Technical Officer at Acumen, Jim Kane, who I've known since we were six or seven years old.
08:42 Matt Waller: Are you serious?
08:43 John James: Yeah, we built a bulletin board system, believe it or not, in 1988 or '89 and we had four phone lines running into my brother's newly-vacated bedroom. So people would dial in from all over the country to dial in to our bulletin board system. I was 15 years old. And I guess that maybe that was my first business, I don't know.
[chuckle]
09:02 Matt Waller: So would you give me some examples of some features or functionality that you're addressing as you build Engine as compared to Shopify?
09:14 John James: So I think if you look at the three trends of e-commerce, so I call it e-commerce 1.0, e-commerce 2.0 and e-commerce 3.0. And e-commerce 1.0 was pretty simple. It was pretty linear. You had this grid of products that you built, and everyone knows what this grid looks like. It's either three or four or five in columns and rows. And that was really good for Google. So e-commerce 1.0 was driven by Google and keyword search. So people would raise their hands and say, "Hey, I wanna buy a pair of cowboy boots," by typing the word "buy cowboy boots" into Google. So you'd harvest that traffic, send it over a grid with a bunch of cowboy boots on it, and they would buy very linear, e-commerce 1.0. 2.0, you started to get social media involved in there. And where 1.0, you're harvesting demand off of Google, on 2.0, you had to create demand off social media. So if you tried the same strategies that worked on Google, it didn't work. You had to create demand for a product. And so you started to see some pretty innovative things come around. Zulily, One Kings Lane, Country Outfitter that I ran. You'd go from zero to a few million Facebook fans seemingly over night, and you'd create demand in a category. So there were 135,000 searches a month for cowboy boots on Google, but there are 18.2 million women that we're gonna target demographic to sell cowboy boots to. And so that was beautiful imagery, and creating a sense of urgency, and collecting of email addresses and all this.
10:48 John James: Well, e-commerce 3.0 is a combination of the two, if you look at it. Country Outfitter that I ran, it didn't do super well after we sold the majority of it. In fact, it did terrible after we sold the majority of it. It was a low-margin business competing with Amazon. Well, that's an awful idea. Amazon has already won, Walmart is a close second, and then you got people like Nordstrom and... Gosh! Where is the room for a retailer of other people's products? E-commerce 3.0 is the digitally-native vertical brand. So brands that build their own product, sell it direct to the end consumer, and that's why we started Engine is to cater to those brands that really wanna establish a direct relationship with their customer. You can name them Dollar Shave Club. There's a really good one. Harry's, their competitor, their upscale competitor. Allbirds, the shoes I'm wearing today, they just had a $1.4 billion valuation. Joey Zwillinger, a buddy of mine out on Silicon Valley, built this company from nothing to a $1.4 billion valuation in two years. They're wool shoes. It's not rocket science here. They're great wool shoes. I'm on about my tenth pair. Rhone, the pants I'm wearing today. It's basically a direct-to-consumer Lululemon. You could go on and on and on and on about these. Glossier, my 15-year-old's favorite brand. It's a direct-to-consumer cosmetic brand. So those are type of brands that we're trying to build software for.
12:14 Matt Waller: So how does Engine interface with, say social media?
12:20 John James: That's the key, it's really the disintermediation of the shopping cart. So wherever you wanna shop, however you wanna shop, on whatever device you wanna shop. Our competitors were starting in 2006 and 2007, so Shopify and Magento were probably the two best-known competitors that we're going against. Well, what phone did you use in 2006? It didn't have a screen on it, and you are darn sure weren't able to buy anything on it. And so why not have a platform that was built in 2018? Well, Facebook didn't really exist in 2006 and 2007 either. So a platform that is your mobile-first, social media enabled, and then the ability to build that direct relationship to the consumer with beautiful imagery and marketing automation, things that really, no one had even thought of back in, in '06, '07.
