Dirig Makes Move With New CEO, VC

Mike Pehl has had a good run since arriving the United States from his native Germany in the mid-1980’s.

He was on the ground floor of enterprise software giant SAP’s U.S. subsidiary, ran his own consulting business (later sold to Deloitte & Touche), and led Web design
shops iCube and Razorfish at the tail of the dot-com heyday.

Now, the 41-year-old has landed at Dirig, a Nashua, N.H., maker of software that help IT managers correct e-business
application glitches before they impact customers.

The firm’s flagship offering, Fenway, covers everything from the front-end Web server to the application server and back-end database. New versions will be previewed for analysts in coming weeks.

And though Pehl has been at larger firms, he was attracted to Dirig’s products (which are in use, not in development), skilled employees and a market that shows
signs of life in an otherwise dismal economy.

“We are selling into a compelling market,” Pehl said in an interview with boston.internet.com. “There is business to be had; it’s not like it’s gone to zero.”

Indeed, although Dirig has eschewed big-budget ad campaigns in its five years, it landed large customers (Tufts Health Care, Northeast Utilities, Giant Loop) and
partners (Aprisma and Hewlett-Packard, BEA Systems). Several other deals are pending with financial service and health care firms, the company said.

One of the challenges Dirig faces is to convince prospective customers to choose their products over larger rivals. For that, Pehl said he will make the case

“I’m used to making 50 phone calls, and 49 times I get a no, that’s OK, at least I can address their reasons,” Pehl said.

In addition to Pehl, who replaced Bob Hoyt in late April, Dirig has also raised $15 million in third-round financing led by Battery Ventures, of Wellesley,
Mass. The firm gets the cash, clout and connections of a top-tier venture firm as well as an endorsement of its focus.

“This is one of the few really hot segments in the software industry today and after looking at all the companies in this space, we feel Dirig is the best,” said Ollie
Curme, a general partner at Battery.

The backing will be used to continue to improve Fenway, as well as bring on sales and marketing staff to sell to the enterprise market. Privately held Dirig has 45
employees, most in Nashua. The company also maintains a Chicago sales office.

Pehl said acquisitions are not a priority for Dirig, which was bootstrapped by University of New Hampshire and UMass Lowell graduates.

“If there is an opportunity to acquire intellectual property and it’s reasonable, maybe,” Pehl said. “But acquisitions are difficult, we have a strong product, we’re not
trying to find something to buy.”

Acquisitions also take money out of the business, something Pehl is loathe to do, having learned from the dot-com bust. He said the new financing should be
sufficient for Dirig to reach positive cash flow.

“Cash is king,” Pehl said. “Every measure you look at at the end of the day come down to managing cash.”

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