05:07 PM

Delphix - SVW 2012 Startup of the Year - A Standout Company With Standout Leadership

A stuffed squirrel sits on the wall behind Delphix founder and CEO Jedidiah Yueh.

I meet with huge numbers of companies every year but it's rare for me to come across a company that excites me as much as Delphix - easily my choice for Silicon Valley Watcher's 2012 Startup of the Year.

Delphix founder Jed Yueh is just 37 years old and will undoubtably become one of Silicon Valley's next generation of leaders and success stories. His focus, his discipline, and his intellect are striking -- and it's these qualities of leadership that sets Delphix apart from the many thousands of startups in the extraordinary global innovation engine that is Silicon Valley.

I visited the company earlier this year shortly after it had raised $25 million in an over-subscribed C-round led by Jafco Ventures, with Battery Ventures joining existing investors Greylock Partners and Lightspeed Venture Partners.

I was impressed by the company's technologies and its business strategy. Mr Yueh is determined to build, rather than sell, one of the next great tech companies of Silicon Valley.

Delphix has developed technologies to create virtual databases. These allow large organizations to speed the development of their business applications. It's an area that the company calls "agile data management."

At first glance virtual databases might seem to be an esoteric and highly specialized sector of enterprise IT markets -- but it is a phenomenal technology that can transform data centers -- even to the extent of closing some of them.

Here are my notes from my meeting with Mr Yueh:

- When companies are working on developing new applications, each team works with a copy of the core database. This makes sure that the applications are tested against actual data but without the possibility of corrupting the main database.

- A Delphix customer such as Facebook, might have as many as a dozen application development teams working in parallel. It must provide each team with its own database copy -- a huge undertaking requiring the cloning of its data centers.

- The use of virtual databases removes the need for multiple copies and can thus result in huge savings in server, storage, and data center maintenance costs.

- Delphix allows companies to make just one database copy and each team has access to the same data as if they were the only users.

- The ongoing problem in corporate data centers is that they can't expand because of electric power constraints and this can be a limiting factor in quickly pursuing new business opportunities. If companies can't develop the IT resources behind new business groups and services they face serious competitive risks.

-Some Delphix customers are not only able to avoid having to build new IT infrastructure but are able to close data centers by using virtual databases. This is unheard of in the world of IT - a technology that requires less in computing resources while greatly improving performance and productivity.

- Delphix customers can achieve hardware savings of as much as 90 percent and have faster database response.

- Virtual database technology is complex and difficult to achieve, representing a significant barrier to entry for competitors.

- Prior to Delphix Mr Yueh founded Avamar in 1999, a data de-duplication company, which grew to more than 20,000 customers. EMC bought Avamar in 2006 for $165 million and created a multi-billion dollar business group. EMC has said that Avamar has been its best performing acquisition next to VMware.

- Mr Yueh says that he sold Avamar too early and that he won't make that mistake again. He believes Delphix could become one of Silicon Valley's largest tech companies.

- His background is not tech but in English and American literature, graduating Phi Bet Kappa from Harvard, and in 1992 he was designated a US Presidential Scholar under former President George Bush, one of the highest US academic honors.

- Startups can face problems raising VC funds if the founder isn't an engineer but Mr Yueh says he hasn't had any problems because he has always managed to recruit top class engineering teams and he has a history of successful ventures.

- One of the lessons he learned from Avamar, is not to base a startup in southern California. It is difficult to find the high calibre of engineers and other specialist staff, and this makes it difficult to grow the company. This is why the Delphix sits in the heart of Silicon Valley, in Menlo Park, close to Stanford university.

- Startups in enterprise IT markets sometimes report that it is hard to find customers because large corporations are concerned that the startups might fail and go out of business. Mr Yueh says that this is not a problem if you know what you are doing. Many IT startups don't know how to do business with corporations, but if you have the right procedures, the right contracts, the right paperwork, invoicing etc, it signals that you know what you are doing and builds confidence among customers.

- I asked if it is difficult to find engineers given Silicon Valley's current boom. He said Delphix was able to attract and retain top talent because engineers love to work on large, challenging problems. Virtual databases are not easy to build and there is a tremendous amount of sophisticated software that has to be developed.

- Does Delphix have beer busts and have special areas where engineers can relax, play video games, etc? "No, we don't run adult day care centers." Delphix has Friday "Scotch whiskey afternoons." He invited me to take a look at a shelf behind where I was sitting, which contained about a dozen bottles of rare whiskies in various stages of emptiness.

- Mr Yueh was critical of some Silicon Valley companies. He considers Google and it's 20% rule where engineers can work on projects outside of their main work responsibility, as an enormous failure. Google's inability to build viable businesses from this resource has wasted the work of thousands of the world's top software engineers.

- Mr Yueh occasionally plays golf otherwise he is completely engaged in building Delphix. Focus is very important he says.

- The company was founded in 2008 and has about 110 employees, mostly highly skilled software engineers.