After struggling with growing pains over the past two years, GCommerce Inc. has been “drinking from a fire hose” recently in landing major contracts across the country, says its co-founder, Steven Smith.

“We’re going to have an explosive year in 2006,” said Smith, who relocated his software company from New York 2 ½ years ago after receiving more than $2 million in incentives from the state of Iowa and the city of Des Moines.

“We’ve signed something like 28 major deals in the past six months,” said Smith, who said the company’s revenues are approaching a break-even point of $2 million, with prospects of doubling in each of the next several years. “We’re on this sort of meteoric growth curve. Now, the big problem is hiring enough people.”

GCommerce was among the first companies to receive state funding through the Grow Iowa Values Fund, and was the first out-of-state company to relocate operations to Iowa because of such funding. Created by the Legislature in 2003, the Values Fund provides grants and forgivable loans to companies that pledge to create or retain high-paying jobs within the state.

GCommerce has pledged to fill 157 professional and technical positions by August 2008, with the average salary exceeding $56,000. However, it has had a much slower ramp-up in employment than expected, said Smith, who called 2004 a “retooling” year. So far, the company has 13 employees in Des Moines, which is five fewer than it had before its move from Valley Cottage, N.Y.

“We’re not hitting our numbers,” Smith said, “but our salaries have been significantly higher than we pledged, and I think we exceeded our investment (of at least $9.28 million it had pledged to invest in relocation costs). We’re well ahead of what we said we would do in that respect.” According to a report it filed in June with the state, the average salary for the company’s new hires was more than $79,000 per year.

Eric Hardgrave, a principal with Acuity Ventures, a Silicon Valley venture fund company that’s backing GCommerce, said he believes the workforce shortage is not a cause for concern because more companies will eventually attract a critical mass of employees.

“From a big picture we see it as really a short-term issue,” said Hardgrave, whose venture fund has brought three other companies to Des Moines. “I’m excited that their customer base is supporting them at a higher rate. We, as their largest venture supporter, are not displeased with the progress they are making.”

Similarly, Iowa Department of Economic Development spokeswoman Tina Hoffman said the company still has plenty of time to reach its employment goal, which must then be maintained through 2013 for its loans to be fully forgiven.

Smith said the company now hopes to double its workforce in 2006, provided it can fill the positions with the highly skilled people it needs. GCommerce recently filled a key executive position with a person from Idaho and another with a person from Florida, because it was unable to find the right people locally.

“We are struggling, no question, with finding people,” said Smith, who said many of the positions require a hard-to-find combination of technical and people skills, or what he refers to as “techies with personality.”

“We didn’t have a problem early on, but definitely it’s an acute problem for us,” he said. “We hope it doesn’t become a chronic problem.”

The company’s software products allow businesses with dissimilar computer systems to share information instantaneously through a Web-based interface. For instance, its PARTnerShip Network enables companies like Advance Auto Parts Inc. and O’Reilly Automotive Inc. to exchange parts information. Last year, it announced a major partnership with Integrated Supply Network of Lakeland, Fla., the largest independent distribution company in the automotive tool and equipment industry,

In the home-building market, GCommerce has contracts with Charlotte Pipe and Foundry Co., the largest pipe supplier to the plumbing industry, and has expanded its relationship with Kohler Co.

In Iowa, one of its clients is Lisle Corp., a Clarinda-based supplier to the automotive and hardware industries.

“Our technology solutions connect trading partners in industries that really touch the two most important assets we have: our cars and our homes,” Smith said.

Acuity Ventures: More relocations ahead

A Silicon Valley-based venture capital firm that helped bring four out-of-state information technology companies to Des Moines within the past three years expects to assist at least two more in relocating here in 2006.

“We are extremely optimistic,” said Eric Hardgrave, managing partner of Acuity Ventures, which has investments in GCommerce Inc., Protocol Driven Healthcare Inc., BayTSP Inc. and Project InVision International. Two of those companies relocated operations from the East Coast; the other two from California. “In aggregate we are tremendously energized by the market adoption rate of their customers,” he said.

Each of the four companies has received economic development incentive packages through the Iowa Department of Economic Development, which a year ago reached an agreement with Acuity to invest up to $2 million more in Acuity-backed companies.

Driven by interest from Iowa-based insurance companies and other potential investors, Hardgrave said his firm is now considering the possibility of opening a venture capital fund made up exclusively of Iowa start-up companies.

“I believe there is tremendous potential for what I would call an Acuity-Iowa-only opportunity,” he said. “It’s still in the discussion stages, and it’s driven by the corporations that are here.”