13:12 Matt Waller: What kind of marketing automation are you thinking of?
13:16 John James: It is a great story behind this. So, in the early days of Country Outfitter 2009, it was like I said, a harvest demand model off of Google and we got to a certain size, scope, and scale. It was about a $5 million business. We figured out how to create demand off of Facebook, and a lot of that involved getting people's email addresses. So we ended up with 11 million of those 18 million subscribing to our email list. And so here you are, it's a champagne problem, right? You've got 11 million people you can communicate with any time you want to, and what we found was our communications, these batch-and-blast emails, for instance, that we'd send out, I didn't know if you're a man or a woman. I didn't know if you liked Miranda Lambert or Taylor Swift. I didn't know if you were rich or poor. And so we'd send the same marketing email to all 11 million people, and of course, "mark as spam," "mark as spam," "mark as spam." And so our open rates would decline, our engagement rates would decline. And so what we decided to do is build a different type of system.
14:19 John James: So the first thing we did, I mean that was kindergarten, right? Send a mail and the same thing to every single person on the list. Twelfth grade was maybe, "Okay, you're a man who is wealthy, who likes lizard skin boots." Well, we'd mail you that, and I think we had 258 different customer personas that we'd mail something out to like that. And that was neat, that was 12th grade. That was a heck of a lot better than it was when we were mailing the same thing, but we realized the PhD degree was really more user-initiated. So when user X would do event Y, marketing cascade Z would happen. So in this case, maybe it's guy out of Atlanta... Woman out of Atlanta Georgia that likes Taylor Swift looked at this particular pair of boots. We'd set up a set of rules that then they would get an email communication four hours later, 24 hours later, maybe 48 hours later, and each of them would have different things. If they didn't respond to those by the fourth email, maybe we'd send 'em a discount. And all that would flow out across omnichannels. So it'd flow to Facebook. Maybe they got a direct mail flyer, knowing what they did. So is was event-driven and it was personalized. And that's the kind of stuff that we're building in the back end of Engine. So event-driven action-oriented, not spam.
15:40 John James: So long story short, when we went from the batch-and-blast days, 11 million emails with the same thing, to event-driven personalized, I mean it was a... I believe it was a 18-fold improvement. So 1800%. Of course it was, just in hindsight, you'd mail a tenth the number of emails and get more revenue that you did when you mailed the whole list. So it was great. People loved it and we loved it.
16:08 Matt Waller: I've noticed in social media marketing, there's more and more direct-to-consumer brands that are using hyper-targeting.
16:24 John James: They're so good at it.
16:25 Matt Waller: Yeah, they're like... Someone will, maybe an influencer will come on and talk about how great the Chiefs did and they used that in Kansas City on Instagram. And then they'll talk about how great the Cardinals are in St. Louis, talking about some product as well. And I've never seen this to this degree. Are you seeing that in general?
16:54 John James: Oh, it's unbelievable. I have a friend, another friend out in Silicon Valley that's built a custom T-shirt shop. And that sounds so boring, right? A custom T-shirt shop. Well, except for the fact that he takes two interests and he meshes them together. So let's say that you own a Welsh Corgi, or you own a Goldendoodle, or you own a Dachshund. Okay, so you're a dog lover. And let's say you like Donald Trump. So, "My Corgi Loves Donald Trump," and there is the T-shirt right in your feed, and of course you buy it. How many of them are there? 100? 1000? I don't know, but there's not very many of those people. So take one interest times two interest times a third interest, and my goodness, you can go absolutely nuts with this. And that's what he's done. He's built a $50-$80 million business just simply around that. Take the other side of it, "My Dachshund Voted for Hillary." Same thing, he's agnostic, he doesn't care. And man, if you showed that out in Atlanta, maybe the Dachshund's wearing a Atlanta Falcons hat. You could go to that level of specificity, right? He's in St. Louis, he's wearing a Cardinals hat. Pretty neat what you can do.
