Delphix

Investment Idea Details

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About the company

Delphix speeds up the transition of companies to digital technologies. Its Data Platform helps businesses accelerate the journey to the cloud, transform customer experiences and increase the adoption of disruptive AI technologies. It enables modern CI/CD workflows, their security, and confidentiality.

Jedidiah Yueh, a Harvard graduate, founded the company in 2008 in Silicon Valley. Two years earlier he sold his first tech company to the Dell EMS empire for $165 million.

Delphix Corp. has over 300 customers worldwide, including 23 companies on the Fortune 100 list. It has clients in completely different verticals, among them there are Facebook, Fastweb, Vertex, Gain Capital, BECU, Allstate, Vodafone, etc.

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Risks

The market for data management solutions is highly competitive. Delphix competes with both major tech giants such as Google, IBM, SAP, Oracle, Microsoft and private companies such as Rubrik, Cohesity, Denodo.

The main risk for these companies is cyberattacks. Enterprise data demands continue to increase, magnifying compliance and security risks. Today, companies need data for a range of digital transformation programs – data for CI/CD test environments, cloud migration trials, and AI/ML model training. In addition to the increase in data volume, the number of endpoints is growing due to the transition of many companies to a remote format of work and the development of the Internet of things. This makes companies more vulnerable and requires vendors of data management solutions to devote special attention to the safety of data.

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Market Opportunities

The global corporate data management market is expected to grow from $77.9 billion in 2020 to $122.9 billion by 2025, with an average annual growth rate of 9.5% over the projected period. Key drivers of growth are the process of digitalization, accelerated by the pandemic and implementation of the Internet of Things. The company pegs its potential market at $40 billion. Some analysts estimate it at $60 billion.

In 2020, demand for Delphix solutions increased significantly as many companies migrated to the cloud and Delphix Data Platform provided them a convenient and secure remote access to their data. The Delphix Consumer Loyalty Index (NPS) was 89 out of 100 during the fiscal year ending January 2021. It is a high level that shows loyalty and support of clients.

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Financials and Valuation

In February 2019, the company reported that it had reached over $100 million in annual revenue. According to the 2018 Deloitte North America Technology Fast 500, the company’s revenue increased by 318% between 2014 and 2017. In 2020, thanks to a sharp increase in demand, Delphix’s revenue increased by more than 85%. In February the company reported that it has achieved profitability. We estimate Delphix’s revenue in 2021 to be $200 million.

The company has raised about $120 million from 11 investors, including Greylock Partners (invested in Facebook, Dropbox, Okta), Battery Ventures (invested in Sprinklr, Fastly, JFrog), Icon Ventures (invested in FireEye, Teladoc Health, Coupa Software) and others. The latest funding round in July 2015 valued the company at $1 billion.

The company’s value on the private market is $1.4 billion, with $12.69 price per share. In terms of product, it can be compared to Snowflake ($74B capitalization), Splunk ($23B capitalization), Rubrik ($5.5B capitalization on the private market), and Cohesity ($5.4B capitalization on the private market). Delphix CFO has a long history of IPO divestment: He was the CFO of ArcSight Inc., leading their successful IPO in 2008, and ultimate sale to HP for $1.75 billion in 2010.

The planned date of IPO Delphix is 2022. Taking into account the profitability and growth of Delphix, as well as the value of similar companies, the expected value of the company on IPO is $4-5 billion. Expected return is 200%.

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