Friday, July 25, 2008

DynaTrace dealt $13M in round two

By Christopher Calnan

Two years ago, Bain Capital Ventures managing director Benjamin Nye learned about an engineer in Austria who claimed he had solved a software testing problem that engineers at one of Nye’s previous companies, Precise Software Solutions Inc., couldn’t overcome in six years of research.

The engineer, Bernd Greifender, said he had an application performance management (APM) technology that could identify a single coding transaction on Java and .Net servers. A skeptical Nye traveled to Linz, Austria, to see it for himself and came away both a believer and an investor.

Earlier this month, Greifender’s Waltham-based dynaTrace Software Inc. closed on a nearly $13 million Series B round of funding that, in addition to a 2006 Series A round increased total investment in the company to nearly $18 million.

The latest financing attracted six investors including Bain Capital Ventures, a division of Boston-based Bain Capital LLC, and lead investor California-based Bay Partners.

DynaTrace, which now employs 75 workers, launched its first software in 2006. Customers are mostly financial services companies, independent software vendors and software-as-a-service companies, officials said.

The company has enlisted a number of former managers of Westwood-based Precise Software, which was acquired in 2003 by Veritas Software Corp. for $537 million.

In addition to Nye, who was Precise’s COO, dynaTrace CFO Mo Garad was Precise’s vice president of finance, and board member Shimon Alon was the company’s CEO. Precise, also an application performance management software maker, was spun out as an independent company from Veritas acquirer Symantec Corp. (Nasdaq: SYMC) in March and is now a dynaTrace competitor.

Other APM competitors include New York-based CA Inc. (Nasdaq: CA), Houston-based BMC Software Inc. (NYSE: BMC) and New York-based IBM Corp. (NYSE: IBM).

The APM market generates about $2 billion a year and is growing 10 percent annually, said Will Cappelli, research vice president of Stamford, Conn.-based Gartner Research Inc. But dynaTrace is solving just one slice of the APM problem and needs to convince customers that it can be “part of the larger, comprehensive system,” he said.

DynaTrace employs about 50 workers at its development facility in Austria and 25 workers in the United States, 12 in Waltham. In March, the company reported record revenue during 2007, tripling its revenue versus 2006, although it doesn’t disclose revenue figures.