18:11 Matt Waller: It really is.
18:13 John James: T-shirts are just the beginning of that, Golly, it's crazy. When you look at the number of things, direct-to-consumer brands that I now had subscriptions with or wear. My entire body is coated with this, Sir Albert shoes, I've got Stance socks and underwear, I've got Rhone pants on, I brushed my teeth right before I came here, you're welcome, with a Quip toothbrush that my wife turned me on to. And they signed me up to this subscription package and they send me a new toothbrush head every three months, they send me new toothpaste every month. If I'm Walmart or Amazon, I'm scared to death of that. Really Procter & Gamble and Unilever, but still, it's a pretty neat phenomenon. I don't wear Ray-Bans anymore, I wear Shady Rays. I saw those in my feed, they're cheaper, they're better, they're polarized. I can't tell you the number of brands I use. It's nuts. And it's just in the last year-and-a-half or so this has started to happen to me.
19:13 Matt Waller: Well, you know, along those lines, there's more and more... So I'll talk about two different ones, one like on Instagram it'll say, "Swipe up," and you swipe up and all of a sudden you can buy whatever it is.
19:18 John James: Right there.
19:18 Matt Waller: Right?
19:18 John James: Yeah.
19:18 Matt Waller: And on Alexa, you could be listening to a wine tasting show and buy one of the wines with just by speaking. Do you have any plans to integrate voice first types of technologies into Engine at all?
19:51 John James: Oh, you have to. Engine, right now... Or proof of concept of that, we actually built an Alexa skill where you could check your e-commerce revenue and so... It's pretty neat, it works on all platforms...
20:04 Matt Waller: Before you go on with that, for those who are listening and don't know, 'cause I think a lot of people still don't know about this. If you have an Echo, an Amazon Echo, for example, you can get what's called a "flash briefing."
20:19 John James: That's right.
20:20 Matt Waller: And a flash briefing is a compilation of a number of "Alexa skills." So, for example, I have an Alexa skill from The Harvard Business Review. I have an Alexia skill from The Wall Street Journal, and others, weather, etcetera. And so, in the morning, I can say, "Alexa, give me my flash briefing," and it will give real short, one-minute summaries from The Wall Street Journal or The Harvard Business Review. I could also do a wine tasting if you want. But, the amazing thing is that you could also buy some of these things on there but I didn't mean to interrupt, but I just thought most people still don't know about this.
20:56 John James: It's crazy. I think the classic thing is what smart people do on the weekends in their free time is what everyone will be doing ten years from now and... You've got Bitcoin, you've got things like Alexa, you've got these self-driving cars... There is... It's endless. Drones I saw three or four years ago, all these smart kids on the weekends, flying their drones around and talking about air traffic control problems and thinking about things you never thought about.
21:24 John James: In your eye, what's the next version of commerce? Well, I can almost guarantee you it's not Facebook. It probably either has AR or VR or voice or a video or something that we... Some kid's tinkering with. Probably some kid over at your University is tinkering with. He'll know it way before I will and I'll see it, and I hope we're able to act quick enough and implement it into our system.
21:51 Matt Waller: Well, you know, I think for those who are listening that aren't familiar with it, I would encourage you to experiment with it. I think Amazon has 70% or 75% of the market share in this right now. I could be wrong about that.
22:05 John James: No, you're right. I read that the day I...
22:06 Matt Waller: Did you?
22:06 John James: It surprised me, actually. I thought... I have a Google Home Max and I love it. I have one... Basically, everywhere I go outside and so I can just yell, "Hey, Google Play." And you're right, Alexa is dominating this market and that surprised me.
22:23 Matt Waller: Well, the thing I've learned about this is I try new skills all the time and most of them, before it's done playing, I'll say, "Alexa, delete that skill." And of all the... You think of social media and just... Nothing's as easy to stop as an Alexa skill. So, it's almost like for this media, you have to be really good in that one minute and so it seems like a big challenge, but it's a big opportunity, for sure.
