Joel Ronning, CEO Digital River

Not a fond memory, but it was a defining moment for the entrepreneur, who admits he was unprepared at the time to handle the backroom operations of a company that went from zero to 150 employees in less than a year. Ronning formed a new venture called Tech Squared and went after Mirror with a vengeance, exhibiting some of the same competitiveness he displays after-hours in his passion for sailboat racing.

"He doesn't give you an inch," says Scott Erdmann, a sailing competitor who races against Ronning two to three times a week.

He didn't give Mirror an inch, either. Within three years, Ronning had acquired the company for what he calls a song. "There is absolutely no doubt that it was the most satisfying experience in my business career," he says.

Besides displaying his competitiveness by starting another company, Ronning also showed that he learns from past mistakes. His first hire at Tech Squared was an accountant, and his first purchase was an accounting system. "I threw myself into operations," he says.

Now, as CEO of Digital River, Eden Prairie, Minn., he is still drawing upon lessons from his past. Since launching Digital River in 1994, he has acquired 10 other companies, many at fire-sale prices, to build what is perhaps one of the most successful e-commerce ASP pioneers to date. And he is doing this by running a tight ship, paying close attention to operations and costs, while some of his competitors burn cash and rack up debt.

Digital River isn't yet profitable, though. The ASP lost $4.4 million on $14 million in sales in the third quarter ended Sept. 30. But the company is debt-free and has $25 million in the bank. And it generated its first-ever, albeit slight, operating profit, excluding acquisition expenses and goodwill write-offs. With Digital River's gross margins on the rise, Ronning expects his company to enter the new year with a positive cash flow.

Ronning attributes that to keeping a tight rein on expenses. While third-quarter revenue was up 84 percent from the prior year, head count rose only 20 percent over the same period. "Our motto here is fewer, better employees with the right answers for customers," he says. "We are efficient because we are furiously working towards giving customers more control over their custom environments."

The CEO isn't spending any money on a corporate facade, either. Digital River's headquarters is essentially a warehouse, which reflects Ronning's own humble beginnings, says Tony Austinson, senior manager of Web site development at Digital River. Mirror started out with Ronning assembling drives in a mobile home. "There's no flamboyance here," Austinson says.

While Ronning may not believe in fancy decor, he uses other means to keep employees motivated. Every Wednesday a different department hosts a barbecue to promote team building, and on Friday afternoons employees can crack open a few beers to unwind.

Ronning plans to double the company's sales again over the next 12 months while continuing to keep a lid on head count. "To do that, people have to step up," he says. "But while you have extremely high expectations, at the same time you need to develop a fun community."

Over time, Ronning may change his mind about what he remembers as his most satisfying business experience. After all, he believes Digital River is at the forefront of a future in which software will be delivered as a service.

"I never thought I'd have a shot at helping define an industry, and that's what Digital River is doing," he says.