Charlton leading Philly startup PHD Virtual to rapid growth, gets more funding

Tom Paine

Thomas Charlton is an interesting man, who has moved quickly and with a sense of purpose throughout his career. For those who think they need a top MBA or Engineering degree to approach the pinnacles of the Tech and VC worlds, Charlton has neither. Growing up in the Harrisburg area, Charlton attended Harrisburg Area Community College and took some courses at Shippensberg, but then moved into the business world and out West.

He began his management career at US Surgical selling surgical staples, ultimately becoming responsible for the Western Area Business Unit with revenues of $220M. He then jumped into tech, although he had no real background in it, becoming CEO of and turning around a company called Tidal Software, which later was acquired by Cisco. He became a Venture Partner with the huge VC/PE firm Insight Venture Partners (over $2 billion under management) in 2004, and since then has been mostly involved in running Insight portfolio companies. Coming back East and settling in Philadelphia, he looked for tech companies to run there but had difficulty finding any, so commuting from Philly he took on assigments managing Insight portfolio companies in Atlanta and Toronto, the later being VoiceGenie which was acquired by Alcatel in 2006.

After VoiceGenie, Charlton finally found a suitable role in Philadelphia. With backing from Insight, he became CEO in late 2006 of Israel-based Shunra Software, which provides tools for emulating and monitoring application performance in a network environment, and moved its US headquarters from New York to Center City Philadelphia. After nine quarters of successive growth under Charlton's leadership, Shunra returned to profitability. Charlton then took on another challenge, becoming Chairman & CEO in early 2010 of PHD Virtual Technologies, which specializes in backup and monitoring software for virtual computing environments, relocating its headquarters from Mount Arlington, New Jersey to Center City, and getting $4 million in funding from Insight and virtualization systems provider Citrix Systems. PHD Virtual had been a company with interesting technology but perhaps a lack of commercial focus. What Charlton appears to do very well is to bring in the right people, package and market the technology, and sell it. He says many of his top salespersons are people like himself, who came from totally different, non-technical backgrounds.

In October, PHD Virtual reported what it says was "its fifth consecutive quarter with year over year quarterly growth (in bookings) of 50% or higher". The company says it now has 70 to 80 employees (they are currently hiring), slightly less than half of whom are in Morris Plains, NJ. Insight and Citrix last month announced another round of investment in PHD Virtual, which Charlton says was for $4 million.

PHD Virtual provides backup and monitoring systems for both VMware and Citrix environments. Charlton says PHD Virtual sales are roughly similar between Citrix and VMware installations right now, although since VMware is the larger player it probably offers more growth potential for PHD Virtual. Its software products start off in the range of a few thousand dollars, but sales within a single enterprise can reach into the hundreds of thousands. PHD Virtual's poducts include no hardware components, which is different than some of its competitors. Competition includes Liquidware Labs, who recently brought PHD Virtual's co-Founders on board, publicly traded Quest Software, Veeam, and VMware's own products in that area.

Although virtualization products make Cloud environments possible, Charlton is somewhat of a skeptic about the Cloud, seeing major barriers to adoption of Cloud technologies within large enterprises though they are more likely to be used within smaller entrerprises or departments. Charlton sees a good deal of organizational resistance from IT people, and not without reason. People underestimate, he says, the complexity of replacing legacy computing environments.

Charton agrees that there is a hole in the ecosystem for Enterprise IT technology in the Philly area. It is interesting that Boston- based OpenView Venture Partners, which was originally an offshoot of Insight, has become so active here with its investments in Monetate, NextDocs, and Xtium, although an OpenView spokesperson says there is no financial interrelationship between it and Insight. See this interesting inteview OpenView Labs did with Charlton early this year. I don't see any other area companies in Insight's portfolio other than PHD Virtual and Shunra, although it was an investor in Primavera Systems. Charlton says he and other PHD Virtual people are starting to get more involved in the Philly Tech community. He has not had overwhelming problems recruiting the kind of talent he needs in Philly.

When I asked Charlton whether PHD Virtual could be a double, triple or home run, he said "home run, definitely". He points to the size (estimated by IDC to be $19 billion in 2014) and growth of the virtual technology market and the multiples the publicly traded companies in it command.

Charlton also is Chairman of another Philly-based company, Goliath Technologies, which he describes as being a more personal investment vehicle to which he plans to add more acquisitions over time.



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