23:01 John James: Our attentions spans are shortening and shortening and shortening. So who... The holy grail is to be able to do push communications to your customer but in order to do that, it has to be awesome. You send them five bad emails in a row, they've unsubscribed. You send them a bad text message. Well, they're gonna unsubscribe. It's a privilege; it's an honor to be able to work the way a lot of these e-commerce brands do and a lot of them abuse it and they don't last for long and... You're exactly right, there's Alexa. The skills and the way they've done it... It's really hard to build one, by the way. It still is. It's still a little bit bespoke in nature. It'll get easier and it will take off. I'm sure you're right on that.
23:45 Matt Waller: It reminds me of some of the early days of Twitter or some of these where people who got in early, it was like a land grab, almost. And it seems like there's a lot of people trying, but I'm telling you, 90%... More than that, 98% of the ones I try I don't like.
24:08 John James: Yeah, they're bad. They're really bad.
24:11 Matt Waller: And some... There's few that are good. I think The Wall Street Journal is really good. It seems like they put a lot of effort into it.
24:16 John James: That's how I wake up every morning. That's my alarm.
24:18 Matt Waller: Is it really?
24:19 John James: Really, yeah. Mm-hmm.
24:21 Matt Waller: Wow. Now, when we think about e-commerce and I don't know, personally, of anyone who's been involved in e-commerce longer than you've been involved in it. There's still... It's one of those fields that it was very well-defined at one time but now, it's complicated in some ways. When I say... It is in some ways and isn't in others. It's easier to get into now, in some ways, because there's tools out there to help you do it, but the combinations and permutations of what you can do and how you can do it is endless, it seems like.
25:02 John James: It is. It starts with how you acquire customers. With a new social network popping up every week... Snapchat, out of nowhere, right? You've got Twitch now which is where all the kids are watching the video games. Who watches other people play video games? Well, my kid does and if we don't understand that as marketers and e-commerce operators, we're gonna miss out. These YouTube stars... I've never heard of these people and they have million-person followings. More people watch that than...
25:33 Matt Waller: There's a social media network called Musically and I hadn't heard of it, but... I still don't quite get it, just like I didn't get Snapchat, at first. You have to play around with these things... But these are really young kids, I think.
25:52 John James: Yeah, my kids all use Musically.
25:54 Matt Waller: Oh, they do?
25:54 John James: Oh, absolutely and have for a while.
25:56 Matt Waller: Yeah, it's been around... I heard that it took a dip and it's gone back up, again. Is that true?
26:01 John James: I don't know what they use now. VSCO is another one I've heard, which is...
26:05 Matt Waller: What's that?
26:06 John James: It's more about the... Boy, you're gonna get me speaking out of turn here, but it's very similar to Instagram and Snapchat, but it's more visual in nature and video-oriented and moving. It's pretty awesome.
26:21 Matt Waller: Well, even though there's all of these social media out there, different types, Facebook still is a strong contender out there.
26:31 John James: It's the gorilla. If people come to me with an e-commerce business and they say, "Where can I get customers?" Well, I tell them, "There's two ways: There's search and social." The only place that you can really, that I've seen a business bigger than, say $1 million be built in e-commerce business is through those two platforms, still today. I've still not seen a Snapchat business build $100 million of revenue. So everyone says, "How do you do it?" Well, there's three ways... Or two ways, it's Facebook and Google, and capture their email address and talk to them. It's kind of funny that those are the old tired things that still what drives 90% plus of revenue. If you take those three, I bet it's 99%.
27:13 Matt Waller: If you look at the history of business at the beginning of the industrial revolution, mankind started to come up with ways to mass produce things and at a lower cost per unit, but variety wasn't high. Originally, variety was very high before mass production because everything was built custom. Mass production came along and it made it possible for people to have all kinds of things, but there wasn't any customization. And now, we're seeing almost like a mass customization.
