There are very few windows in the box-like prefabricated building that houses Metreo's Silicon Valley headquarters. The fewer windows, the less the din from the adjacent freeway can penetrate.

Daphne Carmeli, Metreo chief executive and co-founder, does not need grand architectural style or an inspiring view. She looks out over the cubicles of Metreo's 50 or so employees and sees a business "with the makings of a huge, profitable, independent company".

This is a goal in the grand tradition of Silicon Valley, which spawned Hewlett-Packard, Intel, Apple Computer, Oracle, Sun Microsystems, Cisco Systems and many other companies among today's information technology leaders. Yet in the current business climate, Ms Carmeli might be accused of dreaming.

Whether Metreo will ever be one of the "greats" will not be clear for many more years but today this two-year-old company is thriving and growing, even as many others go out of business or downsize. The secret, Ms Carmeli claims, is that Metreo offers "painkillers rather than vitamins". The former are essential solutions to business headaches. The latter are merely "nice to have".

Metreo's business plan grew out of Ms Carmeli's efforts, as a Netscape Communications executive, to overcome market resistance. She was trying to persuade companies to sell their products via business-to-business procurement websites and finding them unenthusiastic. Suppliers in industries ranging from cars to office stationery were afraid that customers would gain the upper hand in this new market environment.

"E-commerce was all about saving money on purchasing," Ms Carmeli recalls. "The playing field was not even. It was tipped in favour of buyers. I started asking myself what it would take to solve this problem."

After finding no ready solutions, she turned to Nachum Shacham, whose research at the University of California, Berkeley, and SRI International had focused on optimisation of bandwidth use in telecommunications networks. Similar mathematical models might be applied to the task of managing the trade-offs among competing demands in electronic marketplaces, they determined. Thus Netscape's business problem led Ms Carmeli, Mr Shacham and two former colleagues to form Metreo in February 2000.

There could hardly have been a worse time to start a software company. The internet bubble was bursting even as Metreo was searching for office space. Yet the downturn in the US economy seems to have worked in Metreo's favour. While corporate spending on information technology has declined, pressure for companies to improve their financial performance has increased. Now Metreo finds itself tackling a business problem that is broader than it originally perceived - streamlining and optimising pricing decisions, whether sales are made electronically or via traditional channels.

Metreo's latest sale, and its largest to date, is to DHL Worldwide Express, the delivery service. Isabelle Bax, DHL's director of pricing, yield management and sales support, says: "We need to be able to get back to potential customers more quickly with a price that will win the business and be profitable."

DHL expects to improve its competitiveness as well as making significant productivity gains as a result of using Metreo's software.

In another undisclosed deal, a leading US computer company has also adopted Metreo software, adding to the start-up company's credibility.

"Many companies know they have this problem. A lot of our deals have come through formal requests for proposals. Price optimisation is one of the priorities of every chief executive we talk to. They are looking for solid results from their IT investments and our software pays for itself in about six months," says Ms Carmeli.

She is quick to point out that Metreo won its latest sales in the face of competition from the "goliaths" of the e-business software sector. Although salesforce management and supply-chain management software packages are not directly comparable with Metreo's pricing software, some of their functions are similar and the leaders in these market segments are hungry for business.

Dealing with giant competitors who purport to solve the "pricing problem" is just one of the new challenges facing Metreo. After spending cautiously for two years as it developed and began to market its product, the start-up is now changing gears, boosting its sales efforts and setting out to form partnerships with systems integrators.

A floor plan pinned to the wall at Metreo headquarters maps out about 30 new work spaces. The pool table will have to go to make room for new employees but the kitchen, stocked with chocolate bars, big boxes of cereal and instant soup, is sacrosanct. There are few convenient alternatives on the freeway.

Had Metreo been formed six or 12 months earlier, the company might have raised more funding and been tempted to create a high-profile image with advertising, marketing and swanky offices. Instead, Ms Carmeli has been watching every penny.

However, in January Metreo raised $15m (?0m) in a third round of venture capital funding, to bring its total to about $27m. This was itself a significant achievement but Ms Carmeli is still jousting with another investor who would like to add more funds.

With big money in the bank, Metreo will throw its earlier caution to the wind. Now the game plan is to build a big customer base and take full advantage of its early leadership in the emerging segment of price optimisation.

Dangers abound. Metreo claims to have a two-to-three-year lead on the e-business software market leaders but big competitors could force the fledgling into an expensive marketing battle, or create market confusion by claiming to match the functionality of Metreo's product.

As Ms Carmeli is well aware, the best technology does not always win. An alumna of Netscape, Healtheon and Silicon Graphics - all companies that once held market leadership positions, only to be overtaken by competitors - she has seen good companies decline.

She compares building a new business to rock climbing. "You head from one milestone to the next and you never look down." Her climb may prove to be worth watching.

Contact Louise Kehoe