27:53 John James: Yeah. It's really neat watching it. And the confluence of those two things is what excites me the most about e-commerce. So a custom e-commerce site that provides a new user experience maybe you haven't thought of, and then this ability of personalization and customization and quick turn-building your supply chain, you're just in time but on steroids. And a brand that comes to mind is... Another friend of mine, Christiane Lemieux, she was on Ellen DeGeneres' design show. Her last business, she sold the Wayfair, and she's building a business called theinside.com. And The Inside is basically custom furniture. So she partners with designers, and she puts out a new furniture collection almost every day, it's unbelievable! And at a good price. And she's got access to one of a very rare printer, I believe, that actually direct-to-garment prints this furniture. So you've just disrupted, go to your local Havertys or Bassett and place an order and have someone in High Point, North Carolina build it, and you may get it in 12 weeks, but it's only that.
29:08 Matt Waller: So when, well, John was talking, I looked it up on my iPhone, and here it is: The Inside. "Fashion your home. Introducing The Inside Times, Christine... "
29:25 John James: Christiane Lemieux, yeah.
29:26 Matt Waller: Yeah. It, "Shop the collection."
29:29 John James: Yeah, so a new designer will come in and they'll collaborate, and they'll put out these incredible new fabrics, and a new collection every day or two. And how does she tell you about it? Well, she pushes it out through email. And why do I open them? Because it's good and it's interesting, it's like Pinterest in your inbox. She's curated from the best designers in the world, and the stuff's affordable. There's another brand that she actually started while she was at Wayfair, Birch Lane is the name of it, and we ordered everything for our entire lake house from this place. It's like Pottery Barn, except it's a third the price and it's actually well-constructed. It's incredible! And so, she started that brand at Wayfair and spun out, started this other one as a standalone, just raised a round of venture capital. She raised I think $4 or $5 or $6 million of venture capital. We just closed our round for Engine, about $4 million round, which is...
30:26 Matt Waller: Well, congratulations! I didn't know that.
30:29 John James: Yeah, it just came as... Someone just published it today.
30:31 Matt Waller: Are you serious?
30:32 John James: Yeah, it came out...
30:33 Matt Waller: Well, congratulations!
30:33 John James: Well, thank you, yeah. So rewind back to 2009, if memory serves, Matt, you would raise the previous round of venture capital a decade before I did at Acumen.
30:45 Matt Waller: Yeah.
30:46 John James: So our round in 2009 was the first one in about a decade. And it's still rare as hen's teeth in Arkansas, so to raise a $4 million round, it's pretty exciting.
30:55 Matt Waller: That is what is good news.
30:58 John James: Yeah. We've hired a bunch of people, it's been fun.
31:00 Matt Waller: Is that in the newspaper now, or?
31:02 John James: It came out in Talk Business & Politics today and I'm running a post about it today so I'll show you the news and what we plan to do with it.
31:08 Matt Waller: Oh, good. That's exciting! Well, it seems like there's some action.
31:15 John James: There is, finally!
31:16 Matt Waller: You just got a round and Movista just got a round.
31:21 John James: Yeah, theirs was a little bigger. That was pretty big.
31:22 Matt Waller: And it was $12 million? They're from Bentonville.
31:24 John James: Yeah, they've been around for a while. So watch then in April what they've built. And it's great, it takes a few things like that.
31:32 Matt Waller: But yeah you think about that just between Bentonville and Fayetteville, within a couple months, $16 million. And two companies has been razors, I'm sure there's more, but those are the ones I'm aware of that's seen a lot of action.
31:44 John James: Those are the only ones, unfortunately, yeah.
31:45 Matt Waller: What's that?
31:47 John James: Unfortunately, I think those are the only... You could count the number of venture capital rounds in Arkansas in the last five years on both your hands. And that's sad to me. There's not enough seed funding to get those things to a point where you can raise a $4 or $5 million round.
32:04 Matt Waller: I was just at an event last week and over the weekend called the Heartland Summit. And one of the speakers said that 75% of all venture capital in the United States goes to three states.
32:21 John James: Yeah.
32:21 Matt Waller: California, New York and Massachusetts. So the rest of us get 25%. And there's more and more venture firms and private equity firms that are saying, "Hey, this could be an arbitrage opportunity."
32:34 John James: Oh, it's a huge arbitrage opportunity. The prices of these early-stage companies for kids that have never built a business is off the charts. So you wanna seed invest in a company with a 23-year-old entrepreneur that's never built anything. Well, he's raising at a higher valuation, because he's in Silicon Valley, than I am. I've built five companies, sold a couple of them and... This week.
33:00 Matt Waller: What's interesting is 20 years ago, when I was really in the software business, it was very hard to live here and be in software.
33:08 John James: Yeah.
33:09 Matt Waller: But I do think today, where you live is a little less important than it was 20 years ago.
33:16 John James: It is. The idea of a remote team used to scare me to death and now, with the collaboration tools, Slack, Trello, others. We use four-five different things. I've got a little crew out in Denver. We have four people in Denver. We just hired someone in the middle of Kentucky. We've got a developer in Portland. We work with this group out of the West Coast of Mexico where the hurricane's about to hit, and we've got a developer in the Netherlands. You're no longer encumbered by geography. Yeah, we'd love to have all our developers, all of our engineers here in Arkansas, and the majority of them are. We have 23-24 people in our office here in town, up from three at the beginning of the year by the way. It has been quite a...
34:04 Matt Waller: That's a ramp-up.
34:05 John James: It's a pretty good ramp-up. I haven't slept much lately which is fine, but the ability to find the best talent and recruit them into the best idea is no longer a Silicon Valley, New York, Massachusetts thing.
34:17 Matt Waller: Well yeah, and plus if you are a direct-to-consumer business, an e-commerce business, you can live in Silicon Valley and pay a huge amount or you can live in Northwest Arkansas and really have great amenities for living and an airport, there's lots of direct flights to major cities, and live well.
34:40 John James: Well, it's a completely different ballgame. I mean, you look at... In fact we raised this $4 million round, and we reached out to a couple of the big blogs that write about this stuff. We don't write about fundraising, unless it's more than $5 million. I'm like, I don't need $5 million, I don't need $10 million to do what I'm gonna do. We have cheap office space. We have relatively cheap labor. We have all the amenities. I can get to San Francisco in three hours. I can be there by 8:00 o'clock in the morning you just go up in the direct flight, and you go west. I'm out there for a full day of meeting. Same with New York, it's multiple flights that go to New York. It's the best place in the world I think to build a business. It's different. If you're in Silicon Valley, there's thousands of people doing what we're doing. There's two or three or four of them doing it here which means we don't have to compete as hard for talent which means we get our pick of talent. Kids who are educating at Walton College, they used to have three choices, right Tyson, Maude, JB Hunt and now you see them coming to start-ups and starting their own, which... Well, I know you've got a big passion for that. To see that change just in the last decade has been... That's heartwarming to me 'cause that didn't exist when I built Acumen in '09.
35:57 Matt Waller: No. I know John, you've had a lot of experience taking young men and women right out of college or even while they're in college and mentoring them and really training them to do all kinds of things in e-commerce. How's that going?
36:13 John James: Well, it stems back. I didn't have a lot of mentors. A friend of both of ours, David Roth who runs Workmatters, David introduced me to three men who I still call great friends today. Steve Graves, the other mutual friend, and then Rick West and Henry Hill. Those four guys invested their time in me when I was probably 29-28 years old, just starting my own business. They taught me a lot of things around how to behave, how to build a culture that was incredible, how to do ethically morally things that follow in your faith even. As I look at that as the model and then I see Donnie Smith out doing the same thing, I don't know Donnie very well, but I see what he does with his mentorship. How can you give back into the community through mentorship and teaching? Every kid we hire... Every person we hire at Engine is younger than me. It goes even to who we hire, give these young guys a chance and let them just go. It's...
37:17 Matt Waller: I know you've mentored a lot of our students, and I thanked you before and I thank you again, it's tremendous. But you were smart early on to know to get mentors like that. The four mentors you just mentioned are pretty phenomenal.
37:34 John James: Oh my gosh, right! Well, I don't know that I was smart enough, I'd never thought about it. David Roth was the one that basically said, "John, who mentors you?" I'm like, "Nobody." And we had 10 guys together that would do a Bible study in my house and so he introduced these three icons from Northwest Arkansas business into our lives. And from then I was like, "Oh gosh, why haven't I done this in the past?" And then it's 'give before you take', and that was clearly what the four of those guys who would come by and thought of us were doing.
38:08 Matt Waller: I think they still do it. They're clearly like that. The other thing I've noticed is... Well, I'm reading a book right now called Atomic Habits. It's about how to form good habits, how to break bad habits, and the psychology of habits. I have read other books like this, but I really like this book. But in it, they talk about who you spend time with and therefore especially who mentors you, but who you spend time with affects who you become so much, it affects how much you weigh, how much you exercise, statistically at least.
38:44 John James: I believe this, yeah.
38:45 Matt Waller: Right? But when you... People you mentioned are successful business people with high integrity and care for people, no wonder... I mean, that's gotta be a big part... I think you're very smart and you came up with a great idea many times in your life, but that mentoring is so valuable.
39:06 John James: There's difference in building a small business with one or two employees and building a culture that fits everything you stand for as that human, and that's a lot harder to do. Without that mentorship, without that leadership, that guidance, that someone to emulate, you might copy everything about any of those men that you met, but you wanna take the best of them and apply it to your own personal circumstance. You look at the culture Field Agent has built. It's awesome. You walk in there, and there's a feeling that you get when you walk in. Well, I have a different culture. They may say a prayer before morning work. We don't do that. We tend to express our beliefs and our, the way we work in a little more discrete way. Doesn't mean it's right or wrong it's just, you see... You start to emulate things and pick up on it when you see really smart people.
40:03 John James: When we started Engine, I really didn't know if I was gonna run another business again, but I saw an opportunity to work with my two favorite people I've ever worked with, Jim Kane and Blake Puryear. Jim, like I told you, we've known each other since we were in sixth or seventh grade, known him since before that, but... He was the smartest kid the year in front of me and just the most loyal, honest talented person you've ever met. And then, Blake Puryear is the younger version of Jim... He's kind of a combination of me and Jim. He's got the ability to figure out how to make money from a situation maybe like I do and then the technical ability of Jim, so to work with those... And has the ethics and the morals and the loyalty...
40:45 Matt Waller: Yeah and then, Blake I noticed, he's... For his age, he has got an amazing emotional intelligence.
40:52 John James: Oh my gosh, it's not fair! You talk to him, you're like... What is he? 28, I think, maybe 29.
40:57 Matt Waller: I don't know.
40:58 John James: He could be my child, I suppose and he is wiser than me and Jim in a lot of aspects. The three of us have a really good relationship. I think the ability just to work with those two guys and build something great with people you like was why I decided then, "Hey, we will give it one more run and see what comes out of it."
41:19 Matt Waller: Well, thank you for sharing your expertise in company-building and in e-commerce. Really appreciate it.
41:26 John James: Thanks for having me. This was a blast as always.
41:29 Matt Waller: Thanks for listening to today's episode of the Be Epic podcast from the Walton College. You can find us on Google, SoundCloud, iTunes, or look for us wherever you find your podcast. Be sure to subscribe and rate us. You can find current and past episodes by searching Be Epic podcast, one word, that's B-E-E-P-I-C podcast. And now, Be Epic.
